August 10, 2020

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Hong Kong Budget shows increased focus on FinTech

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The Hong Kong 2019-2020 Budget was announced on 27 February 2019 at the legislature. The regions Financial Secretary present the Budget and gave a speech explaining its terms, removals, additions, amendments and objectives.

The Financial Secretary noted in his speech that the aim of the Budget is to support the implementation of various measures, including those proposed in the Policy Address by providing new resources ready for use. These new resources amount to about US$150 billion in this Budget, with additional resources earmarked for various purposes.

This is hoped to demonstrate the Government’s determination to enhance public services, support enterprises, relieve people’s burden and invest for the future. Resources will be allocated as appropriate to support these measures.

The increasingly volatility and uncertainty of the global economic landscape will result in a smaller budget this year, the Financial Secretary explained. Economic growth is expected to slow down in 2019.

Despite this, the HKSAR Government is determined to ensure that the standards of living increase and that the region’s population is safeguarded from the looming prospect of economic hardship.

It was noted that The Mainland is seeking to change its mode of development, optimise its economic structure and identify new growth engines.

Thus, Hong Kong should pay particular attention to the following areas in which the country is pushing ahead in full steam:

(a) intensifying supply-side structural reform, accelerating the development of advanced manufacturing, and promoting deeper integration of the internet, big data and artificial intelligence with the real economy;

(b) using innovation to foster economic development, with emphasis on scientific research and technology application;

(c) building a strong domestic market with domestic consumption remains the main engine of economic growth;

(d) implementing the Greater Bay Area development and the Belt and Road Initiative; and

(e) pursuing further reforms and opening up to stabilise foreign businesses and investments; and promoting the new direction of two-way opening up with equal emphasis on “going global” and “attracting foreign investment” to boost two-way investment and trade flows between China and other countries.

In his speech, the Financial Secretary acknowledged that the rapid development of I&T is ushering in a new era, noting that it is reshaping production and business models, but also bringing significant changes to daily life and consumption.

As an example, the Secretary mentioned that artificial intelligence may bring significant breakthroughs in advanced areas such as healthcare, noting that, however, jobs may be replaced, causing a blow to the labour market.

While Hong Kong (and the world) benefits from the convenience and opportunities brought by the rapid development of I&T, it should be well-prepared for the change by making corresponding adjustments in areas such as development of industries, education and vocational training.

Noting that Hong Kong’s economic development relies heavily on service industries. In particular, financial services, tourism, trading and logistics, and professional and business support services are the pillars of its economy and employment, collectively accounting for over 57 per cent of our GDP in 2017.

These service industries are all highly susceptible to changes in the external economy. Any economic downturn in the major markets will deal a direct blow to these service industries and thereby Hong Kong’s economic outlook. As such, Hong Kong should endeavour to diversify its economy.

It was noted that a holistic strategy to development industries. Hong Kong must realise its positioning, strengths and weaknesses, and leverage its edges by utilising resources and policy measures. This, the Secretary stated, can be achieved in two major areas: financial services and I&T.

Leveraging Financial Technologies (FinTech)

Hong Kong currently has over 550 financial technologies (FinTech) companies with wide business coverage, and the Government has been working to provide a conducive environment for Mainland and overseas FinTech companies to work in.

2018 saw significant progress in the application of Fintech. The Faster Payment System (FPS) and the Common QR Code Standard for Retail Payments launched by the Hong Kong Monetary Authority (HKMA) in September 2018 received an overwhelming response.

The Government is working to use the FPS to provide the public with greater convenience in paying taxes, rates and water charges. The Transport Department, the Immigration Department and the Leisure and Cultural Services Department (LCSD) will examine the feasibility of accepting payments through the FPS at their shroff counters on a pilot basis.

The HKMA will shortly issue virtual banking licences. Banks will also implement the Open Application Programming Interface functions in phases. These will bring more innovative banking services to the public.

The Insurance Authority (IA) also approved the first authorisation of virtual insurers last December, marking a new chapter for insurance technology development in Hong Kong.

On the regulatory front, the Securities and Futures Commission (SFC) announced a new regulatory approach for virtual assets in November 2018 with a view to exploring ways for encouraging market innovation while protecting investors.

Moreover, the HKMA and the SFC are making use of the Global Financial Innovation Network to share with other regulators the experience and knowledge in relation to the supervision of Fintech applications.

FinTech talent training

In addition to grooming local talent, the HKSAR Government is also working to encourage financial talent from outside to pursue their careers in Hong Kong through various talent admission schemes.

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