On 24 February 2021, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2021/22 budget speech (Budget). In his speech, the Financial Secretary emphasised that Hong Kong has always been an offshore financing centre for Mainland enterprises and an important conduit for international capital to enter the Mainland market, and that the capital markets of Hong Kong and the Mainland can complement and interact positively with each other. The Financial Secretary stated that there will be a joint working group set up by the Financial Services and the Treasury Bureau, Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC) and the Insurance Authority to explore how Hong Kong can complement the economic and financial development of Mainland China and meet the needs of international investors while enhancing Hong Kong’s competitiveness as an international financial centre. The working group will set out the development blueprint and put forward concrete proposals and measures for engagement with the Central Authorities to secure their support.
In this publication, we set out key measures in the Budget targeted to further spur the development of green finance and expand the investment funds and financial services markets in Hong Kong.
The Financial Secretary restates the Government’s target to achieve carbon neutrality before 2050, as previously announced by Hong Kong Chief Executive Carrie Lam, and further added that Hong Kong’s Climate Action Plan will be updated later this year to set out more proactive strategies and measures to reduce carbon emissions. The Government will also take forward the Strategic Plan announced at the end of last year by the Green and Sustainable Finance Cross-Agency Steering Group.
The Budget also announced government subsidy for the expenses for OFCs established or re-domiciled in Hong Kong, and the proposed introduction of law to provide tax concessions for carried interest issued by private equity funds operating in Hong Kong. The Financial Secretary also referred to plans to continuously expand the capacity of the Stock Connect, including progressive inclusion of exchange-traded funds (ETF) and other types of assets as well as expansion of the scope of eligible securities, and to further encourage the development of the REITs market in Hong Kong,
Read about these and more in our publication:
We welcome the various key measures in the Budget in support of the financial services industry. In particular, we welcome the proposed initiatives and subsidies to encourage the set-up of OFCs, LPFs and listing of REITs in Hong Kong to further enhance Hong Kong’s status as a premier asset and wealth management as well as capital raising hub. We look forward to the announcements from SFC and the Government in these regards. It is also encouraging to see that the Government is developing and expanding its green and sustainable finance support and offerings in light of the growing importance and focus on ESG and sustainability globally.
We recently published with Chambers Practice Guide Investment Funds 2021 on the trends and developments of the Hong Kong investment funds market [1], we covered extensively on Hong Kong’s unique position with respect to Mainland China, as a key international capital market and leading asset management centre, which are being enhanced with rapid legal and regulatory developments in recent years for Hong Kong to remain competitive as an attractive location to set up investment management business. Such measures include the new Hong Kong fund domicile structures offered along with tax incentives, which the Budget strongly demonstrates the government’s clear intention to further support with the government subsidy on OFCs and the tax concession for carried interest to be introduced very soon.
Besides the measures relevant to green finance, investment funds, fintech and financial services markets we outlined above, importantly, the Budget covered the Hong Kong government’s proposed relief measures from the impact of the Covid pandemic and for economic recovery. There is cause for optimism and confidence for Hong Kong to build back better, in Hong Kong’s ambition and efforts to be the global ESG investment hub of Asia and be a leader in the growing adoption of green and sustainable finance globally.
[1] Chambers Practice Guide – Investment Funds 2021: Hong Kong Trends & Developments: (https://practiceguides.chambers.com/practice-guides/investment-funds-2021/hong-kong/trends-and-developments)