《由治及興：以信心和遠見引領(lǐng)香港》

Fromresilienceto

resurgence:pavingthe

wayforwardforHong

Kongwithconfidence

andvision

Introduction

OneyearonsinceChiefExecutiveJohnLeetookoffice,HongKonghas

demonstratedeconomicandsocialresilienceatlargeandcontinueditssteady

pathtorecovery,scoringpositiveyear-on-yearrealGDPgrowthinthefirstand

secondquarterof2023.HongKong’saccessiontotheRegionalComprehensive

EconomicPartnership(RCEP),China’sstrongbackingforHongKongtofulfilitssuperconnectorroleinthedevelopmentoftheBeltandRoadInitiative(BRI),

thereturnoftouristsmarkedbythesuccessfullaunchoflandmarkeventsin

recentmonths,andtheInternationalMonetaryFund’s(IMF)reaffirmationofthecity’sstatusasarobustandreliableinternationalfinancialhub,wereamong

someoftheheadlinesworthcelebrating.

However,theHongKongSpecialAdministrativeRegion(HKSAR)governmentstillfacesstrongheadwindsintheformofaglobaleconomicslowdown,the

loomingclimateemergency,financialmarketvolatility,letalonehome-boundissuessuchasweakretailconsumptionandtheongoingtalentshortage.

1Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision2

Tonavigatethechallenginglandscapewith

confidenceandvision,HongKongmustgivefullplaytoitsstrengthsasaninternationalfinancialhubwhilefosteringstrongregionalcooperations.Bytapping

intoacomprehensivestrategytoolbox–from

recalibratingitscapitalmarketstrategiestofosteringinnovationanddevelopingrobustinfrastructures–

theHKSARgovernmentwillbeablenotonlytobravethosechallengesbutalsotocreatetheenvironment

necessaryforupgradingandtransformingitseconomicstructures.

Ourrecommendations,whichcapturetheinsights

fromourexpansivenetworkofsubjectmatterexperts,

arerootedinsixkeyprinciples:1)cementingHong

Kong’sstatusasaninternationalfinancialcentre,2)

fosteringarobustsustainabilityecosysteminHong

Kong,3)unlockingthenextphaseofgrowthwith

innovationandtechnology,4)providingmoresupport

andflexibilityforattractingandretainingtalentin

HongKong,5)establishingHongKongasaregional

datahubforfrictionlessflowandexchangeofdata,

aswellas6)optimisinginfrastructuredevelopmentto

bolsterlong-termgrowthandcompetitiveness.

Figure1:AsummaryofPwC’srecommendationsfortheHKSARgovernment

Sixkeyfocusareas

Recommendations

1.CementingHongKong’sstatusasaninternationalfinancial

centre

?Enhancingstockmarketliquidityandsuperchargingthedevelopmentofthecity’scapitalmarket

?ConsolidatingHongKong’scompetitiveadvantagestofurtheradvancefinancialservices

?ExpeditingHongKong’sdevelopmentasaleadinghubforfamilyoffices

2.Fosteringarobust

sustainabilityecosysteminHongKong

?Improvingdisclosuresonsustainabilityanddrivingcorporateaction

?Promotinginnovationanddevelopmentofnewsectors

?Usinggreenandsustainablefinancetocatalyseinvestments

?Improvingclimateresiliencetotackleworseningurbanheat

3.Unlockingthenextphaseofgrowthwithinnovationand

technology

?Strivingtobethegenerativeartificialintelligence(GAI)hubofchoicefortheGBA

?StrengtheningHongKong’se-hubwithtaxmeasures

?AddressingtheI&TdevelopmentneedsintheShenzhen-HongKong

InnovationandTechnologyPark(HSITP)andotherinfrastructureprojects

?Increasingsupporttoinnovativestart-upstobackupandacceleratetheirgrowth

4.Providingmoresupportandflexibilityforattractingand

retainingtalentinHongKong

?AcceleratingtheexpansionofHongKong'staxtreatynetwork

?Exploringnewtaxincentivesandothermeasurestoattractandretaintalentofspecificindustries

