Hong Kong Financing the future

Intrinsically Kong A city built on the financial services industry

City snapshot in numbers

Heart of Asia Supporting the growth of the region

Features New connectivity Catalyst for change Trust in the rule of law

Voices on Hong Kong Intrinsically Hong Kong A city built on the financial services industry Hong Kong has a long and proud history as one of the world’s most prominent trading hubs, with an advantageous geographic location making it integral to routes between Mainland China and the West. This achievement is supported by the city’s dynamic financial services industry, as well as its free market environment, sound legal system, deep pool of talented professionals and transparent regulatory regime. Securities industry While Hong Kong’s key outputs have evolved over time from primarily manufactured products to services, the Securities trading has come city’s role as a connecting hub has remained unchanged, a long way allowing it to develop itself into an international financial centre and nurture a reputation for providing world-class Reports of securities trading in Hong Kong date back to the mid-19th century. The first formal services. market, the Stockbrokers’ Association of Hong Kong, was established in 1891.

Financial and banking system Hang Seng Index was established In 1969, the Hang Seng Index was first published and is now globally recognised as the benchmark An anchor of stability for the Hong Kong stock market. The Linked Exchange Rate System (LERS) was established

Hong in 1983, pegging the to the US dollar within Kong a band of HK$7.75 – 7.85 to US$1. According to a statement published by the IMF Staff Mission in 2019, the LERS serves The trading hall that ran for as an anchor to stabilise Hong Kong’s economy. three decades The trading hall located at Exchange Square opened in 1986 following the merger of Hong Kong’s four stock exchanges at the time. The Systemically important financial centre hall closed for its original purpose in 2017, Hong Kong’s inclusion in the Financial Stability Board, amid the rise in electronic trading, which began formerly the Financial Stability Forum, which was established in the city in 1993. by the G7 in 1999, is a recognition of the city’s status as a systemically important financial centre.

Hong Kong Exchanges and Clearing Efficient interbank payments The , Futures Exchange and Introduced in 1996, the Hong Kong dollar Real Time Gross Hong Kong Securities Clearing Company Settlement system enables safe and efficient settlement of merged in 2000 to become Hong Kong Hong Kong dollar-denominated interbank payments. The Exchanges and Clearing Limited. system now also allows interbank transfers in US dollars, euros, and renminbi. Regulatory framework

Four regulators Over the years, four financial regulators have been Finance industry landmarks established in the city to oversee and maintain financial stability in Hong Kong – the Hong Kong Hong Kong is renowned for its iconic skyline. This Monetary Authority (1993), the Insurance Authority distinctive feature is an important part of the story (2015), the Mandatory Provident Fund Schemes of how financial services have shaped the city Authority (1998) and the Securities and Futures over time. Commission (1989). 366 362 (2019) Combat financial crime (2018) Since 1991, Hong Kong has been a member 309 of the Financial Action Task Force (FATF), an (2015) inter-governmental body formed to develop and promote national and international policies 249 to combat money laundering and terrorist (2011) financing. The city fully subscribes to the FATF’s 212 (2007) recommendations in these areas.

177 (1997)

120 (1993)

51 (1987) Hong Kong nominal GDP (US$ billion) Source: World International Commerce Centre The 108-storey Two International International Finance Centre Commerce Centre (Two IFC) was the world’s 3.8 second-tallest building (1970) Standard Completed in 2003 and when it was completed soaring around 420 in 2010, and still features Chartered metres above the Central prominently on the Bank Building waterfront, Two IFC Kowloon skyline. boasts 88 floors – a lucky The 42-storey building number in Chinese culture. named after another In October 2003, the note-issuing bank was Tower Financial Times “wrapped” completed in 1990 the building in the world’s Designed by the late and rises 191 metres biggest newspaper HSBC Main Chinese-American in height. architect I.M. Pei, the promoting the launch of its Building tower was completed Asian edition. Designed by British in 1989 and was the Connaught architect Norman first building outside the Centre Foster, the building was United States to reach a completed in 1986. height of 305 metres. Now known as At the time, it was the Jardine House, it most expensive building was built in 1972 in the world. and at the time was the tallest building in Asia.

