Visit to three European countries: Asia and Europe joining hands to embrace financial innovation

Last week, I concluded a trip to Europe, after visiting the Netherlands, Spain and Portugal.  The focus of this trip was to participate in two major forums, namely Money20/20 Europe, the largest financial technology (fintech) forum in Europe held in Amsterdam, the Netherlands, and South Summit, a remarkable technology and start-up event held in Madrid, Spain.  By attending the two forums, I aimed to publicise the unique strengths of Hong Kong’s financial market and the latest initiatives taken by the Government of the Hong Kong Special Administrative Region (HKSAR) in promoting fintech innovations.  This visit has proved me right about the development in Europe.  I have always thought that in a macro environment beset with global political and economic uncertainties, enterprises and the financial sector in both western and southern Europe are all eager to find a new direction and positioning for social and economic development, and they all hope to drive the creation of new and more competitive industries and business models by embracing innovation.  Their eagerness was well reflected in the themes for discussion in the forums I attended, including the promotion of efficient and low-cost payment options, the prudent development of Web3.0 and the virtual asset market, as well as the use of green finance to foster sustainable economic transformation.

For those who are seeking opportunities for innovation and rapid growth in the global market, Asia is where they should set their eyes on. While interacting with various sectors during my visit to the three countries, I encouraged them to choose Hong Kong as the first stop and entry point for tapping into the Asian market by leveraging our unique advantages under “One Country, Two Systems”, including the safeguard for free flow of capital, an open and friendly business environment, a simple and competitive tax regime and a diverse talent pool.  In addition, Hong Kong’s start-up ecosystem has continued to thrive, thanks to our favourable environment and rich soil for innovations.  Last year, the number of start-ups increased by more than 270 year-on-year to a record high of nearly 4 300, of which about a quarter were set up by non-local founders.  These start-ups, spanning a wide spectrum of industries including fintech, e-commerce, supply chain management and logistics technology, hired over 16 000 people, which was 10% more than the previous year.  Founders of start-ups in Europe may use Hong Kong as a base and springboard for tapping into the affluent market of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), which has a population of more than 86 million.  At a GBA business seminar held by the HKSAR Government in Portugal, we invited a representative from the office of the Shenzhen Government in Europe to give a speech specifically to promote the “dual engine” role played by Hong Kong and Shenzhen, with a view to giving the local business community a better idea about how to navigate the vast GBA market by leveraging the strengths of both places in terms of finance and innovation.

In respect of financial innovation, I explained to the local financial sector and regulators during my stay how Hong Kong, as a pioneer of Web3.0 development, had recently fostered market development in various aspects, including formulation of regulations, product innovation and government’s fund raising. First, the licensing regime for virtual asset trading platforms has been implemented since last June.  We are also working on licensing requirements for other virtual asset operations, including the issuance of stablecoins and over-the-counter trading services, with a view to gradually building a comprehensive regulatory framework covering all key segments.  On product innovation, Asia’s first six spot virtual asset exchange traded funds (ETFs) were launched in Hong Kong in April.  It is noteworthy that Hong Kong pioneered an in-kind subscription and redemption mechanism, allowing more flexibility for investors to subscribe and redeem their ETF units.  On raising funds through the issuance of government bonds, the HKSAR Government took the global lead in issuing two batches of tokenised green bonds.  The first batch, which was issued in February last year, is the world’s first tokenised government green bonds.  The second batch, issued in early 2024 and amounting to US$770 million, is the world’s first multi-currency (Hong Kong dollar, Renminbi, euro and US dollar) government green bonds issued in a digitally native format.  Embodying multiple innovations which served to broaden access by different market investors, support interoperability and improve transparency and efficiency, this second batch of digital bonds was oversubscribed globally by a wide spectrum of institutional investors, from financial institutions such as major asset managers, banks and insurers to non-financial institutions.

As this October is Hong Kong’s month convening flagship Web3 events, I took the opportunity to invite the relevant officials and the management of the regulators to visit the city and attend the Hong Kong FinTech Week, an annual flagship event hosted by the Financial Services and the Treasury Bureau, and other world-class activities in the hope that they could seize such occasions to further exchange views with key fintech stakeholders at the international level and explore room for co-operation.

Apart from promoting financial development and innovation, I also strived to foster international tax co-operation during my visit.  When meeting with the Secretary of State for Tax Affairs of Portugal, I expressed concern that Hong Kong had still not been removed from Portugal’s “list of countries, territories or regions with a clearly more favourable tax regime”, which would subject Hong Kong enterprises to the risk of increased taxation in Portugal, and urged Portugal to remove Hong Kong from the list as early as possible.  My team will continue to liaise with the relevant government departments in Portugal to follow up this issue after returning to Hong Kong.

Times are changing.  Hong Kong, as a pioneer in embracing financial innovation, will continue to proactively respond to and steer changes, as well as establish extensive international connections and work in partnership to meet the development needs of each other, thereby charting a new course for and starting a new chapter of Hong Kong’s development amid changes.

11 June 2024