Deloitte welcomes 2023 Hong Kong Policy Address

The HKSAR Chief Executive today unveiled his second Policy Address, and Deloitte welcomes the wide-ranging goals set for Hong Kong and the new measures proposed to strengthen capital market development, enhance tax effectiveness, promote growth of innovation and technology (I&T), optimise planning for the Northern Metropolis, and expand cross-boundary healthcare services.

These and other measures address several appeals from society and reinforce Hong Kong’s unique, long-established advantages while capturing new growth opportunities under the 14th Five-Year Plan, Guangdong-Hong Kong-Macao Greater Bay Area (GBA), Belt and Road Initiative (BRI) and other national strategies, creating new impetus for growth.

“Deloitte is committed to supporting the HKSAR Government’s endeavours to promote economic diversification, strengthen investment in traditional and emerging strategic sectors, and attract key enterprises and talent to accelerate the development of the “eight centres” and ensure sustainable, long-term growth,” says Deloitte China Vice Chair and Government & Public Services Industry Leader Dr Norman Sze.

“The Chief Executive emphasised the importance of adhering to President Xi Jinping’s “four musts”, “four proposals”, and remarked that “Hong Kong will prosper only when its young people thrive” as the blueprint for governance. An approach focused on advancing economic development and improving people’s wellbeing reflects the Government's dedication to propelling society from stability to prosperity through effective governance.

“We welcome the release of the Policy Address and look forward to maintaining close communication and collaboration with the Government and all members of society to collectively promote Hong Kong’s prosperity, stability and economic growth in the context of our country’s development.”

Deloitte China Southern Region Managing Partner Edward Au adds, “Promoting high-quality development of the capital market is vital to consolidating Hong Kong's status as an international financial centre. Deloitte is pleased to see the Chief Executive has taken on board the views of the industry by proposing measures in the Policy Address to strengthen and reinforce the competitiveness of the stock market, including lowering stamp duty on stocks to 0.1%, reviewing trading spreads and lowering market information fees. This is conducive to enhancing trading activities and uplifting market sentiment."

"We also echo the Government’s unwavering commitment to advance Hong Kong towards becoming a pivotal regional hub for green and sustainable finance, while expanding the local green finance and technology ecosystem. To that end, GEM market reform could encompass initiatives to facilitate fund-raising by green finance and technology businesses, which would also support green development and growth in the GBA. This will further establish Hong Kong as a green finance and technology hub, and accelerate the city's journey towards regional leadership in sustainability."

"Given the expanding interactions with ASEAN and Middle East nations in trade and finance, along with the Government’s active efforts to join the Regional Comprehensive Economic Partnership (RCEP), we believe Hong Kong's capital market can distinguish itself by evolving into a regional mutual market, while maintaining its position as a global offshore Renminbi (RMB) business hub. Leveraging robust connectivity with the Chinese mainland market, HKEX could intensify efforts to enter into strategic partnerships and collaborations with other international exchanges to strengthen ties and propel joint market development. This strategic move would enhance Hong Kong's international connectivity, attract more investors and potential issuers, thereby strengthening the city’s role as a preeminent global financing hub."

Increasing financial sector agility and resilience

Deloitte agrees that an innovative, diversified financial market will be a key to further reinforce Hong Kong’s core competitiveness. We welcome measures to strengthen connections with domestic and overseas markets, including a proposed new platform to expand fund distribution, strengthen offshore RMB business and deepen financial cooperation in the GBA.

To attract high net worth clients from the GBA to establish family offices in Hong Kong, we suggest the Government introduces more RMB-denominated stocks, bonds, funds, insurance and derivative products. It might also consider allowing family offices to use central bank digital currencies and mBridge for overseas wealth management investments to help develop Hong Kong as a family office hub in Asia. This could involve a pilot Family Office Connect program that creates synergy with other connect schemes to deepen financial connectivity between the mainland and Hong Kong.

Cross-jurisdiction data transfer and sharing has always been a hot topic in financial services. Financial institutions must accelerate digitisation, system modernisation and operation transformation to address customers’ changing needs and regulatory requirements. As stated in the Policy Address, Hong Kong is liaising with Guangdong to adopt an “early and pilot implementation” approach to streamline compliance arrangements for cross-boundary flow of personal data. This would help Hong Kong’s financial sector succeed in its GBA business journey.

