*By Oriol Caudevilla
Hong Kong Chief Executive Carrie Lam Yuet-ngor unveiled last Wednesday, November 25, the much-awaited 2020 Policy Address, in which several initiatives to revitalize Hong Kong´s economy were listed while pledging to uphold the One Country, Two Systems principle.
Undoubtedly, 2019 and 2020 have been thus far two very difficult years for Hong Kong. However, after each major crisis, Hong Kong has always emerged stronger, and this time it will be no different, since it is ready to grasp any opportunity that promises to secure its regional financial dominance and its inhabitants’ wellbeing. We can take assurance from the fact that Hong Kong went through the Asian financial crisis, the SARS outbreak, the global financial crisis and the current pandemic without any significant outflow of capital.
There are two aspects of the Policy Address that I would like to focus on in my article, the two of them related to the economic measures: first of all, those policy initiatives laid out to consolidate and enhance the status of Hong Kong as an international financial center and, secondly, those policy initiatives established to develop Hong Kong into an international innovation and technology hub.
As to consolidating Hong Kong´s status as an International Financial Center, the Policy Address makes reference to maintaining financial stability, expediting the implementation of the GBA cross-boundary wealth management connect scheme, promoting real estate investment trusts (REIT) in Hong Kong, launching the FinTech Proof-of-Concept Subsidy Scheme to encourage traditional financial institutions to partner with start-ups to conduct Proof-of-Concept projects, conducting public consultation on the establishment of a licensing regime to monitor virtual asset service providers, among others.
In regard to developing Hong Kong into an international innovation and technology hub, the Policy Address lays out the next policies: jointly developing the Shenzhen-Hong Kong Innovation and Technology Co-operation Zone with Shenzhen, launching a five-year Global STEM Professorship Scheme to attract outstanding R&D talent from overseas to engage in R&D work in Hong Kong, releasing the Smart City Blueprint for Hong Kong 2.0 in December 2020 as well as launching the iAM Smart one-stop service platform in the same month for the delivery of a number of government and public utility electronic services.
All these measures laid out by the Policy Address must be welcomed and are undoubtedly a relevant step forward. As I mentioned in my article “Policy Address should focus on jobs, retailers, innovation” (China Daily HK Edition, November 13), Hong Kong has a strong R&D capability through its world-class universities and research centers, but its overall R&D expenditure still accounts for a relatively small proportion of GDP. According to the Census and Statistics Department, Hong Kong’s R&D expenditure as a ratio to GDP was at 0.86 percent in 2018, while the Mainland’s hit a record high at 2.23 percent of its GDP in 2019.
Nevertheless, even though Hong Kong still has room to improve, the 2020 Policy Address seems consistent with the objective of keeping Hong Kong´s preeminent role as one of the world´s most important financial centers while fostering the development of technology and innovation.
Those economies that will thrive and prosper the most in these coming years are those which will fully embrace innovation. If Hong Kong embraces it (based on the latest developments and based on the Policy Address, HK seems to be moving in the right direction indeed), its future will be much brighter.
It seems impossible for me to think of any major financial center these years to come which will only focus on traditional finance, leaving aside innovation. Technology and innovation are key, the present and the future.
In this sense, as mentioned in my article “Hong Kong is moving towards a new era of Fintech” (Macau Business, November 9), the recent Hong Kong FinTech Week showed us that Hong Kong has taken it a step further, by becoming ready to move towards a new era of FinTech. In his opening keynote, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue announced that Hong Kong has embraced a new era for smart banking, and shared four main initiatives that the city was undergoing to prepare its financial sector for the future: a new data strategy, trade finance, CBDCs and RegTech.
What does a country or region need to thrive and innovate? Bright people and new ideas, of course, but also adequate government support. And Hong Kong has it all: there is no doubt that Hong Kong has bright people, and, as stated by the Policy Address, it is clear that it has the adequate government support as well.
In this sense, Hong Kong has already been for decades one of the world´s most important financial centers and will remain so, but it is wise to keep improving and embracing technologies in order to keep its leading position and never being left behind.
*The author holds an MBA and a doctorate in Hong Kong real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company and he has given seminars at HKU on Shadow Banking in China and at several universities in Macau on China´s new digital yuan. He is currently a member of the Blockchain, Digital Banking and Greater Bay Area Committees at the Fintech Association of Hong Kong (FTAHK).