Hong Kong Economic and Trade Office, Washington DC
Hong Kong

"Five Trends to Watch in Asia: How Hong Kong is Taking on the Challenges"
Keynote Speech by Mr. Clement Leung, JP
Hong Kong Commissioner to the United States

26th Asia Business Conference
The University of Michigan, Stephen M. Ross School of Business
January 20, 2017


Professor/Dean DeRue, good afternoon everyone,

Thank you, Professor/Dean DeRue, for your very kind introduction. In the spirit of transparency, you have told the audience that I came from a different business school on the West Coast. I know that Michigan is great in college sports. To borrow the favourite line of your coach Jim Harbaugh, you guys support your team “with an enthusiasm unknown to mankind”. But you should know which side I will be cheering for if the Wolverines ever play against the Cardinals again in the Rose Bowl Game.

2. It is a great honour and privilege to be given this opportunity to speak at the Asia Business Conference of the Ross School of Business. This is also my first visit to Michigan. Being here in winter is actually not as intimidating as I expect. But I am saying to myself that perhaps I should choose a different conference in Hawaii next year.

Hong Kong and the United States

3. Before I talk about Asia, I would like to spend a few minutes taking about Hong Kong and our relations with the United States. Our city reached an important milestone in our history in the year 1997. After being administered by Britain for 155 years, Hong Kong became a Special Administrative Region of China under the “One Country, Two Systems” arrangement. We are given a high degree of autonomy:

  • We have our own separate legislature and government. Private property rights and civil liberties are protected under our constitution and strong rule of law.
  • Our legal system is based on the English common law, and the judiciary is fiercely independent. Our society has zero tolerance towards bribery and corruption.
  • We maintain our own fully convertible currency, the Hong Kong dollar, that is pegged to the US dollar.
  • Hong Kong permanent residents travel overseas using separate passports that give us visa free access to over 150 countries.
  • We are a separate member of the World Trade Organization (WTO).
  • We have a free hand to manage our economy and we strongly uphold the principles of open market, free trade, free flow and capital and information. We keep taxes low and simple. The top salary band pays 15% max and all companies pay a flat tax of 16.5% on profits.
  • We enforce strong fiscal discipline keeping public expenditure within our means and saving up for rainy days, while investing heavily in physical infrastructure and human capital.

4. Defence and foreign affairs are the responsibilities of Beijing but we can maintain what we call “external relations” with our trading partners. That is why we have a separate mission to Washington DC. As Commissioner, I report to the Secretary for Commerce in Hong Kong but not the Chinese Ambassador here. The downside is that I am not quite the diplomat, and if I get a ticket for speeding or illegal parking, I will have to pay for it myself!

5. This is our bilateral trade map with the 50 states. You can see that New York, California, Washington, Illinois and Texas are the key states that we trade with. Michigan is in the mid-range.

6. Hong Kong maintains a strong and robust relationship with your country. The US is Hong Kong’s second largest trading partner. Hong Kong is your number 9 largest export market. In 2015, we bought 37 billion dollars of goods made in America. We are your fifth largest market for beef, number 6 for agricultural products. Of course, we do not eat all the beef but we trade the products widely in Asia. Cathay Pacific, Hong Kong’s home airline, has the world’s second largest fleet of Boeing 777 aircraft. There are 1,400 US companies in Hong Kong and 85,000 Americans calling our city home.

7. We are also close partners in international law enforcement. Our Police cross-trains with the Navy SEALS. We work side by side with our US counterparts in the DEA, FBI, Interpol and Homeland Security to combat terrorism, money laundering, drug trafficking and other cross border crimes.

The World in 2016

8. Henry Ford once said “Coming together is the beginning. Keeping together is progress. Working together is success.” This sentiment is not only appropriate for this Conference but also for the world in the coming year.

