Secretary for Financial Services and the Treasury Christopher Hui holds a press conference on Feb 24, 2022 to introduce initiatives of the Financial Services and the Treasury Bureau in the 2022-23 Budget. (PHOTO / HKSAR GOVERNMENT)
Secretary for Financial Services and the Treasury Christopher Hui Ching-yu is on the show this week.
Hui says he's not worried whether Hong Kong can maintain its international finance center status, since we still have "ingredients of success", including rule of law and international standards of practice and wealth of professionals. But he said Hong Kong must grab new opportunities in ESG, fintech, virtual assets etc.
Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Christopher Hui.
Chan: This is Eugene Chan and welcome to Straight Talk. Our guest tonight is Mr Christopher Hui who is the Secretary for Financial Services and the Treasury. He serves on the boards of the MTR and Airport Authority among his many other capacities. Needless to say, he has extensive experience in the banking and financial sector. And we have invited Mr Hui tonight to tell us if Hong Kong still has its competitive edge in financial services. Welcome, Chris.
Hui: Thanks for having me, Eugene.
Chan: So Chris, you were appointed the Secretary for Financial Services and the Treasury in 2020. So basically, you have seen through Hong Kong in one of the most challenging periods. Increasingly and more so in recent months, there has been rhetoric saying Hong Kong's international financial hub status is weakened due to the geopolitical tensions and also with a pandemic. But with the recent global financial center index coming up with Hong Kong, ranking number three, that kind of defies all the doubts and accusations. So Secretary, are you surprised with the result of Hong Kong being... still maintained number three?
Hui: I think after all, if you look at what happened over the past few years, if there’s one thing that we can talk about Hong Kong international financial center, I think it's about its robustness. Because after all, if you look at the performance of the stock market, or the overall operation of our market, also at the same time, not just on the stock market side, but on the other aspects of our financial services, including insurance, including private equity, so on and so forth, you can see that on various fronts, we have been performing rather okay, it also actually performed rather well as international financial center. So on that count, I must say our competitiveness, as an international financial center is still there.
Right. So Secretary, as I also look at the other cities that are closely behind us, from fourth to eighth, we have Shanghai, LA, Singapore, San Francisco, and also Beijing. And behind us, they're very close by there's only one point apart. So do you think we can keep our ranking for the next index?
Hui: Hong Kong all along, has been not just competing against other cities, but against ourselves. Because after all, if you look at our role as an international financial center, basically, we are an intermediary, trying to pull together investors who are interested in investing in this part of the world. And also issuers who need money to further execute their expansion. So this role basically has been the lynchpin of our status, international financial center, and all along the competitive edge of ours, including the rule of law, the international business standards, and also the way we operate has been well proven, and it’s still very much the case. So on that count, I must say that we'll continue to work on what we should to enhance our overall role as an IFC, and at the same time try to identify strategic areas that we need to focus on to further our development.
Chan: Right, Secretary. As you know, Hong Kong people are very keen to maintain our position number three, if not better, I know historically, number three is as high as we could get. But with the recent fifth wave, and also with the even Omicron outbreak on the mainland, not to mention with Shanghai locked down, do you think this is going to affect our index next time?
Hui: I think sight should not just look at the index per se, but rather in terms of the overall role of ours as a financial center for the Chinese mainland and the rest of the world. Because you'd like for example, if you look at the global tensions you've just highlighted, and also other issues you just pinpointed as the global issues, Hong Kong is not alone as being affected. But that said, what we should focus on, first of all, the overall operation of all markets to make sure that is efficient and also operating as it should be, and if it is actually the case, that’s number one. And number two, if you look at the areas that we have been focusing on, like for example, on the private equity side, on the family office side, and also on the virtual SSI, we've been focusing on areas where we see new growth opportunities, and this is something that we will continue to do in order to further enhance our role in this area.
Chan: Right so Secretary, a good statement you made, Hong Kong is not alone, facing the pandemic and sort of changing in the economic climate. So as the title of the show asks. Do you think that... I mean, what is your assessment of Hong Kong's future, maintaining it as an international financial hub? And most importantly, being competitive?