?PrioritisinginvestmentsincapacitybuildingforESGtalentandactivelyattractoverseasprofessionalsingreenfinancetoHongKong

?Creatingcross-boundaryregulatorymeasuresthatfacilitateseamlessoperations

?Providingsupportforfull-timeparentstoreturntotheworkforce

?Adoptingamulti-prongedstrategytoencouragesilver-agepeopletoremainintheworkforce

5.EstablishingHongKongasaregionaldatahubforfrictionlessflowandexchangeofdata

?Creating,improving,andimplementingharmonisedlegalandregulatoryframeworksaswellascommonmechanismsforcross-boundarydata

sharing

?DevelopingandimplementinginitiativesthatsupporttheHKSAR

government’svisionofbecomingadigital-first,data-drivenorganisation

6.Optimisinginfrastructure

developmenttobolsterlong-termgrowthandcompetitiveness

?Reinventinginfrastructuredeliverymodelswiththeprivatesector

?AcceleratingthecoordinateddevelopmentoftheNorthernMetropolisandKauYiChauartificialislandsprojects

?Diversifyingsourcesofinfrastructurefunding

1

Cementing

HongKong’sstatusasaninternationalfinancialcentre

Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision4

Astheglobaleconomyracestoresumenormalcyandinvigorateitseconomicactivities,Hong

Konghasfounditselfinawholenewraceforgrowth,capitalandtalent,particularlystemming

fromfiercecompetitionwithSingaporeinrecentyearsinitsquesttobecomethego-to

financialhubinAsiaPacific.WhileHongKongisstillfaraheadofSingaporeintermofequity

fundsraised(withapproximatelyUSD32billionraisedforHongKongagainstUSD5.7billion

forSingapore)andassetsundermanagement(USD4.6trillionagainstUSD4.1trillion),itis

importantforHongKongtofurtherconsolidateitspositionasthepreeminentfinancialcentre

intheregion,particularlyleveragingitsuniquestrengthsinfinancingandprofessional

servicesinthehigh-qualitydevelopmentoftheBRI.

Ontheplusside,withthelinkedexchangesystemactingasananchoroffinancialstability,

thecityalsohasunparalleledadvantagesfromitscloseintegrationwiththeChineseMainland,

alongwithafavourabletaxandregulatorysystemthatallowsfreeflowofcapitalandaccess

toadiversearrayoffinancialproductsandservices.Tosustainthiscompetitiveedge,we

recommendimplementingmeasurestofacilitateinitialpublicofferings(IPOs)andlistingswith

bothforeignandChinesestructures,aswellasenhancingregionalintegration.

Figure2:ComparativestatisticsbetweenHongKongandSingapore

Totalequityfundsraised

(2022,USDbillion)

Assetsunder

management

(2021,USDtrillion)*

4.6

32

4.1

5.7

SingaporeHongKong

SingaporeHongKong

.

*ThelatestavailabledatafromMonetaryAuthorityofSingaporeisasof2021,whilethe2022figureisyettobepublished.

Source:TheHKEX,SingaporeExchangeMarket

5Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

Enhancingstockmarket

liquidityandsuperchargingthe

developmentofthecity’s

capitalmarket

TheHongKongStockExchange(HKEX)isoneof

thelargestintheworldandforalongtimehasbeen

thefastestgrowingstockexchangeinAsia.However,

thenumberofnewlistingsattheHKEXhasseena

steadydeclinesince2018.InordertorevitaliseHong

Kong’scapitalmarket,werecommend

strengtheningcollaborationwithglobalstock

exchanges,especiallythoseintheMiddleEastand

SoutheastAsia,throughexploringduallisting

opportunitiesandleveragingtheGEMmarketas

achanneltoattractsmall-mediumenterprises

withhighgrowthpotential.Duallistingoffersthe

advantageofexpandingtheinvestorandissuerbase,

makingHongKonganevenmoreappealing

destinationforIPOs.

