Source: Wang Long, Ta Kung Pao
On December 12, Wang Long, assistant chief executive of Zhongtai International, published an article titled "Hong Kong's unique financial position is difficult to replace" on Hong Kong Ta Kung Pao. The article compared the economic development of Switzerland, Hong Kong and Singapore, and analyzed the progress of Hong Kong in broadening its track and improving relevant laws and regulations.
Key points:
1. The Hong Kong Stock Exchange has become the first exchange in Asia to offer crypto asset ETF products, with a current scale of 300 billion yuan;
2. The SAR government has taken the lead in establishing web3.0 associations and issuing virtual asset management licenses to promote the regularization of this business;
3. Hong Kong may launch a derivative No. 2025 license plate in 11;
4. Overall, Hong Kong has the following advantages. ① Complete infrastructure construction: professional settlement system and financial license system. ② Strong talent attraction: the "High Talent Pass" will be implemented in 2023, which has attracted more than 10 talents to apply; ③ Backed by the advantages of the mainland, various "passes" have been established, such as the "Hong Kong Stock Connect" trading volume and custody volume are increasing day by day.
The following is the original content of the article:
The Fed will continue its rate hike strategy in 2023, which will have a significant impact on Asian assets, including Chinese assets. This article focuses on the current situation of Hong Kong's financial market and compares it with the world's three major financial centers to explore Hong Kong's unique advantages, including Hong Kong's strong appeal due to its unique advantages backed by the mainland, the strong support given by the SAR government to enhance its status as a financial center, and Hong Kong's sound financial and legal systems. It can be seen that Hong Kong's important position as an international financial center will not change.
Hong Kong is backed by the mainland and is still more attractive and irreplaceable than other regions. The SAR government is also actively working to build a better financial environment for enterprises. In addition, Hong Kong's financial and legal systems are relatively complete, suitable for financial institutions to carry out various businesses. Therefore, I believe that the important position of Hong Kong as a financial center will not change.
In terms of asset size, Switzerland, Hong Kong and Singapore rank among the top three global wealth management centers. In terms of year-on-year growth rate, from 2017 to 2022, Switzerland's cross-border wealth growth rate remained at a lower level of less than 10% compared with Hong Kong and Singapore, while Hong Kong's growth rate reached 2019% in 45.
The reasons for Hong Kong's growth are diverse. In 2019, the mainland's Internet industry developed rapidly. The rise of many Internet giants and start-ups drove the mainland's economic growth and created a large amount of new wealth. The holders of new wealth pursue more professional, diversified and globalized asset management services. They tend to choose international financial centers such as Hong Kong to manage their wealth. In addition, from a policy perspective, the mainland implemented a series of financial opening measures in 2019, allowing more funds to flow into the Hong Kong market.
Although, due to the impact of the epidemic and the economic downturn in the mainland in recent years, some high-net-worth clients have transferred their assets from Hong Kong to Singapore, which has had some impact on Hong Kong's expectations for its status as a financial center. However, from the following aspects, Hong Kong's important position as an international financial center will not change.
1. A hub connecting overseas and the mainland
Comparing the three major financial centers of Switzerland, Hong Kong and Singapore, Hong Kong still has strong appeal due to its unique advantage of being backed by the mainland.
Switzerland:Given Switzerland's tax incentives for Europe and the Middle East, as well as its similar culture, Switzerland has a natural advantage in attracting funds from Europe and the Middle East, and is the preferred financial center for cross-border investors from the EU and the Middle East. However, the slowdown in asset transfers from EU countries and the influence of geopolitical factors have affected Switzerland's competitiveness to a certain extent.
Singapore:Singapore is geographically remote and small in size, making it more suitable for attracting capital from non-Chinese Southeast Asian countries, including funds from Southeast Asia, Japan, South Korea and other places, and has advantages in family offices and wealth management.