Hui: I can answer this question from two areas. First of all, we have to look at the ingredients of our success over the past few decades, including the rule of law, and also the way that we operate in line with international standards, at the same time, the wealth of our professionals here, all these have and will continue to stay. So on that front, I'm not worried. And the second aspect I want to focus on is, not just on the fundamentals, but in terms of how well we will to be able to grab these new opportunities, like for example, on ESG, on fintech and also family office, virtual assets, as I just highlighted, and that's why the government has been focusing on these areas, and also look into ways that we can further enhance our competitiveness in these areas.
Chan: So in short, you are confident to maintain (Hong Kong) to be competitive.
Hui: Yes.
Chan: Right, before we move on to the virtual assets or the fintech, all that you have mentioned. Let's look at Hong Kong's resilience. Looking at the last few years, I think Hong Kong has done very well. I think Dr Rocky Tung was here last week, and he told us that we were down to number six in the international financial centre index. I mean, because of the national security legislation, we've back at number three, but this year's financial market has been quite turbulent. If you look at the stock market, you look at IPO or even at transaction activity, look at the bond market. You’d kind of use the word, lackluster, and not to mention, there's an interest hike coming. So with all this trend happening, does it represent that Hong Kong is not as competitive as before?
Hui: I don't think so. Because after all, our markets go up and down, it’s part of the natural market forces, so to speak, which drives these cycles. And if you look at how our markets have been performing, or operating, despite these cycles, we have been doing that very robustly. And so, on that count I must say we may maintain competitiveness at the same time and will continue to uphold the integrity and also the stability of the market in such a way that will continue to grow in this area.
Chan: Right. One area that we talked a lot in the last few shows is the travel restrictions. We know that some of the firms and people inevitably will need to consider some relocation. So what is your view of such travel restrictions, in particular, on the financial industry?
Hui: As I just highlighted, we are not alone, being affected by the pandemic. And at the same time, we have been engaging very closely with various stakeholders in the state sector, including banks, security firms, PE (private equity) firms, so on and so forth. And we have been also trying to explain to them the rationale of all the policies that we have provided so far in terms of the COVID front. And I think most of them, not just on the financial service side, but also many CGs (consul generals) that we have been seeing very much welcome the measures that we have put forward, back in… a few months back in terms of gradually, in a phased manner, relaxing the certain restrictions now we already have. So on that front, it's very clear that it's a balancing act. On the one hand, when we introduce these measures, we have to regard economic and social needs, and also at the same time the acceptability of the people of these measures. But at the same time, we also have to look into the overall COVID situation, right, which is something that we'll continue to do.
Chan: Right as Secretary, as one of the one of the major pillar industries of Hong Kong is financial services, which accounts for 23 percent of our GDP, it employs 18 percent of our workforce, it's a very high number. Do you think this recent so-called brain drain of people leaving Hong Kong that it's been widely reported, how much is that going to affect the industry? As you said, people are very important. And secondly, what is the government going to do about this?
Hui: The way that people move, I think it's very driven by many factors. But of course, COVID is one. But I think more fundamentally, it is about the development opportunities that a place can offer. Because after all, if you look at a company or individual, when they decide where to locate their home or business, they will also look into whether there's any prospect for them to do so. So on that front, I'm must say like, for example, recently, we just announced the expansion of our connectivity program, in the mainland includes the ETFs (exchange traded funds), at the same time, we are going to introduce new laws to provide for family office tax concessions. And also we're also trying to introduce new laws to better regulate our virtual assets service providers. I think all these are actually development opportunities for the sector, not just for the financial services sector, but also for the economy at large. So on that front, I must say people will generally be driven by all these development potentials and come back to Hong Kong.
Chan: Right. Another item that we always mentioned is about our neighboring city Singapore. I've heard that over there, they have given education subsidies to the citizens during COVID, so that to upgrade them so that they can have a new path or they'll be better trained. Is it something that we can consider to further enhance our resilience, and also build our talent pool?
Hui: Talking about talent pool, I think there are three sources to speak of talents. First of all, there are definitely local new talents, like for those who just graduate from universities. And on that front, we actually have specific programs to help them to find opportunities to work in fintech companies, or in our financial sector, because these are the people who don't have the required experience. And that's why they need a little bit of boost and support to get them on board into the labor market. It's something already done. And we have to actually 2,000 employment opportunities programs, catering for this group of people. And other groups of people apart from the new graduates will be the professionals, because they need to be continuously retooled, or re-skilled, in particular with new financial service trends by ESG and fintech. And it's something that we have been doing, like recently, we have broadened our subsidy program, to encourage more training to be organized by the trade associations in the insurance sector and also security sector, in such a way that they can have tailor made programs for the professionals. It’s something that we continue to do. And the third bit as I just highlighted, is not about just growing or developing the new grads, but also the professionals here, but also bringing in new talent. And so just recently, we have revised our talent pool by revising our talent list in such a way that we can bring in talent on the ESG side, on the fintech side, and also on the asset management compliance side, because these are the people that we see as potential.