1 City snapshot

Business hub Hong Kong One of the world’s top 5 in numbers competitive Hong Kong strives to uphold its reputation as a premier international financial centre. Those economies for doing business in the city know that they are in an enabling environment driven by healthy competition, economic efficiency, an innovative financial services industry and a forward-thinking, consecutive years entrepreneurial culture. 16 since 2005 Renminbi The world’s largest offshore renminbi hub, with the deposit pool of hours’ flight RMB 5 time billion from half of the world’s 757.2 population as of 31 December 2020

Banking Around Home to over 70 75% of the world’s 100 of the world’s cross- boundary renminbi payment largest transactions were processed via Hong Kong in 2020

Asset and wealth management

Asset and wealth management sector managed close to US $3.7trillion in 2019, of which 64% came from foreign investors

2 FinTech Talent and economic value

One of the most important fundraising cities in Asia for growing . From 2014 to 2019, Hong Kong-based FinTechs raised around 272,600 US people employed $1.5 billion in the financial sector in 2019, accounting for 7.1% of the workforce

Insurance market Insurance density High concentration (insurance premiums per capita) of US$9,706 in 2019, of insurers in Asia, with 165 authorised the highest in Asia and firms operating as of the second-highest globally end of September 2020

Capital markets 2,538 companies listed on the Stock Exchange of Hong Kong, with a total market capitalisation No.1globally of around for Initial Public US Offering funds $6.1trillion, in seven out of the raised past 12 years as of the end of December 2020

Green finance US $10 billion worth of green bonds were arranged and issued in 2019

3 Heart of Asia Supporting the growth of the region Hong Kong’s role as an integral trading hub and one of Asia’s premier financial centres makes it a vital market for companies trading in the region, and a key link between Mainland China and the West. Hong Kong is perfectly placed to enable and support Asia’s growth, in which much is destined to come from the Guangdong-Hong Kong- Macao Greater Bay Area (GBA) – a Chinese Government initiative to establish a globally competitive economic cluster.

our flight time Uniquely competitive in Asia 5-h zone

A trusted legal system that makes it the only common law city in China

Rule of law that gives it international credibility Beijing in helping to resolve trade disputes and intellectual property conflicts in the region South Japan Korea

Shanghai

Liquidity of funding, as Asia’s financial hub India Taiwan Vietnam Laos Hong Kong

Thailand A low and simple tax system, without Philippines VAT or GST, capital gains tax, withholding LOW Cambodia tax on investments, estate duty or global TAX taxation Malaysia Singapore One of the world’s freest and most services- oriented economies, with services sectors accounting for more than 90% of GDP Indonesia

Press freedom, allowing for open, free and reliable information

Superb connectivity, boasting key rail and infrastructure connections with other GBA cities and offering access to half of the world’s population in just five hours’ flight time

4 The GBA at a glance

The GBA, as an economic cluster, will rival the San Francisco Bay area, New York Metropolitan area and the Greater Tokyo Bay area. The cluster covers nine municipalities in southern China’s Guangdong province, as well as the two special administrative regions of Hong Kong and Macao. Hong Kong, as a major international financial centre, is well positioned to enhance the GBA’s financial capabilities.

our flight time 5-h zone

Zhaoqing

Guangzhou Huizhou

Dongguan Foshan

Zhongshan Shenzhen

Jiangmen Hong Kong, Macao, Zhuhai Guangzhou and Macao Hong Kong Shenzhen are the core cities of the GBA, as well as the major drivers of the region’s development

Quick facts about the GBA (figures as of 2019)

• GDP: over US$1.6 trillion (more than that of Australia), • With cross-boundary infrastructure projects such by 2030, the region’s GDP could top US$4.6 trillion as the Hong Kong-Zhuhai-Macao Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link in • Population: over 72 million (more than that of both the service, travel time within the region is reduced to within UK and France) an hour

• Land area: over 56,000 square kilometres – less than • Green Finance is one of the key strategic initiatives of the 1% of China’s land mass, but produces 37% of the GBA and Hong Kong is poised to become an international country’s total exports and generates 12% of its GDP green finance centre in the region. Green bonds arranged and issued in Hong Kong amounted to US$10 billion in 2019, supported by a diverse pool of issuers