Hong Kong:Although some funds have been transferred to Singapore in recent years, there is no trend of transferring to Switzerland based on current data. Singapore's financial product diversity and professional talent pool are far behind Hong Kong. Therefore, investors who currently open accounts in Singapore are likely to reinvest their funds in Hong Kong products.
As the hub between overseas and mainland China, Hong Kong is the first choice for both fund and asset management companies if they want to participate in the huge bond market in mainland China. Although some foreign investors have withdrawn due to lack of confidence, this behavior is mostly related to the economic cycle.
Therefore, I should not be too pessimistic about Hong Kong's status as a financial center. Hong Kong will still be the first stop for Chinese institutions and domestic investors to go overseas. Compared with Singapore, Hong Kong's account opening system, account opening costs, and environment are the most friendly to Chinese institutions and domestic investors.
2. Expand new tracks to enhance competitiveness
The Hong Kong SAR government is also actively working to enhance its status as a financial center. On the one hand, it strongly supports the development of virtual assets, green finance and other areas, while at the same time providing strong support for family offices.
Since last year, the SAR government has gradually relaxed its investment policy on cryptocurrencies. On October 10 last year, Hong Kong officially issued the "Policy Declaration on the Development of Virtual Assets in Hong Kong". On December 31 of the same year, the first batch of crypto asset ETF funds in Asia were listed on the Hong Kong Stock Exchange. The Hong Kong Stock Exchange became the first exchange in Asia to provide crypto asset ETF products, and its current scale has reached 12 billion yuan.
At the same time, the SAR government has taken the lead in establishing the web3.0 association and issuing virtual asset management licenses to promote the regularization of this business and build a web3.0 ecosystem. Currently, some financial institutions have obtained virtual asset management licenses.
Green finance includes ESG (environment, society and governance), which is also the focus of the SAR government. The HKMA assisted the SAR government in launching the Green and Sustainable Finance Funding Program. As of the end of June 2023, the total debt value involved in the program exceeded US$6 billion.
In addition, the SAR government has also been vigorously promoting family offices and other areas this year and has provided strong tax exemption policies, which will also enable Hong Kong to become the world's largest offshore financial center.
3. Improvement of financial and legal systems
Hong Kong's financial and legal systems are very complete, with a professional settlement system that is suitable for financial institutions to carry out various businesses.
Hong Kong's financial licenses are clearly subdivided, with 12 types of licenses stipulated, and the improvement of financial licenses will promote the development of the financial market. The issuance of virtual asset licenses today and the 2025th license for derivatives that may be launched in Hong Kong in 11 are both manifestations of the continuous improvement of Hong Kong's financial licenses.
Hong Kong has a sound legal system and strict regulatory provisions, which fully protect the rights and interests of investors and enhance market transparency. Hong Kong continues to rank sixth in the East Asia and Pacific region in the "2023 Rule of Law Index" published by the World Justice Project, and ranks 142rd among 23 countries and regions in the world, maintaining its overall high ranking.
In general, Hong Kong has the following advantages. ① Complete infrastructure construction: professional settlement system and financial license system are complete. ② Strong talent attraction: the "High Talent Pass" will be implemented in 2023, which has attracted more than 10 talents to apply; ③ Backed by the advantages of the mainland, various "passes" have been established, such as the "Hong Kong Stock Connect" trading volume and custody volume are increasing day by day;
In addition, the "Northbound Connect" launched in 2017 allows overseas funds to invest in the mainland's interbank bond market of nearly US$10 trillion through Hong Kong, and has become an indispensable channel for overseas funds to participate in China's bond market, thereby allowing large amounts of funds to be deposited in Hong Kong. The current custody volume is approximately more than US$1 trillion.
In addition, the exchange is also promoting the "Bond Connect" within the exchange system related to corporate bonds overseas. As of June 2022, "Bond Connect" has attracted 6 of the world's top 78 asset management companies and 36 international investors from 3513 jurisdictions.
Therefore, the important position of Hong Kong as a financial center will not change, and it will remain more attractive and irreplaceable than other regions.