Figure3:ComparativeanalysisoflistingsinHongKong,Indonesia,andSaudiArabia

YearlynumberofnewlistingsattheHKEX

(2015-2022)

218

174

154

126

98

138

184

90

20152016201720182019202020212022

2019202020212022

Numberoflistedcompanies

IndonesiaStockExchange

668

713

766

825

SaudiExchange(Tadawul)

199

203

210

223

NumberofIPOs

IndonesiaStockExchange

55

51

53

57

SaudiExchange(Tadawul)

5

4

15

36

Source:TheHKEX,IndonesiaStockExchangeandSaudiExchange

Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision6

ThePrimaryEquityConnect(PEC)initiative,

introducedintheHKEX’s2016-2018strategicplan,

unveilsamechanismtoallowMainlandinvestorstodirectlysubscribeforIPOsintheHongKongmarketandviceversa.WerecommendtheimplementationofthePECinitiativeasitholdssignificantpotentialtoenhanceconnectivityandpromotecompaniesto

listinHongKongbyraisingfundsinRMB.

Additionally,itwouldallowMainlandinvestorsto

participateinHongKongIPOsusingRMBwhile

HongKonginvestorscansubscribetoMainlandIPOs

usingHKDorRMB.ExpandingtheStockConnectschemefromsecondarymarketstoIPOscan

significantlyenhanceliquidityofbothmarkets.

WhileforeignandChineseMainlandcompaniesarestilltypicalcandidatesfornewlistingsandIPOsinHongKong,localSMEsandstart-upsarealsoa

sourceforuntappedpotential.In2018,theHKEXdiscontinuedthestreamlinedprocessfortransfer

fromtheGrowthEnterpriseMarket(GEM)tothe

MainBoard,concurrentlyincreasingtheminimummarketcapitalisationandcashflowrequirementforGEMapplicants.

TounlockthelistingpotentialofSMEsandstart-ups,werecommendthatregulatorsreviewand

repositiontheGEMbyrelaxingsomeofits

existinglistingrequirements,suchasminimum

marketcapitalisation,publicfloatvalueofsecurities,cashflow,and“trackrecordperiod”.Adedicated

teamcouldbeestablishedtoacceleratethevetting

processofGEMapplicants,simplifythelisting

procedures,disclosureandreportingrequirements

suchasbyeliminatingmandatoryquarterlyreporting.

ThisapproachcaneffectivelyreduceIPOcostsandongoinglistingscomplianceexpenses,ultimately

enhancingtheappealofGEMasadesirablelistingplatform.Inaddition,regulatorsshouldconsider

allowingsecondarylistingonGEMtodiversifyinvestorbaseandenhanceliquidityofGEM.

Furthermore,GEM-listedcompaniesshouldalsobeabletomigratetotheMainBoardoncetheyfulfilthelistingrequirementsofthelatter,subjecttothe

approvaloftheListingCommittee.Thetransferfrom

GEMtotheMainBoardcouldbefurtherexpeditedbyreplacingtheexistingIPOprospectuswithastandardtransferapplicationform.

7Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

Anotherwaytodrawmoreinvestmentintothecity'sentrepreneurialandinnovativesectors

wouldbethroughtheenrichmentoftheCapitalInvestmentEntrantSchemeintroducedin

the2023-2024Budgetbyexpandinginvestibleareastoincludedomesticstart-ups,

listedshares,publicandprivatefundsdomiciledinandmanagedbyfundmanagersin

HongKong.

Finally,policymakersshouldreconsiderthepossibilityofreducingstampdutiesbyhalffor

stocktradingandconductathoroughreviewoftheimpactofstampdutyonthemarket

intermediariesandtheimpactonthedevelopmentoffinancialproductsinHongKong.The

reductionoftransactioncosts,especiallythestampdutyleviedonsharepurchases,would

yieldsubstantialbenefits.Itwouldinvigoratetradingvolume,amplifyliquidity,andfosterlong-

terminvestment.