9. Speaking about the world, 2016 is an amazing year. If you ask me to describe it in one word, I would say “unpredictability”. I am referring to the stunning results of the Brexit vote in the United Kingdom and the presidential election in the United States. A lot of pundits and political commentators ended up eating their newspaper columns for losing the bets with their readers. The global economy is confronted with new uncertainties: the tide of populism and protectionism is rising, the recoveries of advanced economies are fragile, world trade remains sluggish, central banks are heading towards opposing directions, with US interest rate undergoing normalization while others are still easing. Geopolitical tensions in the Middle East, Eastern Europe and Asia have brought additional risk for businesses.

10. For those of us who are in Asia, we are definitely not immune from these uncertainties. But it is not all bad news. Asia also presents unique opportunities that are exciting and are important for governments and companies which want to be competitive and successful.

Five Trends to Watch in Asia

11. I would like to highlight five key economic trends to watch in Asia. These five trends are:

  • One: the challenge to free trade and globalization.
  • Two: the emergence of regional trade and economic cooperation initiatives.
  • Three: the liberalization of the currency and capital markets in China.
  • Four: the rise of the middle class, and
  • Five: the growth of entrepreneurship, innovation and technology.

12. I would also talk about how Hong Kong will ride on these trends and strive to stay ahead of the game.

Challenge to Free Trade and Globalization

13. The principles of open market and free trade have all along been the fundamental bedrock of Hong Kong’s policies. It is the cornerstone of our own brand of economic success that transformed us from “a barren rock”, as the British once described us, into an international trade, business and financial powerhouse.

14. The Heritage Foundation, the Wall Street Journal, Cato Institute and Canada-based Fraser Institute have ranked us as the world’s freest economy for the past 20 odd years.

15. For a place like Hong Kong where economic freedom is not just the dominant religion but also deeply encoded into our people’s DNA, our hearts bleed to see the all-out attacks against free trade and globalization. Free market values have been taking the all blame for many wrongs in the world and these values have been put under immense pressure, particularly in rich economies in the West.

16. The UK’s referendum in favour of Brexit and the US presidential election were perhaps the clearest indications that sentiments against open markets and free trade are fast rising. And it remains to be seen whether this sentiment will gain further traction during the elections in France and Germany later this year.

17. It was not so long ago that globalization was that unstoppable force that generated freer flow of goods, capital and people; that raised productivity and efficiency; that pulled millions of people out of extreme poverty; and that improved the quality of life and lowered the cost of living for everyone.

18. I have to be fair to admit that free trade and globalization have problems. Those better equipped with knowledge and skills will benefit more in this new economy, while those who are less mobile and less adaptive to changes can face painful dislocation. But it is rather sad to see trade being accused as the big bad wolf that kills jobs, destroys families and communities.

19. The Peterson Institute for International Economics, a Washington based think tank, estimated that actually 80% of the job loss was caused by technological advancement: the internet, e-commerce, automation, robotics and containerization.

20. Yes, governments need to take care of those who are vulnerable and disrupted by economic and technological changes, to invest in education and retraining for displaced workers, and to pursue policies that promote more inclusive growth to address income inequality. But is the return to isolationism and raising the drawbridge the answer for reviving economic growth and bringing back jobs?

21. During the height of the Industrial Revolution, a group of English textile workers, called the Luddites, went around destroying machines in protest of their livelihood being robbed by industrialization. Nowadays, the notion that these actions can turn the clock back and stop progress looks silly and futile. It would not be possible for us to “uninvent” the internet, to “unlearn” the theory of comparative advantage, or to stop using container boxes to ship our goods.

22. The world and consumers probably won’t go back to the old ways. My friend sent me this one. If you want to “Make America Great Again” and get a baseball cap with the slogan, where would you go to buy it? Amazon.com, right. Here you go. You find the product, check the price ($12.99) and how many stars in the rating (4 stars), and you scroll down to read customer Q&As and you see these :

Question: Is this made in China?
Answer: Aren’t they all made in China?
Question: Is this hat made in China? I want to make America great again without paying more for made in America.

