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New Opportunities amid Changes Unseen in a Century

Since the United States (US) announced the imposition of so-called “reciprocal tariffs” on its global trading partners, international financial markets have experienced significant volatility. Investors are concerned about a potential economic recession in the US, and are increasingly worried about the global economic outlook. Although the US has made some minor adjustments to its measures, there has been no fundamental change in its policy stance, leading to ongoing investor pessimism. Alongside sharp declines in US stocks and pressure on the US dollar, US Treasury bond prices also plummeted, causing yields to spike. Last week, the 10-year Treasury bond yield, which moves inversely to bond prices, recorded its largest weekly increase in 24 years. This raises borrowing costs and financing pressure for the heavily indebted US and undermines market confidence in US Treasury bonds as safe-haven assets.

As President Xi Jinping noted, there are no winners in a tariff war, and going against the world will only lead to self-isolation. Regardless of changes in the external environment, China will remain confident and determined, focusing on managing its own affairs. Our country will maintain a firm and clear stance, continuing to advance high-level opening-up while promoting fairer and more inclusive economic globalisation and free trade. By emphasising co-operation, mutual benefit and win-win outcomes, this approach will provide strong support for global development and serve as a solid foundation for our country’s response to the tariff war.

Last Monday, I met with the media, together with the Secretary for Financial Services and the Treasury, the Secretary for Commerce and Economic Development and representatives of financial regulators.

Since last week, the Hong Kong dollar has remained strong against the US dollar, with the exchange rate against the US dollar trading on the strong side of the Convertibility Zone, which indicates that funds are staying in the local market. After a dip on Monday, the Hong Kong stock market largely stabilised. The Hang Seng Index closed at 20,914 last Friday, slightly above its level at the beginning of January this year. The average daily turnover last week increased to $427.6 billion, up around 68% from the previous week. Overall, the market has continued to operate smoothly and orderly throughout the week.

In response to the drastic changes in the external trade environment and significant financial market volatility, the market surveillance mechanisms we implemented have continued to function effectively. In fact, we have strengthened our “round-the-clock, coordinated and cross-market” real-time monitoring systems in recent years to guard against risks that emerge suddenly, especially during periods of fragile market confidence. The Government remains highly vigilant and well-prepared to address potential market shocks, supported by enhanced monitoring, forecasting and contingency planning.

We have been closely monitoring the operating conditions across various industries in Hong Kong, particularly small and medium-sized enterprises (SMEs). Recently, the Hong Kong Monetary Authority (HKMA), in collaboration with the banking sector, introduced additional sector-specific support measures to further assist more SMEs in obtaining bank loans and in their upgrading and transformation.

In light of the current environment, the banking sector has reaffirmed its commitment to the SME support measures previously launched. It will provide more targeted assistance to various industries, guided by the principle of prudent risk management. Among other measures, banks have agreed to provide flexible extensions to trade facilities and other suitable credit arrangements for the import-export and manufacturing sectors, helping corporations facing short-term cashflow pressures due to trade frictions. The total amount of dedicated funds for SMEs set aside by the participating banks in the Taskforce on SME Lending in their loan portfolios has increased to more than HK$390 billion.

Additionally, the Hong Kong Export Credit Insurance Corporation has introduced three support measures for SMEs: (1) extending free pre-shipment risk coverage under “Small Business Policy” (SBP) until the end of June next year; (2) offering 50% premium discount on pre-shipment risk coverage to non-SBP holders; and (3) lowering insurance premium rates for exports to emerging markets to align with those for traditional major markets, thereby helping exporters expand into markets such as ASEAN. These measures are expected to benefit around 2 700 policyholders, including around 1 200 SBP holders.

The US's extreme tariff measures violate World Trade Organization rules and have seriously undermined the confidence of trading partners and investment markets. In a globalised model of efficient industrial and supply chain distribution, cooperation is essential to achieving mutual benefit. Differences should be resolved through communication based on mutual respect.

Countries worldwide are responding to the US's extreme measures by reassessing the risks of investing in the US market and assets, accelerating the exploration of lower-risk asset allocations, discussing trade cooperation with other partners, and investigating the increased use of local currencies for bilateral trade settlements.

As global market conditions evolve and new demands emerge, we will fast-track efforts to attract non-local capital, talent and enterprises to develop in Hong Kong.

Recently, many major international financial institutions and patient capital from other regions have been paying closer attention to Hong Kong. They seek to explore ways to increase their participation in the local market. Meanwhile, many overseas researchers and academics are thinking of relocating to Hong Kong to continue their work. An increasing number of technology companies are also choosing Hong Kong as a base from which to expand into international markets.

Furthermore, we are also proactively attracting high-quality issuers from around the world to list in Hong Kong. The city already has a regulatory framework that facilitates dual or secondary listings for companies listed overseas. In light of recent global developments, I have instructed the Securities and Futures Commission and the Hong Kong Exchanges and Clearing Limited (HKEX) to be fully prepared for the potential return of Chinese Concept Stocks listed abroad. HKEX will also enhance its outreach and promotion in the ASEAN and the Middle East markets to attract more quality enterprises from these regions to list in Hong Kong, while drawing in additional international capital and further strengthening Hong Kong's position as a global financial centre.

With the strong support from the country and the advantages under the “one country, two systems” arrangement, Hong Kong stands out for its stability and appeal during uncertain times. As long as we work together to manage our responsibilities effectively, Hong Kong will be able to create new and favourable opportunities in this era of great change.

April 13, 2025