Before joining the government in 2012, first as the Secretary for Development, Paul Chan had served as the Hong Kong Institute of CPAs’ President in 2006, and as the Legislative Council Member of the Accountancy Functional Constituency from 2008 to 2012.
He sat on many of the Institute’s committees, including taxation, small and medium practitioners, member services and Mainland affairs, as well as the Fourth and Fifth Long Range Plan task forces. “I volunteered my time to the Institute and that opened my eyes to the role that CPAs can play for the wider community. Particularly in terms of policy advocacy, we can make a difference,” says Chan. The seasoned Institute member, who has built on his career in the accounting profession to reach one of the highest positions in government, sits with A Plus in celebration of the Institute’s 50th anniversary.
From helping to formulate the Institute’s Budget proposals to the government, to now being on the receiving end, Chan is well acquainted with the Institute’s history as a thought leader and also the impact CPAs’ expertise can have on improving society. The Institute’s Budget proposal is one of the main submissions that the government makes reference to, he says. “Over the years, the Institute has been making valuable submissions touching on such issues as Hong Kong’s economic development, manpower, tax, sustainable development, etc. and they are important pieces of reference to us,” he adds. “The Institute has been very active in terms of policy advocacy, particularly on enhancing the competitiveness of the tax system. So naturally in the submission, there are proposals about tax concessions or exemptions towards different areas.”
Weighing suggestions against numerous factors aside from technical validity is crucial when looking at Budget proposals, including those on tax policy, Chan says. “We need to take into consideration the economic situation, public finance, the fiscal strength of the government, the competitiveness of the Hong Kong economy, as well as the future direction of our economic development. We have to balance not just these factors but also the interests of different stakeholders, because the Budget concerns everyone. People expect that the Budget would be fair and balanced, meeting their current needs as well as realizing the long-term vision.”
Something that the Institute has long called for in its proposals is an extensive review of the tax system to be conducted due to the narrow tax base of Hong Kong, with the aim of enhancing the city’s overall competitiveness. Chan highlights that Hong Kong is still at the early stage of economic recovery after the epidemic, and so the potential impacts of such a review should be carefully examined. “We face a challenging external environment. In the first five months of 2023, the total value of merchandise export fell by more than 16 percent year-on-year. To safeguard a sustainable economic recovery, we have to be very careful and refrain from doing anything that may dampen business confidence.”
The timing of such a review is an important consideration, he adds. “We are at a time of attracting businesses and talents, and a simple and low tax regime is one key aspect of our competitiveness. We want to make sure that businesses will see that we are welcoming them.”
Since reopening its borders and boundaries, Hong Kong’s economic activity has been normalizing, according to the International Monetary Fund in May. However, headwinds continue to loom over the city, such as slower growth in the United States and Europe weighing on external demand, and tighter financial conditions around the world.
While keeping an eye on external risks and uncertainties, Chan remains optimistic about Hong Kong’s economy for the rest of the year. “Hong Kong is a small and open economy, and thus the external headwinds will affect us. The situation of exports is challenging, but with COVID under control, Hong Kong has resumed normalcy and convenient travel with the Mainland and the international community,” he says. “If the number of incoming tourists continues to recover and rise in the second half of the year, and the external environment doesn’t deteriorate significantly, we will achieve the gross domestic product (GDP) growth target for 2023. This year will be better than last year.”
Chan points to other positive signs that an economic recovery is underway. “Our export of services in the first quarter of this year was much better than the previous quarter. Investment expenditure for the first quarter went up by about 5.8 percent, whereas it contracted by more than 7 percent last year,” he says.
Other than the latest round of consumption vouchers, schemes focused on assisting small and medium-sized enterprises (SMEs), such as the special 100 percent loan guarantee under the SME Financing Guarantee Scheme rolled out by the government, are also reinforcing the momentum of recovery. “By continuing to provide SMEs with the government-guaranteed loans to enable them to borrow from the banks, they can maintain or even expand their business. We seek to protect employment because SMEs account for over 98 percent of business establishments in Hong Kong, and over 45 percent of employment in the private sector,” says Chan. “Protecting jobs, and giving people additional money to spend – this will help private consumption.”
To further stimulate private spending, the government in April launched the “Happy Hong Kong” campaign, comprising a series of food fairs, carnivals, sports and musical activities, and more. Chan says it’s important that these events boost the mood and atmosphere. “For us as a city, the last three and half years have been difficult. First the black-clad violence, then COVID which impeded Hong Kong’s connections with the Mainland and the rest of the world. Upon returning to normalcy, we rolled out the ‘Hello Hong Kong’ campaign in February which welcomes incoming tourists and business travellers. We gave out free air tickets, organized mega events, and put in resources to attract exhibitions. At the same time, having gone through all those challenging years, we want to rebuild a spirit of optimism and a sense of happiness in the community,” Chan says. “Apart from the economic benefits, we want the people of Hong Kong to be happy.”
Amid increasingly intense global competition, Chan said the digital economy would be a key driver of future growth and development for Hong Kong. He points out that businesses can enhance efficiency through digitalization. “We need to press ahead with digital transformation, particularly for SMEs, because they are less well-resourced. That’s why we have partnered with Cyberport to allow SMEs to use off-the-shelf software to help with the digitalization process,” Chan adds. He announced in this year’s Budget that HK$500 million would be allocated to launch a Digital Transformation Support Pilot Programme to assist SMEs in applying basic digital solutions. The programme is in addition to the Technology Voucher Programme that has been being implemented over the past few years. On 14 July, the Legislative Council approved the funding for the programme.
