Financial Services Industry
76. Hong Kong has long been leading Asia in financial services industry. Looking ahead, China will continue to take centre stage in driving global economic development. We must upgrade and enrich our pool of financial talent if we are to maintain our leading edge and firmly remain the most competitive financial centre in Asia.
77. To this end, I have asked the Hong Kong Monetary Authority (HKMA) to make plans to set up an academy of finance in collaboration with the Financial Services Development Council, the financial sector, tertiary institutions, professional training bodies and regulators for promoting cross-sector expertise sharing and collaboration in applied research.
78. The Financial Leaders Forum I chair has laid down the general principles on developing Hong Kong into a preferred listing platform for emerging and innovative enterprises. The new regime should be in place in the second quarter of this year after the Stock Exchange of Hong Kong (SEHK) has consulted the market on the proposed specific arrangements and the amendments to the Listing Rules. It will boost Hong Kong's competitiveness as a listing platform and attract listing applications from emerging and innovative enterprises, including large enterprises with weighted voting rights structure and pre-revenue biotechnology enterprises. We will ensure appropriate safeguards for investors and uphold the quality of our market under the new regime.
Developing Bond Market and Green Finance
79. We have seen rapid growth in the Asian bond market in recent years, with US$300 billion worth of US dollar bonds issued in Asian economies other than Japan last year, 60 per cent more than 2016. We expect that the Asian bond markets will continue to expand. To encourage more investors and issuers from the Mainland, Asia and along the Belt and Road to participate in the Hong Kong bond market, the Government plans to launch an array of measures to enhance our competitiveness, including attracting corporate bond issuance, facilitating investors participation and broadening investment platform.
Pilot Bond Grant Scheme
80. First, I propose to launch a three-year Pilot Bond Grant Scheme to attract local, Mainland and overseas enterprises to issue bonds in Hong Kong. The pilot scheme will cover eligible enterprises issuing bonds in Hong Kong for the first time. The amount of grant for each bond issuance is equivalent to half of the issue expenses, capped at HK$2.5 million. Each enterprise can apply for a grant for two bond issuances at most. The HKMA will announce the details in due course.
Qualifying Debt Instrument Scheme
81. I also propose to amend the qualifying debt instrument scheme by increasing the types of qualified instruments. In addition to instruments lodged and cleared by the Central Moneymarkets Unit of the HKMA, debt securities listed on the SEHK will also become eligible. We will also extend the scope of tax exemption from debt instruments with an original maturity of not less than seven years to instruments of any duration. Under the enhanced scheme, Hong Kong investors will enjoy tax concession for interest income and trading profits derived from a more diverse range of debt instruments.
Government Bond Programme
82. On developing retail bonds, I propose to continue the issuance of Silver Bonds in 2018 and 2019, targeting Hong Kong residents aged 65 or above.
Green Bond and Green Finance
83. To demonstrate the Government's commitment to promoting green finance, I propose to launch a green bond issuance programme with a borrowing ceiling of $100 billion. The sums borrowed will be credited to the Capital Works Reserve Fund to provide funding for green public works projects of the Government. The measure will encourage more issuers to arrange financing for their green projects through our capital markets. The Government will submit a resolution to the Legislative Council (LegCo) as soon as possible so that the inaugural government green bond can be issued in 2018-19.
84. The Hong Kong Quality Assurance Agency launched the Green Finance Certification Scheme last month to provide third-party certification service for potential green bond issuers. We will introduce a Green Bond Grant Scheme to subsidise qualified green bond issuers in using the Certification Scheme.
Asset and Wealth Management
85. The Government has introduced a number of initiatives in recent years to sharpen the competitive edge of Hong Kong's fund industry and diversify the management platform. These initiatives include removing constraints in the existing legal structure, providing a more facilitating tax environment and expanding the distribution network. It is expected that the regime for open-ended fund companies to be used as a fund vehicle and the relevant tax exemption arrangements can commence operation later this year. Besides, we will review the existing tax concession arrangements applicable to the fund industry with regard to international requirements on tax co-operation. The Government will also examine the feasibility of introducing a limited partnership regime for private equity funds and the related tax arrangements.
Corporate Treasury Centres
86. To attract multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, the Government will further amend the Inland Revenue Ordinance to extend the coverage of profits tax concession to specified treasury services provided by qualifying corporate treasury centres to all their onshore associated corporations.
Offshore Renminbi Business
87. Hong Kong maintains the world's largest offshore RMB liquidity pool. Apart from issuing RMB sovereign bonds in Hong Kong nine years in a row, the Ministry of Finance also issued US dollar sovereign bonds here last October. This is not only conducive to the development of the Hong Kong bond market, but also helps promote the integration of the Mainland financial market into the global market. We have provided profits tax exemption for non-RMB (including US dollar) sovereign bonds issued in Hong Kong by the Central People's Government so as to ensure that Hong Kong continues to be the premier platform for our country to issue sovereign bonds in different currencies. Moreover, to promote mutual market access between Hong Kong and the Mainland, we will continue to explore the possibility of including a wider range of investment products in the two-way mutual access mechanism.
Faster Payment System and Virtual Banks
88. The HKMA is prepared to launch a Faster Payment System offering 24-hour real-time payment function. This will allow banks and Stored Value Facility service providers to provide real-time, round-the-clock, cross-institution payment and fund transfer service to their business and personal customers.
89. Moreover, since virtual banks are considered commercially and technically viable based on overseas experience, the HKMA is consulting the industry on reviewing and amending the relevant guidelines, and will make the best endeavour to issue licences within this year.
90. I will ask the Insurance Authority to explore ways of enhancing Hong Kong's competitiveness as an insurance hub, including tax arrangements and other regulatory requirements, in collaboration with the industry.
91. The Hong Kong Mortgage Corporation Limited (HKMC) will launch a Life Annuity Scheme in the middle of this year. Purchasers will only have to pay a lump sum in exchange for a stable flow of monthly income. In view of the community's positive response to the Scheme, the HKMC will actively consider increasing its issuance size.
92. Deferred annuity products are already available in the market. They can be purchased by means of contributions, allowing greater flexibility in the amount and duration of payment. To encourage the development of the deferred annuity market, thereby offering more options to people in making financial arrangements for retirement, I will ask the Insurance Authority to issue guidelines, and enable all deferred annuity products available in the market meeting the guidelines to enjoy tax concessions.
93. As contributions made to such financial products for retirement protection are similar in nature to voluntary contributions made to the Mandatory Provident Fund (MPF), the proposed tax concessions will be applicable to MPF voluntary contributions. To meet the long-term saving objective for retirement protection, voluntary contributions which have enjoyed tax deduction will be transferred to the mandatory contribution accounts, and subject to the same withdrawal restrictions on mandatory contributions.
Dedicated Provision for Development of Financial Services Industry
94. I have set aside a dedicated provision of $500 million for the development of the financial services industry in the coming five years, providing necessary support for bond market development, Fintech, green finance, manpower training and other aspects of financial services.