23. Isn’t it ironical?

24. That is why we are concerned, actually horrified, by the growing rhetoric against trade. International trade has been in pretty bad shape in the past few years. After the global financial crisis, trade flows only increased by 3% annually. It was lower than the annual GDP growth during the period. Trade used to grow twice as fast as world GDP in the two decades before that.

25. One private sector analyst estimated that if the US really imposes a 45% tariff on China, it would drag down China’s GDP growth by 4.8 percentage points and China’s exports to the US by 87% in three years. Would China just sit there and do nothing? Regardless of whether this estimate is correct or not, the prospect of a trade war between the two biggest economies of the world will be devastating to small, externally oriented economies like Hong Kong. All other Asia countries which are already part of the global supply chain would suffer as much as, if not more than, China. The world could plunge into another recession.

26. No one will emerge as a winner in a global trade war given the interconnectivity and interdependence of today’s economies.

27. What can Hong Kong do if a trade war is coming our way?

28. I am afraid very little as we are at the receiving end of it. Our traders and logisticians, who have a more diversified, flexible global sourcing network would be in a slightly better position to absorb part of the shock, when compared with those with a more rigid single market operation.

29. I understand that there are strong feelings within this country that some economies are not playing fairly, and that put American workers and businesses in great disadvantage. Something must be done. Likewise, other countries may feel the same about certain US policies and practices. But there are ways to resolve these conflicts in a civilized, rational and less confrontational way, through such platforms as the WTO on trade and G20 on monetary and financial issues.

30. Some commentators expressed their fear that US trade policy may descend into the Dark Age. At the very least, we can assume that it will be overwhelmingly enforcement oriented. To borrow the famous line from Uncle Ben of Spiderman: “ with great power comes great responsibility”. The US is the only superpower of the world and what actions it is going to take will be watched very closely at home and abroad. Is it going to project its power on other countries rather than to negotiate in good faith? Is it going to honour the legally binding tariff commitments made on a non-discriminatory basis under the WTO treaty? Is it going to act ruthlessly and recklessly at the risk of starting a trade war? We shall see.

31. We expect a turbulent global economic environment in 2017. Whether we will have a full fledge crisis will depend on whether big countries will be able to settle their differences in trade and other economic issues in an amicable manner. This is the first trend to watch.

Emergence of Regional Trade and Economic Cooperation Initiatives
32. I hope I did not sound too pessimistic. Despite the severe challenge to free trade and globalization, there are some positive trends that will foster cooperation, create opportunities and spur growth. I am referring to the number of regional trade and economic cooperation initiatives that are being pursued on various fronts.

33. In Geneva, the WTO is on track to get two-thirds of its members (110 out of 164) to ratify the Trade Facilitation Agreement concluded in 2013. Once it enters into force, the Agreement is expected to reduce total trade cost by some 14%. Hong Kong is proud to be the first WTO member to ratify the Agreement and 105 economies have followed suit. We need 4 more countries to do the same to get the Agreement over the threshold.

34. Just about a year ago, over 50 WTO members concluded the expansion of the Information Technology Agreement and committed to completely eliminate tariffs on over 200 new generation IT products, over 1.3 trillion dollars in trade.

35. Forty-six countries are negotiating on an agreement to reduce tariffs on over 200 environmental-friendly goods like solar-powered air conditioners and LED lights, another 1 trillion dollars in trade annually.

36. Twenty-three WTO members that account for 70% of global service trade are engaging in talks on a Trade in Services Agreement to open up markets and improving rules in areas such as licensing, financial services, telecommunications, e-commerce and maritime transport.

