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A new paradigm in 2022

Year 2021 has been described by some as the year of economic recovery. It is quite an accurate description for the situation of Hong Kong as the figures showed. At the beginning of the year, the Hong Kong economy was still plagued by gloomy sentiment and the epidemic. Fortunately, the strong growth in exports of goods had helped the economy stabilised since Q2 of last year. The gradual containment of the epidemic and the increase in vaccinations, coupled with the release of electronic consumption vouchers in August, further boosted local consumer sentiment and supported the recovery of the local retail, catering and service sectors. Economic growth for last year as a whole is estimated to reach 6.4%, reversing the recession recorded in the previous two consecutive years.

While the Hong Kong economy has been maintaining its positive momentum with the labour market improving notably, the recovery is not yet comprehensive. This is mainly because inbound tourism remains frozen, causing the pace of recovery in the tourism and related sectors to lag behind the overall economy. Enterprises and employees in these sectors still face greater pressures, and their actual “sensory temperature” have yet to get warm.

Only through successful prevention and control of the epidemic can we provide stable and sustainable conditions for economic recovery. We hope that everyone can join us in fighting against the virus. Apart from getting vaccinated ourselves, let’s also invite our relatives and friends to get a jab as well. To better protect Hong Kong together, we should do our best in risk management and go for testing if required.

Yesterday I attended an activity celebrating the 25th anniversary of the establishment of the HKSAR held during the Hong Kong Brands & Products Expo.

Year 2022 will be the year for economic and social development. The implementation of the Hong Kong National Security Law has rapidly restored order to the society. The improvement of the electoral system and the smooth completion of two important elections have reinforced the implementation of “patriots administering Hong Kong” and the executive-led system, which would ensure that the “One Country, Two Systems” arrangement is back on the right track on an institutional level and allow us to move forward steadily. Hong Kong is now entering a new stage of good governance, and we look forward to a future of accelerated progression, including the resolution of long-standing deep-rooted social issues, and a more rapid economic development.

Externally, market generally expects to see a further recovery in major economies this year, thus rendering support to Hong Kong’s exports. Even though the Mainland economy faced some downward pressure in recent months, its sound fundamentals and still ample policy room for manoeuvre can support the economy to achieve “stability while pursuing progress”. By integrating proactively into the national development, Hong Kong economy will surely gain more growth momentum and development space.

However, the external environment is very complicated and the global economy still faces enormous challenges. The pandemic development remains the greatest uncertainty. The Omicron variant becomes an imminent threat and is spreading rapidly in many parts of the world recently. Many governments have tightened their anti-epidemic measures and travel restrictions, which may pose a drag on global economic growth. On the other hand, the supply bottlenecks in various regions may linger for a longer period of time. This, together with the upward pressures on energy and commodity prices, may hinder global production activities and push up global inflation. Major central banks have begun to tighten their monetary policies due to rising inflation, and the possible repercussions on global financial market and capital flows warrant attention. Developments in China-US relations and geopolitical tensions need to be monitored closely, and its impact on Hong Kong must not be taken lightly.

Overall speaking, if there is no abrupt deterioration of external environment and the local epidemic situation remains stable, Hong Kong economy should stay on a growth track in 2022. Yet, the breadth, depth and pace of recovery are still highly certain at this stage. I will announce the economic forecast for this year in late February when the Budget is released.

While the external environment is beyond our control, we have to keep a grip on the local situation. We can hardly control the evolving external environment, but we can make every effort to enhance our system and make Hong Kong one of the most competitive markets. Industries with clear advantages, as our “forwards”, have to play a more leading role. Emerging industries have to speed up their developments, advance forward and “make a breakthrough”. Core industries, as “holding midfielders”, have to undergo upgrading and transformation. All these ensure the entire “economic train” to accelerate forward, creating new markets and more job opportunities. Only by achieving a more broad-based and in-depth integrated economic development, can the goals of "full employment" and "quality jobs" be met, allowing people to better share the fruits of economic development.

In promoting market development, it has been our guiding principle to be proactive. We strive to promote the robust development of different industry sectors with a view to providing greater growth momentum to the economy. Take the financial services sector as an example. Building a diversified, vibrant and sustainable fundraising platform has always been our direction in elevating the platform’s competitiveness. Two institutional reforms, including the listing regime for special purpose acquisition companies (“SPACs”) and the enhancement of the secondary listing regime, have come into effect in Hong Kong since yesterday to further consolidate Hong Kong’s leading position in the financial services industry.

Last year, I requested the Hong Kong Exchanges and Clearing Limited and the Securities and Futures Commission to study about introducing a listing regime for SPAC in Hong Kong. Upon the intensive work and market consultation in around half year’s time, the current proposal strikes a balance between the needs for market development, prudential supervision and investor protection. The Hong Kong version of SPAC listing regime allows investors to fix the scope of investment of the funds at a more early stage and identify suitable investment projects within designated timeframe. At the same time, requirements such as restricting subscription and trading to professional investors, prescribing minimum fundraising threshold (to $1 billion) as well as requirements during de-SPAC transaction (such as requiring companies to fulfil all requirements for a new listing), etc., strikes a right balance between protecting investor, market quality and market attractiveness. The new SPAC listing regime will broaden the fundraising channel for enterprises to list in Hong Kong and strengthen the competitiveness of Hong Kong as a premier listing platform around the globe.

Meanwhile, the enhancement of the secondary listing regime will help attract more “China Concept Stocks” to return from the overseas market, with a focus on facilitating overseas-listed Greater China Companies from the traditional sectors and without weighted voting rights (“WVR”) structures to secondary-list in Hong Kong. The enhancement also provides greater flexibility to dual-primary listed issuers.

Continuous innovation and enhancement of our regime are conducive to maintaining the strong vibrancy and adaptability of the market. In 2018, I pursued the reforms of the listing regime to allow the listing of innovative companies with WVR structures in Hong Kong with appropriate investor protection safeguards. Together with SenseTime, the artificial intelligence company that listed last week, over 60 companies have listed under the relevant regime over the past three years, with over HK$570 billion of funds raised through IPOs in aggregate. These companies account for around one-fourth of Hong Kong’s stock market capitalisation and boosted the daily turnover of our stock market from less than $90 billion in 2019 to over $160 billion in last year. This shows that institutional reform and innovation are the only way to continuously enhance the overall competitiveness of Hong Kong’s fundraising platform.

This year marks the 25th anniversary of the establishment of the Hong Kong Special Administrative Region (HKSAR). Hong Kong has entered into a new phase of good governance and full steam development. The HKSAR Government will work together with different sectors of the community, including the new Legislative Council, to focus on economic development and the improvement of people’s livelihoods, with a view to delivering concrete actions in addressing people’s needs and difficulties and promoting our social development in full speed!

2 January 2022