HongKong'sstampdutyrateonsharetransferscurrentlysurpassesthatoftheChinese

Mainland(0.05%appliedtotheselleronly)evenbeforetherecentincreasefrom0.20%to

0.26%oftransactionvalue,effectivefrom1August2022.

Figure4:StampdutyratecomparisonintheChineseMainland,theUS,andHongKong,

Jurisdictions

Effectivestampdutyrates

ChineseMainland

0.10%totheselleronlyandrecentlyfurtherreducedto0.05%inAugust2023

UnitedStates

NostampdutyintheUS,buthasaSECfeeof0.0008%leviedtothesaleofsecurities

HongKong

0.13%tobothsellerandbuyer

Source:MinistryofFinanceofthePeople’sRepublicofChina,USSecurityandExchangeCommission,HKSARGovernment

Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision8

ConsolidatingHongKong’s

competitiveadvantagesto

furtheradvancefinancial

services

HongKong’smedicalservicesareinhighdemand

withintheGBA.TheincomingimplementationoftheGBAInsuranceConnectisexpectedtofurtherboostthepopularityofhealthinsuranceproductsofferedbyHongKonginsurersforpeopleinotherGBAcities.

Intheeyeofsuchgrowingdemand,itisadvisablethat

theHKSARgovernmentactasthefacilitatorto

advocateforanintegratedpropositionofmedical

servicesandhealthinsurancedevelopmentintheGBAbyencouragingHongKonginsurersandreinsurerstoexpandtheirpresenceintheGBAmarket,whileproliferatingmedicalservicefacilitiesintheNorthern

MetropolistocopewithgrowingSouthbounddemand.

LaunchedinSeptember2021,theWealth

ManagementConnect(WMC)schemehasprovidedeligibleGBAresidentstheopportunitytoinvestin

wealthmanagementproductsdistributedbybanks

acrosstheGBAthroughaclosed-loopfundsflow

channel.Withthenecessarybuildingblocksnowin

placeandatrackrecordofnearlytwoyears,itisnowtheperfecttimetoenvisionthefuturerolesoftheWMCinitiativetoensureitisfit-for-purposeforyears

tocome.ThisisessentialconsideringtherapidgrowthofHongKong'swealthmanagementindustry,whichislargelydrivenbyevolvinginvestorpreferences.

Tothiseffect,wesuggestexpandingbeyondthe

retailinvestorchanneltoincludeotherinvestor

groups,suchasinstitutions,highnetworthindividuals,andfamilyoffices.

Additionally,introducingabroaderrangeofproducts,particularlyalternativeassetclasseslikeprivatefundsandinfrastructureopportunities,willofferinvestors

greaterexposureandopportunitiesfordiversification.

Historically,retailinvestorshavefacedseveralobstaclesthatpreventedthemfrominvestinginalternativeassets,mostnotably,regulatoryrestrictionsoninvestor

protection,thecomplexityofsuchinvestments,illiquidproductstructures,longinvestmenthorizons,and

significantcapitalrequirements.Withtechnology

advancements,increasingregulatoryacceptanceand

greaterinterestfromproductmanufacturerstomaketheassetclassmoreaccessibleforretailinvestors,itisnowpossibleforinvestorstogainexposuretoalternative

investmentstrategiesthroughretailstructuresinotherjurisdictions.Innovationandproductstructuringhave

providedalternativeassetsanavenuetoreachalargerbaseofinvestorsworldwide.Thisshifttowards

"retailisation"hasopenedupnewopportunitiesfor

alternativeassetmanagerstoreachalargerglobal

investorbase.Assuch,itisrecommendedthatrelevantregulationsbedevelopedinHongKongwithanaimto

facilitatethistransformationandenableretailinvestorstoaccessabroaderrangeofalternativeassets.