Skills for moving up
Chan says his training as an accountant was useful for his career. “When I was an accountant in business, I realized that the training as an accountant is excellent and rewarding. Of course, apart from the technical skills such as accounting and finance knowledge, one needs to develop leadership and communication skills, because you always work in a team. As one moves up the management ladder, you have to demonstrate the ability to lead, command respect and build consensus, and to have people working with you together to achieve goals and realize the vision,” he says.
“I realized that the training as an accountant is excellent and rewarding. Of course, apart from the technical skills such as accounting and finance knowledge, one needs to develop leadership and communication skills, because you always work in a team.”
Chan also encourages accountants to enrich their knowledge about the Greater Bay Area (GBA) and the Mainland, as it is very important nowadays. At the same time, he suggests young members should develop their intercultural skills. “Mobility is important, which is the ability to work and interact with people from different cultures, and the readiness to venture into new areas, whether it is a different geographic area or a new area of economic development, for example, the digital economy,” he says.
On that note, Chan adds that accountants should embrace technology and innovation. “Although people in different fields may have varying degrees of exposures to technology and innovation, it is a mega trend that is taking place. Accountants will have to embrace new technology and financial innovation.” Noting that Web3 and its blockchain technology will spur new financial innovations and bring opportunities for the community, the government has established a task force for promoting Web3 development in Hong Kong, as announced on 30 June. Chaired by Chan, the task force comprises 15 non-official members from relevant market sectors, and key government officials along with financial regulators are also members.
A key profession
During Chan’s tenure as Institute president in 2006, regulatory reform was a main focus while the profession globally was facing rapid changes. “There were a few corporate failures in the United States, and regulators worldwide were reviewing the regulation of the accounting profession. Hong Kong, being an international financial centre, was in that process. During my time as President of the Institute, talks began about establishing the Financial Reporting Council (FRC),” he says. “Looking back, that was the beginning of the change in the regulation and oversight of the profession, both globally and domestically.”
Changes continued. Since then, the regulation of the profession has evolved, and further changes have been signified by further reforms which transferred certain statutory regulatory powers and responsibilities of the Institute to the FRC, now renamed as the Accounting and Financial Reporting Council, or AFRC.
“The accounting profession is a major profession for Hong Kong as an international
financial centre. I trust the Institute will continue to offer valuable views and suggestions on a range of matters.”
Now with the Institute’s regulatory powers transferred to the AFRC, Chan sees the opportunity for the Institute to deliver value for its members. “Apart from education and continuing professional development, the Institute has been providing various services to members over the years. Going forward, there is room to enhance members’ services and they would be valued,” he says.
One thing that Chan thinks will remain unchanged for the Institute is its role as an important advocate for the profession and for the public interest. “The accounting profession is a major profession for Hong Kong as an international financial centre. I trust the Institute will continue to offer valuable views and suggestions on a range of matters, from economic development to tax policies, which will be valued by the community and the government.”
Supporting Hong Kong’s ambitions
There are plenty of opportunities for Hong Kong to be an even more successful international financial centre, according to Chan. He particularly wants to see more international companies consider a primary or secondary listing in the city.
“Our equities market is successful in terms of size, which is about 13 times of our GDP. But if you look at its composition, slightly more than 50 percent are Mainland companies, and those companies account for over 70 percent of our market capitalization and 80 percent of our daily turnover. That is natural as we have benefitted tremendously from the Mainland’s development. But going forward, as an international financial centre, we want our listing platform to be able to attract more international companies, be they from the Middle East or Southeast Asia,” he says. Hong Kong should also strive to enhance the infrastructure for Renminbi (RMB) and develop more investment and risk-management products, which will be important to future growth as an offshore RMB business hub amid RMB internationalization.”
Another key area for Chan is green and sustainable finance. While Hong Kong is Asia’s number one in terms of the value of green and sustainable bonds issued, there is still plenty of room to grow as the world heads towards carbon neutrality, he says. “This is an area where accountants’ role can be important – including contributing to green standard setting, convergence of the Mainland and international standards, green certification, etc,” he says.
Chan believes that the profession is also instrumental to Hong Kong’s efforts to further develop itself into an international asset and wealth management centre, given that the GBA has a combined GDP of around US$2 trillion. Separately, with Hong Kong acting as a two-way open platform between the Mainland and the international markets, Chan says members can pursue a career in treasury services and risk management.
“I am very optimistic about Hong Kong’s development as an international financial centre, and am so too about the career development opportunities for accountants. For young accountants, choose the field that you are interested in, and go for it.”
As the Institute celebrates its 50th anniversary, Chan says he looks forward to the continuous contributions of the Institute in enhancing members’ services and development, and in helping them fulfil their professional and career aspirations.
The government announced on 30 June the establishment of the Task Force on Promoting Web3 Development. Chaired by Financial Secretary Paul Chan, the task force comprises 15 non-official members from the relevant market sectors, with the participation of key government officials and financial regulators.