Hong Kong Policy Address 2018: From Offshore RMB Business Hub to More Trade Agreements

Hong Kong
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Hong Kong SAR’s Chief Executive Carrie Lam Cheng Yuet-ngor delivered her second policy address today, unveiling about 250 new initiatives on a wide range of issues.

Economic development wise, there are a few highlights from her 40-minute speech.

Offshore RMB business Hub and international asset management center

The Chief Executive said the government aims ride on opportunities from China's Belt & Road initiative and promote Hong Kong as a financial services center for the project.

“We will encourage long-term funds to invest in and finance B&R infrastructure projects, promote Hong Kong’s insurance and risk management platform to enterprises for cross-boundary business, and enhance regional co-operation between Hong Kong and the Mainland,” she said.

She noted that government will continue to explore enhanced enhance access to the Mainland market for Hong Kong financial institutions through the existing platform for cooperation between the two places, which includes exploring further relaxation of shareholding restrictions on Hong Kong financial institutions to set up various types of joint venture securities companies and increase in the number of such firms to be set up on the Mainland.

The government also aims to reinforce the status of Hong Kong as a global offshore Renminbi business hub and deepen the cooperation between the China and Hong Kong so that the variety of RMB-denominated financial products in Hong Kong can be enriched.

According to her, Hong Kong will continue to consolidate its leading role as an asset and wealth management center in the Asia Pacific and promote a more comprehensive development of Hong Kong’s fund and asset management industry.

“Following the commencement of the open-ended fund company regime and the related profits tax exemption arrangement on July 30, 2018, the government is working on the proposal to introduce a limited partnership regime in Hong Kong. The government will also continue to promote mutual recognition of funds arrangements,” she said.

Insurance-linked securities, green bond

She proposes the amendment of the Insurance Ordinance to allow for the formation of special purpose vehicles specifically for issuing insurance-linked securities in Hong Kong.

To support sustainable development and promote the development of green finance in Hong Kong, the government plans to launch a Government Green Bond Program with a borrowing ceiling of $100 billion, and is currently seeking the Legislative Council’s authorization to the issuing the bond.

New tax direction to encourage R&D

According to Lam, the government aims to provide super tax deduction for qualifying expenditure incurred by enterprises on research and development (R&D), an initiative to incentivize companies to increase investment in technological R&D activities.

The government will also continue to expand Hong Kong’s network of Comprehensive Avoidance of Double Taxation Agreements, she added.

Enhancing Hong Kong's financial service hub status 

Lam said the government will work with the regulator and professional bodies concerned to help listed companies in establishing and reviewing their anti-bribery management systems and enhancing the disclosure of their anti-corruption measures.

In addition, Hong Kong will enhance its position as a major platform of capital raising and financing as well as a financial services hub for Mainland Chinese and overseas enterprises by capitalizing on the opportunities brought by the development of the Greater Bay Area and the Bell & Road Initiative (BRI), she added.

Lam also proposes the Implementation of the arrangement for automatic exchange of tax information and measures to tackle base erosion and profit shifting of enterprises to ensure that Hong Kong meets the international standards in relation to tax transparency and tax evasion prevention.

More free trade agreements

Lam noted that the government actively seeks to forge free trade agreements and investment promotion and protection agreements with other economies such as those related to BRI.

“So that we can enhance the trade, investment and people flow with the economies concerned, and open up the B&R and other overseas markets for Hong Kong enterprises and professionals,” she said.