Chan: Yes. Okay, Secretary. Let's have a break, and don't go away.
Chan: Welcome back, thank you for staying with us. We have been talking with Chris Hui about Hong Kong's competitiveness as a financial hub. So Secretary, we had been through quite a bit of Hong Kong's competitors as a financial center, and you're quite confident that Hong Kong is fine. Then let's look at the connectivity with the mainland and the opportunities ahead. As you know, with the Basic Law, we have "one country, two systems", and that's exactly the basis, why we have direct access to the mainland capital markets, and enables us to have two functions: as an international financial center, and also as a unique gateway between our motherland and the rest of the world. So I believe you have two connect schemes running when called the south bound trading of Bond Connect, and the cross-boundary Wealth Management Connect. So can you give us a very brief update of how they have been doing?
Hui: In fact, we have more than two, but actually three, if not more, connect programs with the mainland. And number one is definitely the Stock Connect to start with, with Shenzhen and Shanghai. And at the same time, we have broadened that to include a Bond Connect. At the same time, just very recently, last year, we have the Wealth Management Connect basically, it’s focusing on the individuals in terms of allowing them to invest in the bank's products cross boundaries. And also just very, very recently, we announced that there will be an ETF connection. So all basically you can see that we have been pursuing these connections, first of all, to get them started as soon as possible. At the same time, try to broaden the scope of the inclusion in such a way that we can meet the demand for investment and also asset diversification on a part, on the mainland and also internationally.
Chan: Right. It's very good to hear that we have all these connected programs with the mainland, but with the rest of the world as you know, with the increased geopolitical tensions, we hear of stories like with the recent Russia incident, they actually have sanctions against a whole city. That means all that had never happened, could happen now even the SWIFT system they're not allowed to go in. So how prepared are we, should something like that unfortunate may happen?
Hui: In fact, within the government, we have been working closely with our regulators, basically on a cross-sectoral basis, the banking, securities, insurance so on and so forth, to closely monitor the operation of our markets. Not just on the listing side, but also on the OTC (over the counter) side, and also look at different parameters, indicators to make sure that our markets continue to run smoothly. And it's something that we will continue to do. And at the same time, I will say, when you cast the sight a little bit further, even though there are these short term issues or immediate term issues, if we will look at the source of growth globally, definitely it will be Asia, and also China. So over the medium and long-term, I'm sure that Hong Kong as part of the country in Asia will still be the spotlight for growth and capital will still be driven by returns to come back here.
Chan: So you see Hong Kong as one of our things that we always are very proud of is Hong Kong being an international financial center. And as I said earlier, 18 percent of the population is employed within the industry, and accounted for 23 percent of our GDP. So how does the other remaining parts of the Hong Kong population benefit from us being a financial center if we're not in the industry,
Hui: I think that's very true in a sense that finance or financial services is just one element or one aspect of the overall economy. But that said, it's an integral part in a way that is serving other parts of the economy. Like, for example, recently, we have the consumption voucher. Basically, it is a way for the government, not just to boost the economy, but to encourage the wider adoption of digital payments and services. If you look at the figures, like with the introduction of the consumption voucher, we have more than 6 million accounts being opened at the individual level. And also we have more than 120,000 merchants being included in these schemes. So you can see that through these efforts, we're basically building up the digital ecosystem through the wider dissemination of these benefits across the community. So it's just one aspect because look at it globally right now, I will see that there are basically three trends that are ongoing. Number one is about digitalization as just highlighted. Another key trend is another D, which is decarbonization. And that's what ESG our efforts to grow our sustainability finance ecosystem, the issuance in green bonds is so important. And the third D will be about decentralization, because after all, with COVID, and also with people seeing risk in a different light, people do look at ways to see how they can better diversify their assets. And again, Hong Kong plays a unique role here, because we have an international financial center. And by investing in Hong Kong, you can invest into China and the rest of the world.