37. President Trump said he will withdraw from the Trans-Pacific Partnership (TPP) on his first day in the White House, that is today. But economies in Asia are actively seeking to conclude Free Trade Agreements (FTAs) or to participate in regional cooperation initiatives to deepen, rather than to weaken, trade and integration. To look outwards rather than inwards. To open doors rather than to build walls. These include:

  • The Regional Comprehensive Economic Partnership (RCEP) that covers 16 countries: the ASEAN 10, China, Japan, South Korea, India, Australia and New Zealand, 30% of the world GDP, and half of the world’s population.
  • The Free Trade Area of the Asia-Pacific (FTAAP) that is open to all 21 members of APEC.
  • Then there is China’s “Belt and Road” Initiative. That is the Silk Road Economic Belt and the 21st Century Maritime Silk Road, essentially the land and maritime corridors linking China with 65 countries in Central Asia, the Middle East, ASEAN, India, Africa and Europe, covering 60% of the world’s population and 30% of the world GDP. This is China’s overarching strategy to develop its economic relationship with these countries. Over 50 countries have established the Asian Infrastructure Investment Bank (AIIB) as the key financial institution to support the initiative. It is estimated that the region needs over 8 trillion dollars in infrastructure investment up to 2020 and it is expected that AIIB will meet part of this funding gap.

38. The emergence of these regional cooperation initiatives is the second trend to watch in Asia. What is Hong Kong’s response?

39. As a founding member of the WTO, Hong Kong is a staunch supporter of a rule-based multilateral trading system. We believe that it is the best way to achieve stability and liberalization of global trade, to bring benefits to small, underdeveloped countries with weak bargaining power, and with the least economic distortion.

40. However, we realize how difficult it is to move the global trade agenda forward involving over 160 economies with diverse interest and stages of development. Therefore, we are also keen to expand our network of FTAs and to take part in these regional initiatives if it is in our overall interest to do so.

41. We have signed the Closer Economic Partnership Arrangement (CEPA), our FTA with Mainland China. CEPA offers Hong Kong incorporated companies preferential access to China’s goods and services sectors regardless of the nationality origin of these providers.

42. We have also signed FTAs with like-minded countries like New Zealand, Chile and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland).

43. We are particularly excited by the “Belt and Road” initiative. While membership of the AIIB is for sovereign states at this point, the Central Government in Beijing has expressed strong support for Hong Kong to be involved, particularly in offering comprehensive professional services, in facilitating capital flow, and in supporting AIIB’s financing, investment and treasury operations.

44. We are strengthening our economic ties with ASEAN. Negotiation of an FTA is at its final stage and we hope to be able to conclude the agreement soon. We have just added a new Economic and Trade Office in Jakarta, Indonesia. We are actively seeking to conclude more agreements on investment protection, air services, and avoidance of double taxation with Belt and Road countries.

45. We are taking business delegations to explore opportunities in new markets like India, Kazakhstan, UAE, Hungary and Poland.

46. Noting that a number of the Belt and Road countries have a large Muslim population and the structure of financial products will need to comply with their religious laws, we issued two tranches of Sukuk or Islamic bonds under our government bond programme. We do not need the money but the bonds are issued for market development purpose. This is the world’s first US dollar denominated Sukuk issued by a government with AAA credit rating. The bonds were many times over-subscribed, achieved tight pricing and held by our target institutional investors in the Middle East and Asia.

47. The Hong Kong Monetary Authority has established a new Infrastructure Financing Facilitation Office to help Belt and Road projects find foreign investment and financing. To date, more than 40 organizations have joined the Office as partners. They include multilateral financial agencies, development banks, asset managers, commercial and investment banks, infrastructure project developers and operators.

Rise of the Middle Class
48. The 21st century is always described as the Asia-Pacific Century. Indeed, Asia has achieved outsized success over the last 30 years. In 1980, developing Asia accounted for only 7% of the world GDP. By 2015, it captured more than 20%.

49. Developing Asia is the largest recipient region of foreign investment, accounting for one-third of global FDI flows. While the IMF has lowered its forecast of global economic growth for 2016 to around 3%, nearly 60% of that growth comes from Asia.

50. The OECD estimated that the number of people in the middle class [those earning between $10 and $100 per day] in Asia will rise from 500 million in 2009 to 3 billion in 2030, representing about two-thirds of the total middle class population in the world.

51. This growing segment of consumers with new money to spend will have new demands on goods: big screen TVs and cars; safer and higher quality food, more stylish clothes and accessories; better clinics, hospitals, education, housing and public infrastructure; spending for entertainment and vacations; and banking, insurance and financial services to manage their wealth, savings and retirement.