5 Features

Hong Kong enjoys the dual advantage Cross-boundary of being a part Stock Connect of China, while schemes link the Stock Exchange of maintaining the Hong Kong with those of global networks Shenzhen and Shanghai

The Mutual Recognition of Funds scheme was created to develop Hong Kong as a global asset management centre

Bond Connect Wealth Management allows international investors Connect pilot scheme to access the sizable domestic Chinese interbank bond market framework was unveiled and would be rolled out as soon as practicable

6 New connectivity

Hong Kong’s history has been shaped Kong is well positioned to create those of Shenzhen and Shanghai. by its role as a connector for trade value for both Mainland Chinese These schemes have increased cross- and a gateway to Mainland China, and international firms looking to boundary transactions by making bringing remarkable opportunities for participate in GBA commerce. While available for trading over 2,000 listed both the city itself and for companies being a part of China, it can maintain equities across three markets and operating here. Hong Kong provides a its global outlook and play five have presented investors with new unique platform for firms based near instrumental roles as opportunities for liquidity pools and direct access to and far to invest, raise money and sell the GBA develop further: opportunities in Mainland China.

• Regional financial services centre Bond Connect, launched in July 2017, allows international investors to access • Go-to “dealmaker” and “dispute- China’s sizeable interbank bond market resolver” for the GBA, backed for the first time. This has been made by its common law system and possible through closer connections independent judiciary between Mainland and Hong Kong-based financial infrastructure institutions. • Business hub with expertise in a full range of mature business services, In the fund aspect, Hong Kong enjoys the including accountancy, project strength as a global asset management management and risk management centre through the implementation of the Mutual Recognition of Funds schemes. products in Mainland China, where • Key driver of innovation and technology The schemes cover jurisdictions including ongoing economic reforms and an Mainland China, Switzerland, France, opening-up of its markets will bring • Provider of creative services across the United Kingdom, Luxembourg, the further benefits to the world. design, marketing and architecture Netherlands and most recently, Thailand. Connected cities – Hong Kong’s tertiary institutions, research The schemes have streamlined the the Greater Bay Area capabilities, robust intellectual property process of distributing Hong Kong- protection regime and free flow of domiciled funds in the partnering The Guangdong-Hong Kong-Macao information mean that the city is well jurisdiction and vice versa. Investors are Greater Bay Area (GBA) is a strategic placed to serve institutions that want to be now able to access a more diverse range initiative to create one of the world’s based in the innovation and technology of financial products and opportunities. leading economic clusters. The GBA hub of the GBA. includes Hong Kong, Macao and The cross-boundary Wealth Management nine cities in Guangdong province, Connected markets – Connect (WMC) Pilot Scheme in the representing a population of over GBA is underway. When the WMC 72 million and a projected GDP of equity, bond and asset & is implemented, the two-way wealth US$4.6 trillion by 2030. wealth management management and investment channels Stock Connect schemes, first are expected to expand. As an international financial centre established in November 2014, link and an innovation hub with physical Hong Kong’s stock exchange with infrastructure connectivity, Hong

7 Features SenseTime, an artificial intelligence venture, became the first home- grown “unicorn” with valuation surpassing The Technology US$7.5 billion Talent Admission Scheme has offered a fast-track arrangement for the admission of R&D talent Advocating Powering innovation innovation Hong Kong has allocated over HK$100 billion to promote its I&T development Cloud computing and data centres have been established by tech giants Catalyst for change