Chan: Secretary, another term that we often commonly come across as fintech. How is Hong Kong doing that? And what are the challenges should one of our youngsters want to do a startup in Hong Kong? What are the common challenges that they face?
Hui: I think for entrepreneurs who are going to be successful, they would not just see challenges, but opportunities. And on that front, you can see the Hong Kong office, ample of them… I think first of all, it’s the fact that we are a very successful international financial center. So in the face... in the area of fintech, if you are a fintech entrepreneur, basically there's a very strong breeding bed of your entrepreneurial spirit. In a sense, a lot of your applications that are being developed can be readily applied in our established financial institutions. And that's why in fact, the government has been offering a proof of concept subsidy program. The idea is that we will try to partner a traditional financial institution with a fintech company to allow the applications of the letter to be adopted, in our advice.
Chan: Secretary, we have repeatedly mentioned the term rule of law and also regulatory networks. That's something that we're always very proud of. But how do you balance from over stringent requirements that will hurt our competitiveness? Because added compliance costs can lead to missed opportunities. So how would you rate our regulatory framework in Hong Kong? Are we being too strict?
Hui: If you look at how we use those regulatory systems, be the banks or the regulatees rate our regulators, basically, our regulation has been world class. And it has also been not just recognized locally, but also globally, in various reviews conducted internationally about the robustness of the financial system. So on that front, basically, the quality of a financial regulation is one of the key drivers or the key basis for Hong Kong to continue to grow as an international financial center. So of course, we need to continue to identify areas that we need to improve. And that's why we have a number of legislations such as highlighted, including the virtual asset service providers legislation that are ongoing.
Chan: Since you mentioned that I've got a question from a viewer, they want me to ask you that why does a government believe it’s a way to prohibit retail investors from investing via local run platforms, will help to protect them. And this is, especially when our young retail guys actually have a stake in those businesses, do you think we are being too strict and driving the business away?
Hui: After all, if you look at fintech or virtual assets in particular, it is an evolving landscape. So after all, what we've tried to put together is a regulatory framework in such a way that we continue to perfect it and also evolve it with the market. Because all of you agree that while these kinds of virtual assets are a new thing, a lot of these underlying technologies like blockchain so and so forth, could be of much relevance, not just in the financial services side, but also broadly across the economy. So through the introduction of this regulatory framework, we will grow this market, at the same time, we hope that it will grow in a sustainable and also stable manner, in such a way that we can evolve the market going forward.
Chan: Right. Since you're on the matter of virtual assets, I mean, as you know, Hong Kong, actually it was one of the largest ecosystem, the world despite other markets, but another... I mean I got people knowing you coming in, sent me this question, they said, some of the largest exchanges originally with major presence here, such as FTX, Binance and crypto.com, have reportedly moved away and expanded in other markets. As you know, not only Singapore, the US and Dubai are very keen to get a market. So how is Hong Kong, apart from regulation, how is our business friendliness compared to other cities, because this is going to affect the decision whether they will come to Hong Kong?
Hui: Insofar as a business environment is concerned, I think Hong Kong has what it takes to thrive. Because if you look at the quality of financial regulation, and also the way that we managed to attract talent to come here, I think all these are going to stay. And specifically about virtual assets, of course at the outset, the initial stage, we will only allow professional investors to participate in the regulatory framework I just highlighted. But that said, it is an evolving landscape. So we will see in terms of how the market develops and see what we can do to further perfect it.
Chan: Right. Last question of the show. You have brought to the government with extensive experience. You were in banking, 12 years at Hong Kong Exchange and Clearing and then you were involved in the GBA. With the private equity business, you brought a three-step strategy. And also relatively you're quite a young political appointee. So with the upcoming government, will you continue? If you do, what would be your top three priorities for developing Hong Kong's financial industry?
Hui: I think if you take a more holistic view, whoever will be in my role will basically identify the growth areas for Hong Kong. And for me, there are three definitely number one will be the connectivity with the mainland, and the other will be green and sustainable finance, or specifically ESG. And the third bit will be on fintech and all these areas will be the focus.
Chan: Right. That's all the time we have. Thank you, Secretary for coming to update us with the latest government policy initiatives. I think we all want to see a resilient city, flourishing with financial opportunities, despite the challenges posed by our travel restrictions and heightened geopolitical tensions. Have a good week, and see you next time.