Insomejurisdictions,theestablishmentofnew

marketplaceplatformstodistributeprivatefundshasgainedtraction,broadeningtherangeofdistributionchannelsforinvestors.Oneexampleofthisisthe

emergenceofexchange-basedfunddistribution

platforms,whereunlistedfundscanbetransactedandsettledthroughstockexchanges.Theseplatformsbringtogetherassetmanagersandinvestors,providing

clearingandsettlementservices.Wethusrecommend

developingprivatefundsexchangeplatforms

throughbroadeningdistributionchannelsviatheHKEX,withthegoalofincreasingaccessibilityand

liquidityofprivatefundsandotherplatforms.

9Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

ExpeditingHongKong’sdevelopmentasaleadinghubforfamily

offices

Inrecentyears,HongKonghasmadesignificantstridesinestablishingitselfasaleadinghubforfamilyoffices.Thegovernmenthasprioritisedthisendeavour,asseenintheimplementationofataxconcessionaryregimeandgreaterregulatoryclarity.Leveragingontheexisting"Connect"schemessuchasStockConnect,BondConnect,andWealthManagementConnect,itwouldbebeneficialfortheHKSARgovernmenttoexplorethepossibilityofcodevelopingaFamilyOfficeConnectschemewiththeMainlandauthoritiestoallowthewealthofChineseMainlanderstobemanagedinHongKong.

Figure5:GDPgrowthintheGreaterBayAreainRMB(2022)

Guangzhou

2.88trillion

Dongguan

1.12trillion

0.6%

Zhaoqing

270.51billion

1.0%

Huizhou

540.12billion

1.1%

4.2%

Foshan

1.27trillion

Shenzhen

3.24trillion

Zhongshan

363.13billion

2.1%

3.3%

0.5%

HongKongSAR

Jiangmen

377.34billion

2.63trillion

1.2%

Zhuhai

404.55billion

3.3%

MacaoSAR

160billion

2.3%

26.7%

Source:ConstitutionalandMainlandAffairsBureauoftheHKSAR

Taxconcessionsprovidedtofamilyofficesshouldberegularlyreassessedtostaycompetitive.The

governmentshouldexplorenewtaxincentivesandothermeasurestoattractandretaintalentofspecific

industries,forinstancefamilyofficeprofessionals,therebydeepeningthetalentpoolandcapabilitiesofthe

industry.Thiscanbeachievedviataxmeasuressuchasgrantingtaxdeductionsforchildren’seducationandremovingthecurrentlimitonunilateraldoubletaxationreliefforemploymentincome,aswellasnon-fiscal

incentivessuchashousingsubsidies.

2

Fosteringarobust

sustainability

ecosystemin

HongKong

11Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

25.7

Theincreasingseverityoftheclimatecrisishasledtoaglobalpushformoresustainablecorporatepractices.

Governmentsandthepublicareraisingthebaronsustainabilitystandards,promptingtheprivatesectortoinvestheavilyinEnvironmental,Social,andGovernance(ESG)initiatives.ThisshifttowardsESGinvestmentinthe

financesectorhasbeendrivenbybothregulatorymandatesandinvestorexpectations.IntheAsiaPacificregion

alone,weexpecttoseeESGassetsundermanagement(AuM)totripleby2026.ThispresentsanotableopportunityforHongKong,whichservesasaregionalhubforsustainableinnovation,embracesgreen

technology,andagatewaytotheChineseMainland.

Figure6:ForecastsofglobalESGinvestments

GlobalESGAuM

(USDtrillion)

22.4

16.9

12.8

10.4

6.9

20.7

1.6

14.3

4.83.6

0.6

1.0

10.1

1.1

1.62.7

4.5

2015202020212026Low2026Base2026Best

2015

2020

2021

2026

Low

2026

Base

2026

Best

Mandates

0.0

4.8

10.4

12.8

16.9

22.4

Mutualfunds

1.6

3.6

6.9

10.1

14.3

20.7

Privatemarkets

0.6

1.0

1.1

1.6

2.7

4.5

Total

2.2

9.4

18.4

24.5

33.9

47.6

GlobalESGAuMbyregion

5.0

(USDtrillion)

