Deloitte welcomes 2024 Hong Kong Policy Address to strengthen the city’s unique advantages and foster innovative growth momentum

The HKSAR Chief Executive unveiled his third Policy Address. Responding to expectations for Hong Kong set out in the Third Plenary Session of the 20th Central Committee of the Communist Party of China, the Policy Address puts forward wide-ranging initiatives to consolidate the city’s strengths as a global financial and innovation hub, while accelerating the development of “new quality productive forces” with further refinement of Northern Metropolis development, to explore new growth areas and driving diversified economic and social development in the long term.

Deloitte China Southern Region Managing Partner Edward Au says, “Underscoring the Chief Executive’s spirit of reform and embracing changes, the new Policy Address outlines a forward-looking development blueprint to enhance Hong Kong’s competitiveness and promote economic upgrading. It aims to ensure our city continues to fully leverage its position as an international financial center and to inject new momentum into emerging industries.

“The Policy Address clearly defines Hong Kong’s strategic positioning as “Three Centres and a Hub”, with the introduction of specific measures to attract investment, business and talent, ensuring our city’s prosperity and development against the backdrop of an ever-changing global landscape while playing a greater role in national opening-up.”

Deloitte China Vice Chair and Government & Public Services Industry Leader Dr Norman Sze adds, “With this year’s Policy Address entitled ‘Reform for Enhancing Development and Building Our Future Together’, the HKSAR Government has demonstrated its determination to create diverse opportunities for the economy and society.

“The Policy Address earnestly promotes digital government to enhance public governance quality and benefit the public. The proposal to establish cross-departmental units to drive new growth engines exemplifies the Government’s emphasis on high-level reform and innovation. Measures to continue developing and attracting talent will further enrich Hong Kong’s talent pool to maintain its lead in key areas like financial services and innovation and technology (I&T).”

Capital Markets and Financial Services

Deloitte welcomes the initiatives in the Policy Address to strengthen Hong Kong's position as a financial centre. Edward Au says, “We are pleased to see the Government continue to enrich offshore RMB business. To further enhance Hong Kong’s status as a global hub for offshore RMB business, we suggest halving the stamp duty rate on RMB counter stock trading to 0.05% for three years to promote market transactions and improve liquidity.

“We agree with the expansion of RMB bond issuance (including green and sustainable offshore RMB bonds) and exploring the expansion of Bond Connect Southbound. This would better meet the needs of the mainland market and further promote development of Hong Kong’s bond market.

“We strongly support further optimisation of the securities market, including shortening the listing approval time, improving transparency and implementing cost reduction and efficiency enhancement strategies. These measures are crucial for Hong Kong to maintain its advantage in the increasingly competitive global capital market. Additionally, the trial measure of halving stamp duty could be extended to listed international companies and issuers seeking dual listings, to further enhance Hong Kong’s competitive edge.”

In the area of commodity trading, the mainland is one of the world’s leading consumers of commodities, which gives Hong Kong a unique advantage. The development of warehouse facilities and tax incentives outlined in the Policy Address, along with continued innovation of related products and transactions by Hong Kong Exchanges and Clearing, can help Hong Kong build a vibrant commodity trading ecosystem and become a vital hub for cross-border trade.

Furthermore, Deloitte believes the Government can strengthen promotion of Islamic finance and enhance financial connectivity with Islamic countries. It could consider issuing Islamic bonds again to set a benchmark for the market and attract more Islamic investors. It could also explore the possibility of introducing more types of Islamic financial products, such as Islamic RMB bonds, and green and sustainable bonds.

Deloitte also agrees with measures announced in the Policy Address to further strengthen Hong Kong's position as an international asset and wealth management centre. Deloitte Private Hong Kong Leader Anthony Lau says, “We welcome the Government’s collaboration with sovereign wealth funds in Belt and Road regions in financing the setting up of investments funds. This will further strengthen Hong Kong’s “super-connector” role with SWFs, mainland markets, and other major Asian economies. We suggest the Government also offer a 5% profits tax concession on fees received by regional fund management headquarters established in Hong Kong by SWFs to attract large SWFs to establish local offices here.

“We are pleased that the Government has responded to market demand by enhancing the New Capital Investment Entrant Scheme (CIES) to allow investment in residential properties and adding qualifying transactions eligible for tax concessions for funds and single-family offices. To further enhance mutual market access, Deloitte advocates for a new “Family Office Connect” channel for cross-border investments by mainland high-net-worth individuals through local family offices. To bolster Hong Kong’s family office advantage, it might also explore the acceptance of jointly held assets under the New CIES.”

Deloitte China Tax Partner Polly Wan adds, “The Policy Address proposes various measures to consolidate and enhance Hong Kong’s competitive edges as an international financial, shipping and trade centre. It also proposes to develop “new quality productive forces”, foster I&T cooperation between newly-listed companies and local universities, and attract international start-up accelerators to Hong Kong.

“These economic stimulus measures can enhance Hong Kong’s economic vitality and increase Government revenue yet will take time to implement and have an effect while the economy still faces challenges. We suggest the Government establish a public finances task force and a new taxes advisory committee to examine the financial situation based on economic, demographic and revenue-expenditure data, and review the cost-effectiveness of new policies to ensure the sustainability of Hong Kong’s finances.”