52. In China, consumption now accounts for 67% of the GDP growth. Take entertainment as an example. China was adding 27 new cinema screens every day last year. Average growth of box office sales has been about 40% in the past 10 years.

53. You probably heard about Singles Day shopping in China on November 11 – the four ones resemble single individuals who reward themselves with online shopping. It now becomes the world’s largest 24-hour online sale event. Total sales reached 18 billion dollars last year. To put this in perspective, US consumers spent 3.5 billion dollars on Cyber Monday. Online sales in just one day in China is more than Brazil’s total e-commerce sales for the whole year.

54. There are 400,000 international undergraduate students studying in the US. Most of them coming from Asia. UCLA is the abbreviation for the University of Caucasians Lost to Asians.

55. The number Chinese tourists is projected to reach 190 million, spending 330 billion dollars by 2020. Their average per capita expenditure is already the highest of all international visitors in the US.

56. The rise of the middle class in Asia is the third trend to watch.

57. Hong Kong is able to benefit tremendously from this trend. We had 56 million visitors last year. 75% of them were from Mainland China, and a growing number coming from markets in India and ASEAN countries. We have very broad appeals to tourists with a brand new cruise terminal and theme parks for families, and 57 restaurants with Michelin stars for foodies. Beaches and country parks are within half an hour’s drive from the CBD. We have mega sports events like Rugby Sevens, horse-racing, tennis and golf opens, dragon boat and Formula E electric car racing. A new 100 acre cultural district right at the waterfront of the Victoria Habour is being built. The flagship contemporary art museum called M+ will come into operation in about two years’ time. And we have recently reached an agreement with the Palace Museum in Beijing to display its collection of national treasures in a brand new museum at the same location.

58. Shopping is big for visitors from Mainland China: they come to HK to see, experience and buy the best, the latest and the most trendy products. It turns Hong Kong into a big show window for the growing middle class in China and Asia. Because of this “show window” effect, there is a saying that what sells well in Hong Kong sells well in China. All the luxurious brands in Europe have their flagship stores in Hong Kong. US companies like Tesla and Apple are investing a lot to promote their brand image there.

59. On the B-to-B side, Hong Kong is the location of choice for sourcing, a corporate show window if you like. We are now hosting the world’s largest trade shows and exhibitions for gifts, electronics, toys, lightings, jewelry, fashion and housewares. These events attract hundreds of thousands of exhibitors and buyers from all corners of the globe. Higher income and growing affluence in Asia enables us to expand our offering. In 2008, we abolished wine duty and Hong Kong quickly become a wine trading and distribution hub for re-export to Mainland China, Vietnam and other Asian markets. We have overtaken London and New York as the world’s largest wine auction centre.

60. Art Basel Hong Kong is now the most prominent contemporary art fair in Asia, It attracts other side shows and spin-off events for Asian art, ink art and for start-up or niche collectors.

61. We invest heavily to ensure that we have the physical infrastructure to efficiently connect with our hinterland and the rest of the world. We are building a third runway to double the capacity of our airport, an 18 mile bridge-and-tunnel that links up with Macau and the western part of Guangdong, as well as an express rail link that connects to Mainland China’s national high speed railway network.

Liberalization of the Currency and Capital Markets in China

62. The next trend I will talk about is more specific to China – the opportunities arising from its efforts to internationalize its currency, the Yuan or Renminbi (RMB) and the gradual opening up of its capital market. In doing so, China is making use of Hong Kong’s deep, liquid and well regulated international market infrastructure to help achieve its objectives of reform.

63. Hong Kong is the first offshore market to launch RMB business in 2004 to cover personal banking services such as deposits, credit cards and remittance. Not a very ambitious start. But RMB services were gradually expanded to include trade settlement, and then permission for foreign and domestic enterprises to use RMB for their inward and outward investment. This was followed by the issue of RMB bonds. Then, the market took off with a wide range of RMB financial products such as debt securities, funds, investment trusts, warrants, currency futures, insurance policies and cross border loans.