Looking to the future, Hong Kong has For example, the Technology Talent depth insights into critical trends in a strong foundation to build upon. Admission Scheme, announced in 2018, technology that affects central banking. Its global reputation for connectivity has offered a fast-track arrangement for It serves as a focal point for a network and financial services is conducive the admission of non-local research and of central bank experts on innovation. to shaping tomorrow’s economy and development talent. pioneering fresh approaches to finance. Funding innovation Moreover, leveraging its expertise in Powering innovation Hong Kong offers a number of liquidity innovation and technology (I&T) in Hong Kong has received a significant options for innovative firms seeking the context of the GBA, Hong Kong amount of cutting-edge I&T infrastructure public or private capital: has the potential to establish regional and investment in recent years: leadership and play an integral role in • Hong Kong launched a HK$2 billion enabling technological disruption. • Tech giants such as Google, Alibaba, (approximately US$256 million) , Amazon and Microsoft have Innovation and Technology Venture Advocating innovation established cloud computing and Fund in 2017 (another HK$2 billion Hong Kong has allocated over HK$100 data centres. As at September 2020, was injected according to the billion (approximately US$12.8 billion) Hong Kong accounted for 54% of 2020-2021 budget) to encourage to promote Hong Kong’s Innovation & total investment into the Asia-Pacific investment in local innovation and Technology (I&T) development through data centre market in that year. technology start-ups. The fund a variety of means, including investing welcomes participation from local in infrastructure and R&D, nurturing • Hong Kong is home to at least eight and overseas venture capital funds start-ups and growing new industries. unicorns. as co-investment partners. 2,690 To support capacity building, the city projects have been approved since • The Bank for International Settlements has been taking a proactive approach to this was launched as of the end of (BIS) set up a BIS Innovation Hub Centre attracting talent from around the world. December 2020. in Hong Kong in 2019 to develop in-

8 Hong Kong launched a HK$2 billion Innovation and Technology Venture A digital technology Fund in 2017 (another ecosystem with over HK$2 billion was 1,500 companies and injected according to start-ups in the 2020-2021 budget) Cyberport

Funding Structuring More than 890 innovation innovation technology companies, local and from overseas, are operating at Hong Kong Science Park A new listing regime was put in place to make it easier for biotechnology and innovative companies to list in Hong Kong

• Hong Kong has become the largest technology firms are now operating at • Together with seven banks in Hong biotech fundraising venue in Asia Hong Kong Science Park. Kong, the HKMA launched a trade and the second in the world. Since finance platform utilising blockchain the Stock Exchange of Hong Kong • The Securities and Futures Commission technology in 2018. instituted a new listing regime to has adopted a new regulatory make it easier for biotech firms and framework for virtual asset trading • Also in 2018, the HKMA launched innovative companies with weighted platforms. In December 2020, it issued the Faster Payment System, which voting rights structures to list, leading the first license for operating regulated enables interbank payments easily tech players have chosen to grow brokerage and automated trading and instantly, operates on a 24/7 their venture funds in Hong Kong. services for digital assets. basis and supports Hong Kong dollar and renminbi payments. Structuring innovation The Hong Kong Monetary Authority (HKMA) has also been playing a leading The Insurance Authority has been Supported by public policy, Hong role in driving FinTech and innovation: assisting insurance firms to tackle Kong has been laying the foundation Insurtech-related regulatory issues for a FinTech ecosystem. Hong Kong’s • The HKMA has issued eight virtual through various initiatives. These digital business parks house a growing banking licences. All the licensees initiatives include a fast application number of tech firms and accelerators. have launched their business. The track for new insurers owning and In one of them, Cyberport, there is a development of virtual banking, as operating solely digital distribution digital technology ecosystem with over part of Hong Kong’s commitment channels, an Insurtech Sandbox to 1,500 companies and start-ups, and to Smart Banking Initiatives, is seen facilitate pilot run of innovative Insurtech the city intends to develop more space as essential to advancing financial applications, etc. To date, a total of there by building Cyberport 5. On top innovation, customer experience and four virtual insurer licenses have been of this, over 890 local and overseas financial inclusion. granted with a view to delivering service optimisation, value enhancement and customer convenience. 9 Features

Trust in the rule of law

Hong Kong’s legal system is highly Global recognition ranked internationally and noted for its The Basic Law, a fundamental well-established common law heritage. constitutional document of Hong Kong, The city’s commitment to the rule of ensures that the legal system here will law, and its adherence to the values continue to give effect to the rule of of transparency, trust and fairness, law. This system is safeguarded by an have been integral to its growth as a independent judiciary, which exercises financial centre. its powers of final adjudication free Businesses from all over the world, from interference. This independence including the top international financial and freedom give Hong Kong’s courts institutions, have been drawn to open a global reputation and recognised offices in the city. A cornerstone of authority, and for this reason are often Hong Kong’s transformation into a referenced by other common law globally renowned financial centre is jurisdictions. the knowledge that companies can operate in and be protected by a just legal system.