Innovation & Technology and Digital Economy

Deloitte China Hong Kong Government & Public Services Sector Industry Leader Rita Chan says, “We welcome the Government’s proposal to increase investment and develop platforms and plans to accelerate I&T development and further promote smart city and digital government. In AI, it could consider establishing a platform to integrate and connect government-funded supercomputing capabilities that are independently operated by Cyberport, HKSTP, universities and other organisations, to use public digital infrastructure more effectively.

“Data is key to AI training and application and the Government could promote and facilitate effective inter-departmental government and quasi-government data sharing, or even allow the public to use data for recognised purposes. The Digital Policy Office (DPO) was established this July. The Government could continue to drive and achieve “data governance” and “data sharing and application” through the DPO.

“In smart city and public services, we welcome the continued promotion of development and assistance to industries in technological transformation, including the promotion of legal technology, digital trade development and continued funding for SMEs to adopt new technologies. We also support continued optimisation of digital government, as smart port, smart estate management and using technology to improve construction site safety would benefit society.”

The digital economy driving financial innovation is a major trend in global development. Deloitte China Hong Kong Digital Asset Leader Robert Lui adds, “Deloitte welcomes the Government continuing to promote the development of innovative financial services, including Central Bank Digital Currencies (CBDCs), mobile payment, virtual banks, virtual insurance and virtual asset transactions. This will strengthen Hong Kong's position as an international financial centre and Web3 hub.

“We also support further enhancing the virtual asset trading regime to protect investors by balancing regulation and facilitation. This will enable the sector's sustainable, responsible development. Measures under the “Digital Bond Funding Scheme” will encourage more institutions to adopt tokenisation technology, further promoting the diversified development of capital markets. To enhance public awareness of the importance and potential risks of emerging sectors, we suggest expanding investor education on digital finance.”

Deloitte China Southern Region TMT Leader Bong Chan says, “The Policy Address mentions a new, HKD10 billion I&T Industry-Oriented Fund and the redeployment of HKD1.5 billion to establish joint funds with the market on a matching basis. This will further accelerate and enhance our startup ecosystem.

“We also welcome the HKD750 million for the New Energy Transport Fund and Subsidy Scheme for Trials of Hydrogen Fuel Cell Electric Heavy Vehicles, which will promote new energy development and help secure Hong Kong’s competitiveness as a premier green and sustainable finance hub.

“The Government has multiple existing I&T funding programs. In recent years, an increasing number of technology companies have chosen to establish themselves in Hong Kong, which fully demonstrates the effectiveness of these funding programs. The proposed HKD180 million I&T Accelerator Pilot Scheme, with one-to-two matched funding between the Government and institutions and a maximum subsidy of HKD30 million, will attract established startup service providers to add accelerator bases here. This will further enhance Hong Kong’s startup ecosystem development. We will continue to support companies in applying for subsidies and promote this new funding overseas.

“Furthermore, we look forward to the Government's publication of the Development Outline for the Hong Kong Park of Hetao Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone later this year. Deloitte will align with government policies and leverage the advantages and expertise of our Innovation & Assets Development Center at Hong Kong Science Park to strengthen the ecosystem, nurture talent and make the co-operation zone a crucial source of “new quality productive forces” for our country.”

Northern Metropolis

Deloitte China Strategy and Economic Advisory Partner Alvis Kong adds, “We are pleased the Policy Address further reflects Deloitte’s recommendation on pilot “local districts” for the Northern Metropolis, which can promote economic diversification and enhance Hong Kong’s innovation capabilities.

“The pilot industrial park being explored by the Government should clearly define the lead industry for each site, focusing resources and policy support to form an industrial cluster effect. It could also evaluate the “integration of industry and city” approach of world-leading industrial parks, which provide facilities to meet the comprehensive needs of the working and residential populations.

“Furthermore, the San Tin Technopole can, based on the contract undertaken by HKSTP, cooperate with well-known domestic and foreign industrial parks to introduce advanced management concepts and technologies.”

Healthcare, Culture and Tourism

Deloitte supports the Government's vision to transform Hong Kong into a global hub for medical innovation. The Government can consider establishing a regulatory sandbox for healthcare technology, offering temporary authorisations and expedited approval processes. This would create a conducive environment for testing innovative medical technologies and products, allowing enterprises to pilot their innovations under specific conditions. Such an initiative would not only attract more innovative companies to Hong Kong but also accelerate the commercialisation and market entry of leading-edge medical technologies.

Furthermore, the Government can consider rolling out a “plug-and-play” scheme for medical innovators, providing comprehensive support including office space, research facilities and legal services. This approach would enable businesses to swiftly establish operations, lowering market entry barriers and attracting top talent to the city.

We also applaud the Government's initiative to recruit qualified medical professionals trained overseas and strategically establish a third medical school, addressing workforce challenges in the short, medium and long term. The Government can explore further measures to retain qualified medical talent and even consider extending the retirement age, allowing experienced and willing healthcare professionals to continue serving the community.

In culture and tourism, the Government can consider attracting and consolidating international creative intellectual property (IP) rights in the city. Building upon the foundation of the existing Disneyland, it could explore introducing additional outdoor and indoor theme parks featuring international IPs in the surrounding areas. The aim is to create a “super visitor pool” through the synergy of multiple high-calibre international IPs, thereby fostering long-term “fan economy” effects.

Moreover, the Government could capitalise on the burgeoning “cruise economy” and “sea tourism” opportunities. By developing a multifunctional, well-equipped cluster of cultural and tourism projects centred around the Kai Tak Cruise Terminal, Hong Kong can position itself as Asia's premier cruise hub. The success of this cruise economy hinges on strengthening the commercial ecosystem around Kai Tak.