Now that the world has rung in 2023, it seems the perfect time to analyze what opportunities and challenges lie ahead for Hong Kong. Undoubtedly, 2022 started badly in Hong Kong, but the year ended in much better shape, with most of the population much more immune to the COVID-19 virus and with Hong Kong having done away with most anti-pandemic restrictions.
The Hong Kong Special Administrative Region currently faces several challenges. To me, the biggest one is the fact that the city has experienced a demographic change since the pandemic started, which also puts Hong Kong at risk of facing a talent shortage. If the HKSAR wants to maintain its role as one of the major financial centers in the world, it needs to plan how to attract (or re-attract) talent and investment.
The HKSAR government is well aware of this issue. The Asian Financial Forum, held on Wednesday, was reportedly a “thrilling start to 2023” and pushed the city back into the fast lane for attracting inflows of both capital and talent. Earlier, in his 2022 Policy Address, Chief Executive John Lee Ka-chiu set this as the main goal to bring hope and confidence back to residents.
One area that the CE covered extensively was that of attracting talent from around the world. For this, the chief executive said the government would set aside HK$30 billion ($3.82 billion) to attract businesses to the city, and launch a Top Talent Pass Scheme to entice professionals to pursue their careers in Hong Kong. According to Lee, “Over the past two years, the local workforce shrank by about 140,000. Apart from actively nurturing and retaining local talents, the government will proactively trawl the world for talents.”
For example, among other measures, people who earn an annual salary of HK$2.5 million or more, and graduates from the world’s top 100 universities who have had three years of work experience over the past five years, will be eligible for a two-year pass for exploring opportunities in Hong Kong. Foreigners who enter Hong Kong under talent attraction programs, buy a residential property, and become permanent residents will be able to apply for refunds of the Buyer’s Stamp Duty and New Residential Stamp Duty for their first property, as Lee explained.
With these measures, Hong Kong should be able to navigate through these challenges and maintain and enhance its role as one of the world’s most important financial centers. At the AFF, there were indications that the city is accelerating its transformation of the financial sectors to outpace its competitors, especially Singapore.
The Chinese believe challenges are the harbingers of opportunities. But what about the opportunities ahead for Hong Kong? The city will remain one of the most important financial centers in the world, and offers many opportunities for companies and individuals, both local and from all over the world.
Hong Kong is currently involved in many projects that will not only help it maintain its status as one of the world’s most important financial centers, but will also enhance it, such as the Guangdong-Hong Kong-Macao Greater Bay Area development. In China’s 14th Five-Year Plan (2021-25), the central government again recognizes Hong Kong’s potential at the national level and has reaffirmed its commitment to support the HKSAR in strengthening its status as an international financial, trade and logistics hub.
In addition to the huge importance that the GBA has for Hong Kong’s future, we can also mention other opportunities for the city, such as its fintech development, the HKSAR’s entry into the Regional Comprehensive Economic Partnership and the connect schemes.
As for fintech, the recently held Hong Kong FinTech Week, which I had the pleasure to participate in as a speaker, highlighted the importance of fintech in Hong Kong (and the whole GBA), and it showed once again that, despite the last three and a half years of hardships, and despite the competition from other financial centers, Hong Kong remains as strong as ever. Hong Kong, Macao (to a lesser but relevant extent) and the rest of the GBA are indeed increasing their roles as fintech hubs. Last year, for example, the Hong Kong Monetary Authority unveiled Fintech 2025, its new strategy aimed at driving Hong Kong’s fintech development over the coming years, based on five pillars; and the HKSAR’s pivoting toward a friendlier regulatory regime for digital assets shows that Hong Kong is ready to become an even more important virtual assets center/crypto hub, and also that the “one country, two systems” principle is working perfectly.
The FinTech Week and the Global Financial Leaders' Investment Summit were not the only high-profile events held recently in Hong Kong. Right now, the Asian Financial Forum (AFF) is taking place. The16th Asian Financial Forum, organized by the HKSAR government and the Hong Kong Trade Development Council, is once again be held at the Hong Kong Convention and Exhibition Centre From Jan 11 to 12, bringing together global financial leaders in person. The event is also accessible virtually.
The city’s entry into RCEP — one of the world’s largest free trade pacts — would create opportunities not only for the city, but also for other members of the group, as recently stated by the chief executive. Hong Kong’s accession would indeed be great news for the HKSAR and the Chinese mainland, as it would reinforce their stance on multilateralism and an international free trade framework. As one of the world’s key financial and trading centers, a global city and the gateway to the GBA, as well as the rest of China, Hong Kong can provide essential project financing and professional services support, innovation and technology. It also has the capacity to be a hub for Chinese State-owned enterprises to team up with other RCEP members in financing joint investments and opportunities in countries and regions involved in the Belt and Road Initiative.
As for the connect schemes, the mutual stock market access between the Chinese mainland and Hong Kong (Stock Connect) was recently expanded to include eligible exchange-traded funds, allowing Hong Kong and foreign investors to trade ETFs listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange, and those from the mainland to invest in Hong Kong-listed ETFs, thus enhancing Hong Kong’s role as the mainland’s offshore capital hub. This all proves that the city’s new links with mainland financial markets are beneficial.
In addition, as I mentioned in my article City Needs to Lift Remaining COVID Restrictions (China Daily, Dec 23, 2022), the anti-COVID-19 measures in place until Dec 29, while much better than previously, discouraged many from visiting Hong Kong, as travelers were still required to take a PCR test on arrival at the airport and also on day two, causing Hong Kong to lose potential tourists and talent, at a time when other financial centers were willing to take advantage of Hong Kong’s situation.
However, the HKSAR has since, very wisely, dropped entry restrictions, which will undoubtedly allow the city to make the most of 2023 after fully reopening again to the world.
To sum up, Hong Kong is currently involved in many projects that will not only help it maintain its status as one of the world’s most important financial centers, but will also enhance it, such as the GBA development, Hong Kong’s development of fintech and the city’s new links with the Chinese mainland’s financial markets. Hong Kong still has some challenges ahead, namely regarding the remaining COVID-related restrictions, but the prospects for 2023 seem bright nonetheless — much brighter than over the past three or four years.
The author is a fintech adviser, researcher and a former business analyst for a Hong Kong publicly listed company.
The views do not necessarily reflect those of China Daily.