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Insights Gained from My Visit to Switzerland: Developing Our Financial Industry with a “High-Wide-Deep” Approach in the Face of an Uncertain Future

During my earlier visit to Switzerland, I had extensive exchanges with major international organisations, government departments and financial institutions there, and gained quite some insights into our pursuit of financial market development in the future.  Both Hong Kong and Switzerland are world-class financial hubs with well-developed financial services industries, enjoying a leading position particularly in such areas as asset management, wealth management and insurance.  Switzerland, with its long-established banking, asset management and insurance industries, has become a preferred market for global capital allocation and risk management.  Meanwhile, thanks to the institutional strengths of “One Country, Two Systems” and our close ties with the Mainland, Hong Kong, being our country’s international financial centre, is the world’s largest offshore Renminbi (RMB) business hub with unparalleled competitiveness in areas including asset management, insurance and risk management.  More importantly, both places have always believed in mutually beneficial multilateral co-operation and globalisation.  This is particularly valuable and crucial given the prevailing geopolitical instability around the world.


At a time when the international political and economic landscape is fraught with uncertainties, a three-dimensional “high-wide-deep” approach should be adopted to steer Hong Kong’s financial market development in the future.  We have to promote the diversified development of our financial industry from different angles in order to further strengthen Hong Kong’s status as an international financial centre.


“High”: Pursuing high-end professional development of financial services


We must steer Hong Kong’s financial services towards high-end professional development.  Insurance-linked securities (ILS) are one of the areas with great potential, particularly in addressing the increasingly complex risks and challenges in the global market.  Against the backdrop of increasing risks relating to global climate change and natural disasters, there is a growing market demand for insurance products targeting such risks.  The size of related ILS issuances rose to US$43 billion last year, an increase of more than 20% over the year before.  As an insurance centre in Asia, Hong Kong is well-positioned to play a greater role in this area given its rich market experience and robust regulatory framework.


When in Switzerland, I explored with the senior executives of the Swiss Re Group the ways to further promote the development of the ILS market and to provide more targeted insurance solutions for global climate risks.  As a matter of fact, Hong Kong’s insurance business and the ILS market have displayed huge growth potential.  Five ILS issuances with a total size of over US$700 million have taken place so far, offering protection against natural disasters in the Mainland and overseas markets.  We will continue to press ahead with the implementation of relevant policy measures to attract more insurers to develop ILS business in Hong Kong, with a view to further enhancing our competitiveness in the global insurance and risk management markets.  We will also build an international gold trading market and a commodity trading ecosystem, leveraging Hong Kong’s strengths in terms of security and stability to create new markets.


“Wide”: Widening international business networks


Hong Kong must further widen its international connections and promote different forms of mutual market access.  As the world’s largest offshore RMB business hub, the city has all along been promoting deeper connectivity with the Mainland’s capital market.  We will further enhance the mutual market access regime by, for instance, actively liaising with the Mainland authorities to expand the Southbound Trading of Bond Connect as appropriate and enriching liquidity management tools that facilitate offshore investors’ investment in onshore bonds.  Besides, to develop “headquarters economy” in a proactive manner, we will continue to actively expand and deepen our overseas networks, such as strengthening financial co-operation with the Middle East and the ASEAN region, while providing financial and professional service support for Mainland enterprises to “go global”.


The fact that Switzerland and Hong Kong are located in different time zones means that we can capitalise on the time difference to foster co-operation in asset management and wealth management between the two places, thereby providing global investors with round-the-clock financial services.  In the future, we will continue to strengthen our financial co-operation with different countries and regions, including Switzerland, and broaden our international connections, with a view to further consolidating Hong Kong’s position as a global asset management hub.  Specific policy measures include proposing to increase the types of qualifying transactions (covering emission derivatives/emission allowances, ILS, loans and private credit investments, virtual assets, etc.) eligible for tax concessions for funds and single-family offices, so as to meet global investors’ demand for different assets.


“Deep”: Deepen the cultivation of opportunities in sustainable finance


Hong Kong has well-established financial infrastructure and policy support for deepening the cultivation of opportunities in sustainable finance.  We will, among other things, align the local reporting standards with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB) to provide enterprises with a transparent reporting framework with regard to sustainable development, thereby attracting more inflows of international capital into related fields.


At the experts’ session organised by the United Nations Conference on Trade and Development in Geneva, I briefed participants from around the globe on Hong Kong’s policy considerations and latest progress in promoting sustainable finance.  This included the publication by the Stock Exchange of Hong Kong Limited this April of the consultation conclusions on the enhancement of climate-related disclosures under its environmental, social and governance (ESG) framework, which introduced new climate-related disclosure requirements to be adopted in phases starting from 1 January 2025.  This will make Hong Kong one of the first jurisdictions to introduce climate-related disclosure requirements for listed companies based on IFRS S2.  The Hong Kong Institute of Certified Public Accountants also published the Exposure Draft for Hong Kong’s sustainability reporting standards (Hong Kong Standards), which align with the ISSB Standards.  With the public consultation completed a few weeks ago, the final Hong Kong Standards are expected to take effect from 1 August 2025.  This will further consolidate Hong Kong’s leading position in the global sustainable finance market.


The trip to Switzerland is closely in line with the Chief Executive’s policy vision set out in his 2024 Policy Address: as an international city fully open to the world, Hong Kong boasts both national and international advantages.  We must embrace changes while staying principled, innovative and flexible in meeting challenges and opportunities.  Furthermore, Mr Xia Baolong, Director of the Hong Kong and Macao Work Office of the CPC Central Committee and the Hong Kong and Macao Affairs Office of the State Council, also highlighted at the Hong Kong Business Leaders Symposium he hosted last week the Central Government’s full support for Hong Kong to leverage its unique position to assist the country in deepening reform and advancing Chinese modernisation.  The symposium reinforced the consensus between the Government and the business sector, and provided a clear direction and path for Hong Kong’s future development.  In the face of global competition and challenges, we need to keep on strengthening our ties with the international market while enhancing our financial market and services.


This trip to Switzerland has boosted my confidence in the future of Hong Kong’s financial industry.  We will continue to connect the Mainland with the rest of the world, and pursue higher-quality development in such areas as asset management, green finance and financial technology.  By adopting the three-dimensional approach of pursuing high-end professional development of financial services, widening international connections, and deepening the cultivation of sustainable opportunities, we will further strengthen Hong Kong’s position as an international financial centre and make greater contributions to global sustainable development.

 

11 November 2024