64. Now, Hong Kong is the largest off-shore RMB centre with the largest liquidity pool in RMB deposits. Our real time settlement system handles 70% of all global RMB payments. We are also the largest off-shore RMB financing and asset management centre, with banks syndicated RMB loans and multinationals such as McDonald’s and Caterpillar issuing RMB bonds in Hong Kong to finance their expansion in China. Over 500 listed and unlisted RMB investment products are widely traded in our market.

65. The RMB has been included in the IMF Special Drawing Rights basket, with an 11% share. With the increasing use of the RMB as a currency for global trade, transactions and investment, Hong Kong as the largest off-shore centre will stand to benefit.

66. China is also liberalizing its capital market and again, Hong Kong is the testing ground for this important reform. It started with a pilot programme to allow qualified foreign institutional investors to participate in the domestic market. In 2014, we launched the Shanghai-Hong Kong Stock Connect that allows Mainland investors to invest in Hong Kong listed stocks through the Shanghai Stock Exchange, and international investors to trade Shanghai listed stocks through the Hong Kong Stock Exchange. Just last month, we added Shenzhen to the Stock Connect programme. While Shanghai is home to many big state owned enterprises, the Shenzhen market is dominated by smaller, fast-growing tech companies. The combined market cap of the three stock markets is about 11 trillion dollars, the second largest in the world. Under the Mutual Recognition of Funds programme, funds domiciled and managed in Hong Kong can be sold to Mainland investors, and vice versa.

67. The regulators of both places have agreed to jointly study and introduce other financial products for further expanding the scope of eligible securities for trading under these mutual market access programmes. These could include IPOs, bonds, exchange traded funds, futures, commodities and other derivatives.

68. As the testing ground and laboratory for new liberalization measures, Hong Kong is able to develop strong trust and rapport with decision makers in Beijing, enjoying a first mover advantage, a bigger piece of the action, and a much earlier head-start to build up our financial infrastructure, risk management tools, regulatory framework and talent pool. These new opportunities strengthens our role as the premier international financial centre with unique access to the Mainland financial market.

Growth of Entrepreneurship, Innovation and Technology

69. Last but not least, the growth of entrepreneurship, innovation and technology in Asia. When people talk about these things, they will immediately think about Silicon Valley, and other tech centers in America and Europe. Advanced economies dominated the top 10 positions in Bloomberg’s Innovation Index but Asian countries like China, Malaysia, India and Thailand are catching up fast.

70. According to the World Intellectual Property Organization, Asian countries are the top filers of applications for new patents, trademarks and industrial designs.

71. The rapid development and spread of the internet and mobile communication has helped developing countries in Asia to skip legacy infrastructure and jump right into the latest generation of technology. The average mobile penetration rate in the Asia Pacific region is 73%. China has a slightly higher rate of 77%, of which more than half of them are using smartphones. There are now approximately 1.2 billion internet users in China, India, Indonesia, Vietnam and the Philippines.

72. Adoption of new products and services is particularly fast in certain sectors. Take mobile payment as an example, China is now the world’s biggest market with transactions exceeding 230 billion dollars a year. The top two providers, Alipay and WeChat have a combined active customer base of 1 billion users. This creates a vibrant ecosystem not limited to payments for supermarkets, convenient stores, movie tickets or taxis, but also for P-to-P transactions. WeChat Pay, for example, added a feature that allows users to send cash in virtual red packets, hongbao or lai see, to their loved ones during Chinese New Year. Over 32 billion electronic red packages were exchanged in February last year. Think about how far this can go if this level of innovation and adoption spills over to the areas of finance, investment and other services.

73. In Hong Kong, we are also developing into one of the most popular hubs for start-ups in the region. We now have about 2,000 of them in public sector incubators (such as the Cyberport and Science Park) and some 40 privately invested accelerators and co-work spaces. About half of the founders are from outside of Hong Kong – Mainland China, Japan, Korea, India, France, UK, Germany, Australia, Israel – with the US being the largest group of foreign entrepreneurs. The focus of these start-ups are on IoT (the Internet of Things), e-commerce supply chain, smart city applications, financial technology or Fintech, robotics and healthy aging.