3.3

2.1

19.6

1.0

0.2

0.3

0.3

0.4

0.1

0.2

14.3

0.1

0.8

1.1

12.8

4.5

16.3

4.7

0.2

10.5

7.7

0.70.1

3.8

2015202020212026Low2026Base2026Best

2015

2020

2021

2026

Low

2026

Base

2026

Best

Asia-Pacific

0.2

0.7

1.0

2.1

3.3

5.0

Europe

1.1

4.7

12.8

14.3

19.6

25.7

LatinAmerica

0.0

0.0

0.0

0.1

0.2

0.3

MiddleEast&Africa

0.0

0.1

0.1

0.2

0.3

0.4

NorthAmerica

0.8

3.8

4.5

7.7

10.5

16.3

Total

2.1

9.3inves

18.4

tments

24.4

33.9

47.4

Source:PwCGlobalESGandAWMMarketResearchCentreAnalysis,Lipper,Preqin,ESGGlobal

Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision12

Improvingdisclosureson

sustainabilityanddriving

corporateaction

The2022PolicyAddressencouragedtheadoptionoflocalisedInternationalSustainabilityStandardsBoard(ISSB)standardsforpublicandprivateentities.Thisyear,theHKEXproposedmandatingallissuersto

makeclimate-relateddisclosuresintheirESGreportsandtointroducenewdisclosuresthatarealigned

withtheISSBClimate-relatedDisclosureStandard.OurrecommendationisfortheHKSARgovernment

tocontinuetoenhancetheESGregulatory

framework,ensuringitisrobust,whileconcurrentlyofferingclearguidancetoissuersontheeffective

implementationofthenewguidelines.Wealso

proposecontinuingtomonitorandstrengthenthe

disclosureofESGinformation,aligningitwithinternationalstandards,includingexpandingto

nature-relateddisclosurereferencingtherecentlylaunchedTaskforceonNature-relatedFinancialDisclosures(TNFD)framework.

Promotinginnovationandthedevelopmentofnewsectors

InOctober2021,theHKSARgovernmentunveileditsproactiveclimateactionplantowardsachieving

carbonneutralityby2050.Withelectricitygenerationaloneaccountingfor62.7%ofHongKong’sannualgreenhousegasemissionsin2021,werecommendthatthegovernmentadoptadata-drivenapproachtomonitorenergyefficiencyofitspublicservicesandformulateacomprehensiveenergyconsumptionstrategyinordertomonitorandachievetheircarbonneutralityobjectives.Thisapproachhasbeen

successfullyimplementedoverseas,mostnotablyinSingapore'spublichousingsectororinthecityof

DaeguinKorea.Byimplementingefficientenergy

monitoringpractices,thegovernmentcanserveasarolemodelfortheprivatesector,encouragingthemtofollowsuitintheirownsustainabilityefforts.

Climatetechisafast-growingareaattracting

substantialinvestmentsinrecentyears.Since2021,over25%ofglobalventurecapitalfundinghas

consistentlybeendirectedtowardsclimatetechstart-ups.Tocapitaliseonthistrend,werecommend

continuingtopromoteandincubateinnovative

financialproductsormeasuresthatlinkwith

climatemitigationandadaptation.Thiscanincludethedevelopmentofinsuranceproductsthatcover

commerciallossescausedbyfloodingand

heatwaves,greenandsustainablebondsandloans,andtheformationofanESGdatarepository,amongothermeasures.Thiswouldhelpfosteragreen

financeandtechnologyecosysteminHongKongtoencourageenterprisesandstart-upstosetuptheiroperationsinthecityandengageinacceleration

programmes.

Hydrogenfuelcellshavegainedrecognitionasa

promisingtechnologyforreducingrelianceonfossilfuels,particularlyinthetransportationsector,and

withapplicationsinotherindustries.Thisyear,HongKongispilotinganetworkofhydrogenbuses

alongsidethecity’sfirsthydrogenrefuellingstation.Tosupportthisdevelopmentfurther,werecommend

thegovernmentsupporttheexpansionand

capabilitybuildingforahydrogenecosystemwithinandbeyondroadtransportapplications.