nd in Asia for judicial independence according to Court of the World Economic Forum’s Global Competitiveness Final 2 Report 2019 Appeal has developed a leading reputation globally

10 Financial 10,433 transparency and fair competition local solicitors safeguarded by a and A leading centre for dispute strong 1,657 regulatory foreign lawyers resolution practice in the city in Asia-Pacific regime

Dispute resolution local authorities such as the Hong Supporting all businesses Hong Kong is a leading deal-making Kong International Arbitration Centre. Conducting business in Hong Kong and dispute resolution centre across In December 2017, Hong Kong and means having peace of mind that Asia-Pacific, with the presence of several Mainland China signed an agreement contracts will be enforced, intellectual world-renowned legal and dispute to enhance collaboration in project property will be protected, and disputes resolution organisations, including interfacing and dispute resolution will be settled fairly. the Secretariat of the International services under the Belt and Road Court of Arbitration of the International In addition, Hong Kong has implemented Initiative. Also, the development of streamlined legal procedures for Chamber of Commerce Asia Office; Hong Kong as a major legal and dispute the Asia Pacific Regional Office of registering a company or setting resolution services centre in Asia- up a business. This is important for the Hague Conference on Private Pacific currently forms part of the International Law; and CEDR Asia enabling the city’s start-up community, development plan of the GBA. Hong encouraging innovation and incentivising Pacific, part of the Centre for Effective Kong is therefore ideally positioned to Dispute Resolution. These regional growth companies to incorporate in resolve any disputes arising from Hong Kong. organisations are complemented by these initiatives. Robust regulation Independent agencies are responsible for overseeing the enforcement of industry regulations related to banking, securities and futures, insurance and retirement schemes.

To protect the vitality of Hong Kong’s financial services industry, regulations evolve in tandem with developments in the market. Moreover, regulators actively engage with industry stakeholders to A legal ensure all regulations are calibrated to address real needs and offer suitable system protections. This approach to regulatory oversight underscores Hong Kong’s commitment to fair competition and with well financial transparency. enforced contracts and property rights

11 Voices on Hong Kong Why Hong Kong? Insurance

Hong Kong’s continued rise is best understood by those who call it their professional home. Stock Its reputation as an international finance hub exchange has been reinforced by decades of financial dynamism, facilitated by the world’s top companies and the professionals doing business here. In this section, we hear about Hong Kong’s position as an international financial centre from some of the city’s most accomplished business Don Kanak and thought leaders. Chairman Prudential Insurance Growth Markets

Don Kanak is Chairman of Prudential Insurance Growth Markets, and Laura M Cha Chairman of the Prudence Foundation. He has lived in Hong Kong for over 15 Chairman years, and worked in Asia for over 30 HKEX Group years in insurance and investment.

As the former Vice Chairman of the China Securities Regulatory Commission and the current Chairman of the Hong Kong stock market Laurence Li operator, Cha has extensive regulatory With a vibrant domestic market experience in the finance sector, and and outstanding connectivity to Chairman has played a pivotal role in developing Mainland China and the rest of Financial Services Development Council the city as a competitive, well diversified Asia, Hong Kong is increasingly capital market for global investors. attractive to multinational insurers as a location for Hong Kong is a true international regional, international and financial centre. It has a pool of global headquarters. Like other agile professionals who bring new companies, our Group has been Hong Kong is the ultimate opportunities every day to our doing business in Hong Kong for connector between East and West well-established system of open a very long time. Since October and has long been a preferred markets, regulations, and the rule 2019, we have been headquartered listing and fundraising venue in the of law. in London and Hong Kong with the global arena. The city’s inherent Hong Kong Insurance Authority as The prosperity in Asia continues to institutional strengths, such as Group supervisor. provide a wealth of opportunities, access to deep capital pools, including new major initiatives in China, sound regulatory regime and With the implementation of the in particular for the Greater Bay Area. respected legal system provide Outline Development Plan for the But developmental challenges and the a solid foundation for companies Guangdong-Hong Kong-Macao geopolitical situation are also getting to raise funds and the basis on Greater Bay Area (GBA), Hong more complex. In this environment, which international investors Kong’s insurers see tremendous having good people and good operate with confidence. potential for further growth across information is key. Protection provided a huge, integrated and innovative The world continues to evolve by strong institutions is also important. GBA market. and we need to be in the front As a lawyer who began his career seat. Hong Kong will build on its in New York and now works past achievements to maintain internationally, I have a first-hand its global financial leadership into view of how much institutions in the future. To succeed in the new Hong Kong help businesses manage economy, Hong Kong will use its risks and protect the fruits of their competitive advantages to maintain investments. I am proud of our our international relevance through system and confident that Hong adaptability and keeping an open Kong will continue to be a leading and innovative mindset. centre for financial services globally as well as a great location for the international investment community.