74. Hong Kong is attractive because of our proximity to the China market, our strong legal framework to protect intellectual property rights, easy access to funding, and our location next to Shenzhen and southern China. The advanced manufacturing cluster there can make all the parts and components you need for rapid prototyping. If your prototype works, factories in the Pearl River Delta have mastered the unique and unparalleled speed to take your device to unit quantities of hundreds overnight, and then to full scale mass production if the widget sells really well.

75. That is why MIT picked Hong Kong for its first Innovation Node in the world to bring new technologies “from lab to market”. That is also why Karolinska Institute, the Swedish medical university that selects and awards the Nobel Prize in Medicine, put its first overseas R&D centre in Hong Kong with a focus on stem cell research and reparative medicine.

76. We created a new ministry to coordinate the efforts of government, the private sector, the academic and research communities. We are investing 2 billion dollars to expand the Science Park, to strengthen infrastructure for data centres, and for smart manufacturing in multi-storey buildings.

77. We are giving particular focus on the development and application of Fintech. That would ensure that we retain our edge as the premier international financial centre in this pervasive digital age. Fintech is creating a whole new world of possibilities for financial institutions such as banks, insurance companies, brokers and traders.

78. Some studies have predicted that global investment in Fintech will surge to more than 46 billion dollars in 2020. Fintech can revolutionize user experience, fundamentally change the way services are delivered and, can be the next major disruptor of an established industry.

79. Already, we have seen leading global players and financial institutions in the US, Australia and Singapore establishing their labs and accelerators in Hong Kong. We shall be creating a dedicated working space to support 150 Fintech start-ups over the next few years, and to drive development of various technologies, from cybersecurity to blockchain.

80. Our financial regulators have established communication platforms with the Fintech community to better understand their needs and to ensure that we maintain the right balance between innovation and consumer protection. The Hong Kong Monetary Authority has provided a controlled testing ground for Fintech users to work directly with developers to try out new applications. A Fintech Supervisory Sandbox is in place to give certain flexibility for compliance to facilitate the trial of Fintech. The real-life data and user experience gathered during the trials will provide valuable feedback for Fintech developers in refining their products or services before formal launch.

81. The growth of entrepreneurship, innovation and technology is the fifth trend to watch in Asia.

Closing Remarks

82. It is indeed the best of times and also the worst of times for us in Asia. Best because of the exciting new opportunities and new trends that I have just outlined. Worst because of the uncertainty over the macro trade and economic environment.

83. Over the past decades, Hong Kong is able to get through a number of global, regional and domestic shocks, and emerge stronger after each crisis, successfully transforming our economy at different stages of our development. We are able to do so by adhering to some very basic, fundamental core principles that I set out at the beginning of my presentation. They are, I repeat:
• Rule of law and judicial independence.
• Zero tolerance towards corruption.
• Strong commitment to open market, free trade, free flow of capital and information.
• Low and simple taxation.
• Fiscal discipline, keeping public expenditure within our means, and saving up for rainy days.
• Heavy investment in physical infrastructure and human capital.

84. That’s it. That is our no-so-secret formula. Whether we will continue to be successful in the future will depend on whether we can have the discipline to keep these core principles intact and how well we are able to meet the challenges of the five trends in Asia that I just described.

85. In about a week’s time, we will be celebrating Chinese New Year. This will be the Year of the Rooster, sometimes translated as the Year of the Cock or the Chicken. It doesn’t matter which way you call it, because they all end up at the dinner table. Other than being tasty, the Rooster rises early every morning to awaken those who are still asleep. The animal symbolizes discipline, hard work, and it gets ready for tomorrow’s challenges while others are being too complacent and comfortable. I wish you all a healthy and prosperous New Year. Thank you very much for your patience.


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