Thisincludesconsideringapplicationssuchas

energystorage,portablepower,andgreenshipping,asfurtheravenuestostrengthenHongKong'sstatusasaninternationallogisticshub.Ammonia,unlike

Methanolwhichisanon-zerocarbonfueltraditionally

usedbytheshippingindustry,isazerocarbon

emissionsfuelthatcanbeproducedbycombininghydrogenwithnitrogen.TheInternationalEnergyAgency(IEA)projectsthatammoniaandhydrogenwillsatisfy60%ofshippingfuelsdemandby2050,withammoniaaloneaccountingfor45%,initsnetzeroscenario.

13Fromresiliencetoresurgence:pavingthewayforwardforHongKongwithconfidenceandvision

Continuingtodevelopsafetystandardscovering

thevaluechainofhydrogenfromproduction,

liquefaction,storage,distribution,regasification,toinfrastructuredesignandactualusageisalso

essential.Finally,itisadvisabletoencouragethedevelopmentofgreenfinancingtosupport

hydrogenprojectsbyraisingmarketawarenesswithinthefinancialservicessector.

Usinggreenandsustainable

financetocatalyseinvestments

HongKonghaspositioneditselfasacrucial

intermediaryinconnectingcapitalandopportunitiesinHongKong,theChineseMainland,Asiaand

beyond.WerecommendthattheHKSAR

governmenttakeactionstoenhancegovernanceandcementitsstatusofglobalgatewayfortheChina

CertifiedEmissionReductionschemebydeveloping

measurestoenhanceconfidenceincarbon

trading.Thisincludesestablishingoversightrules

andregulationstoprotectmarketparticipantsfrom

fraud,excessivespeculation,moneylaundering,andotherillicitactivities.CoordinatingeffortsbetweentheauthoritiesofHongKongandtheChineseMainlandisalsorequiredtoharmoniselegalandaccountingtreatmentsforcarbontransactions,whethertheyshouldbeclassifiedasintangibleassets,

commodities,financialinstrumentsorotherassets,becausedifferentclassificationscouldleadto

differentpotentialtaxandcomplianceconsequencesforcross-boundarycarbontradingandfinancing.

Establishingagovernanceframeworkwouldinstil

confidenceandassuranceamongmarket

participants,letaloneaddingcreditabilitytothemarket.

Weassessbasedoncurrentmarkettrendsthat

cross-boundarysecuritisationhasagreatpotential

asatooltoattractinternationalcapitalforfunding

infrastructureprojects,includingrenewableenergies

intheChineseMainlandandSMEbusiness

expansion.Onthisfront,weproposeestablishing

HongKongasaPRCcross-boundarygreenand

sustainablesecuritisationand,inthecontextof

theGreenBeltandRoadInitiative,asukuk

(sharia-compliantbond)platformtochannel

internationalcapitaltowardsgreenandsustainability

projectsinbothHongKongandtheChinese

Mainland.Thiswillcontributetojobcreationand

long-termeconomicgrowthwhilesupporting

sustainabilityinitiativesandgoals.

Whileleadingbyexampleisanimportantapproach,

thereareothereffectivestrategiestofosteragreener

andmoresustainableeconomy.Taxincentives

shouldbeconsideredtoencouragemoreprivate

investmentsinESGandgreenprojects.Forexample,

expandingthescopeoftaxexemptionofexisting

qualifyingdebtinstrumentschemestocover

greenandESGbondswouldattractmoreinvestors

toinvestinsuchbondstradedinHongKong.

Fundingschemesareanotherproveneffectiveway

ofnudgingbusinessesinadoptingmoresustainable

practices.Forexample,thethree-yearPilotGreen

andSustainableFinanceCapacityBuildingSupport

Scheme,launchedinlate2022,shouldbefurther

proliferatedtoencouragetheparticipationoflocal

eligibleandprospectivepractitionersintraining

programmesrela