12 Technology

Banking Investment banking

Jim Lai Vice President Tencent Holdings Limited Chairman Amy Lo Fusion Bank Limited

Chief Executive Under Jim’s leadership, Tenpay UBS Hong Kong introduced many innovative products Dr Haizhou Huang and services which propelled the As Co-Head for UBS Wealth platform into its leadership position in Managing Director Management in APAC and Chairperson mobile payments in mainland China. China International Capital Corporation of the Executive Committee of the Jim led Tencent Financial Technology Hong Kong Private Wealth Management for years before taking up the founding Dr Huang is a senior executive and Association (PWMA), Amy is dedicated chairmanship of Fusion Bank in 2019. leading economist, with over thirty to fostering the growth of the private He currently serves on a number of years of experiences across academic, banking industry and promoting Hong key government advisory committees policy institutions and financial services. Kong as the world’s leading wealth including the FSDC. He heads up the global equities management hub. department at CICC. He was formerly a senior economist at International Monetary Fund.

Strategically located in the As wealth in Asia continues to Guangdong-Hong Kong-Macau grow, Hong Kong’s private wealth Greater Bay Area, Hong Kong management industry is presented is part of the fastest growing As one of the top international with exciting opportunities. The and most innovative region in financial centres,Hong Kong city is strategically located at China. As a Hong Kong native will continue to benefit the heart of Asia which is the focusing on Fintech in neighbouring tremendously from global, global economic powerhouse, Shenzhen in the past decade, regional and especially China’s and has a long tradition of I have witnessed the rise of growth and development. serving as an important gateway Shenzhen as a thriving technology Three key factors are especially for capital flows into and out of centre and the growing partnership important: the strong global liquidity the region. Its strong financial between Hong Kong and Shenzhen supported by the enormous infrastructure is highly valued as an integrated innovation hub. quantitative easing by the Fed by high net worth individuals as and fiscal stimulus by the US they seek to protect and grow The introduction of virtual banking government; the huge demand for their wealth. is putting Hong Kong firmly on the financing due to strong global and global map of Fintech innovations. regional economic recovery; and Additionally, Hong Kong’s proximity Success of the Mutual Market China’s rapid economic growth, and connections to Mainland Access schemes between the strong technological innovations China also allow us to capture the Mainland and Hong Kong financial and further opening up. Hong Kong opportunities in the Greater Bay markets illustrate the inventive role would constantly reinvent itself to Area (GBA), including the growing we can play as the Mainland opens capture these exciting opportunities demand for cross-boundary wealth up to the world. And I believe this and tackle the uncertainties of the management and investment is only the beginning. macro environment. services of GBA residents. Through collaboration and constant dialogue, the industry will continue to work with the government and relevant stakeholders in order to protect and grow Hong Kong’s unique role as the leading wealth management hub in the region and globally. The city where global ambitions are realised

Hong Kong is trusted the world over as the premier location for financial services firms to grow and thrive. Its role as a connection hub will continue to facilitate access to Asia’s most important markets.

The Financial Services Development Council (FSDC) is at the forefront of Hong Kong financial services industry’s development. The FSDC’s work is facilitated through collaboration with relevant industry stakeholders and is focused on shaping the future of finance in Hong Kong and beyond.

Financial Services Development Council [email protected] www.fsdc.org.hk Financial Services Development Council (@FSDCHK)

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