On this basis, regular consultations between policymakers, financial institutions and professional services firms would help the industry contribute to the development of key principles and considerations to aid the formulation of related policies and regulations that could help financial institutions develop and optimise their digital transformation roadmaps.

Enhancing tax competitiveness and using tax measures to promote Government policies

The Policy Address introduces tax measures to enhance Hong Kong’s competitiveness and attract investments. These include the patent box preferential tax rate of 5% and reducing stamp duty on transfers of HKEX-listed stock from 0.13% to 0.1%. It also relaxes stamp duty measures on property transfers, while the hotly debated Buyer Stamp Duty was reduced from 15% to 7.5%.

Measures for attracting overseas talent to Hong Kong are also welcome. The relaxation of requirements will attract more overseas talent to Hong Kong and provide a platform to help them look for opportunities to work and stay in the city.

We welcome and appreciate that the Government is adopting various tax measures to drive policies that are crucial to upholding Hong Kong’s status as an international financial centre and nurturing innovation and technology. We suggest further enhancements to other intellectual property (IP) related tax rules, including allowing deductions or amortizations on the cost of IP acquired from related parties and broadening the scope of R&D that qualifies for enhanced deductions. These would appeal to taxpayers that are considering moving or expanding their IP hubs in Hong Kong.

Boosting I&T growth

To develop Hong Kong into an international I&T centre, the development of artificial intelligence (AI) is an opportunity the city cannot miss. Supercomputing is essential core digital infrastructure for AI development, and we are pleased to see the Government announce the establishment of a supercomputing centre. This will attract talent, technology companies and funds, helping to make Hong Kong a leading AI centre in Asia Pacific and even globally.

AI is not only crucial for Hong Kong’s diversified economic development, but also closely related to people’s livelihoods. The aging population is a pressing issue for Hong Kong society. We are pleased to see the Government introduce measures to promote fertility as part of a long-term development plan for the working population and society. Based on this, we suggest the Government fully and flexibly leverages technologies like AI in public rental housing applications, medical consultations, education and other application scenarios to build a smart, liveable city and provide a good environment for people to have and raise children.

Technologies such as AI can also help create a safer living and working environment for people. Hong Kong’s industrial accident rate has risen in recent years and occupational safety has become a major concern. We suggest the Government expands AI application scenarios to cover hazard prevention and detection, replace workers with robots in high-risk work environments and make more use of AI in searches for missing persons to make Hong Kong an even safer place in which to live and work.

Optimising planning for the Northern Metropolis

The Policy Address states that the Northern Metropolis will develop different industries across four major zones: a high-end professional services and logistics hub, I&T zone, boundary commerce and industry zone, and blue and green recreation, tourism and conservation circle, to integrate deeply with the planning of Shenzhen and other GBA cities. We are pleased that the Government will accelerate development of the Northern Metropolis to drive Hong Kong’s re-industrialisation and deepen the integration of I&T with the real economy.

With the launch of infrastructure projects including the Northern Link, Deloitte looks forward to the Government’s publication of the Action Agenda for the Northern Metropolis, which will set out comprehensive policies and drive resource integration. Given Hong Kong’s housing needs, we also support efforts to prioritise land planning and accelerate the supply of affordable homes, which would be an incentive for residents to have children.

In response to the huge funding required to develop the Northern Metropolis, Deloitte hopes the Committee on the Financing of Major Development Projects established by the Government will be open to diverse opinions from different industries and invite financial market participants and professional institutions to make recommendations on project planning and innovative, sustainable finance policies.

Expanding cross-border healthcare services

Deloitte welcomes the Government’s development measures to support and promote Healthy Hong Kong. By aligning with the “Healthy China” initiative and fully leveraging the powerful synergy between Hong Kong and the mainland, these measures can address issues including population aging, the management of chronic diseases and a shortage of healthcare professionals. Emphasizing primary healthcare and wellbeing, increasing medical services accessibility, adding workforce capacity, reducing waiting times and enhancing the portability of medical records are vital to improving patient care.

The Government is continuing to evaluate the impact of demographics, rising medical costs and inflation, and how these could affect healthcare affordability. To further improve patient care and increase patient access while reducing costs, it should continue to increase the use of digital and innovative technologies in healthcare services.