On 16 July, a memorandum of understanding (MOU) was signed between Invest Hong Kong (InvestHK) and the Abu Dhabi Chamber of Commerce and Industry of the United Arab Emirates, pledging cooperation in promoting inward and outward investments in both Abu Dhabi and Hong Kong. It is one of many MOUs signed, exemplifying stronger-than-ever relations and two-way capital flows between Hong Kong and the Middle East.
Keen on further deepening those ties is the Financial Services and the Treasury Bureau (FSTB), which views Hong Kong as offering the Middle East plenty of opportunities to tap its developed financial and professional services sectors, as the Gulf Cooperation Council (GCC) economies seek to reduce its reliance on oil. It also views these investments as an important opportunity for Hong Kong.
“We want to diversify in terms of either the source of our funding and the source of our collaborative opportunities. And, at the same time, to broaden the market for our services sector. Because after all, the clientele that we are supposed to serve sees no borders,” says Christopher Hui, Secretary for Financial Services and the Treasury.
Opportunities also lie in complementing the Gulf region’s ambitious development plans and focus on innovation technology. Hui brings up Saudi Arabia’s linear city, The Line, as an example, a glass-walled smart city under construction that is meant to stretch across the Saudi desert by 2030. “Hong Kong boasts very robust fintech and also fintech ecosystem, and we are famous for being an efficient infrastructure builder. This brings a host of opportunities for our professional sector because we are very well-versed in terms of undertaking these huge infrastructure projects, and many of them attain global sustainability standards, which is exactly what the Middle Eastern countries want,” says Hui.
He says Hong Kong can also address talent needs. “Traditionally, the economy has been relying on the oil sector. So, if they want to diversify, they need people who understand their market, and at the same time can bring something new to the market. We are quick learners and are well-versed with international global standards.”
Looking at the strategic goals of these countries, such as Saudi Arabia’s Vision 2030 agenda, Hui points out that the countries are building long-term plans that aim to grow their economies, and enhance society in line with global trends around green sustainability, technology and an aging population. “They focus their planning around these challenges so that they can be well prepared infrastructure-wise or societal-wise,” says Hui. “Hong Kong has long been facing the issue of a large aging population, so there’s so much that we can offer in terms of experience on how to develop their health sector or biotech sector, to better serve an aging population.”
According to Hui, Hong Kong has so far signed Comprehensive Double Taxation Agreements with five of the six GCC countries, bringing business sectors in both economies greater tax certainty and more incentives to conduct business or make investments.
The pitch for family offices
Showcasing the appeal of Hong Kong to global family offices, and encouraging more of them to set up here, is also important to Hui.
Around 2,700 single family offices were operating in city, as of the end of 2023, according to a market study published by Deloitte in collaboration with FamilyOfficeHK, the dedicated family offices team under InvestHK. Over half of these family offices have assets under management exceeding US$50 million. “I think it’s very telling of what we already have. But, we need to do more. That’s why InvestHK, through the global network, has been engaging different sectors regionally and globally,” says Hui.
One of the things Hong Kong can help wealthy families do is diversify their assets. “Of course, diversification has been an eternal theme [for family offices] but I think the need for diversification is more acute now because we are facing a very uncertain, insecure world,” he says. “We have a world-class financial infrastructure, be it hard infrastructure on banking, on payment settlement, etc., but also on the soft infrastructure, financial regulation, accounting standards, so on. I think this whole area of professional services provides a very solid foundation for wealth to be accumulated here. They are here not just for the short-term growth or returns, but also for generational transfer of wealth.”
“This whole area of professional services provides a very solid foundation for wealth to be accumulated here.”
The inspiration behind naming the FSTB’s annual summit of family offices “Wealth for Good in Hong Kong,” came from recognizing the diverse needs of wealthy families, explains Hui. “It’s not just about money for them. It’s also about the passage of their values to the next generation, and also the appreciation of artwork, charities, and making sure it’s not just returns for themselves, but also social returns to the broader community.” This, he adds, plays into Hong Kong’s attraction as a global family offices hub, given the city’s diverse society, long-standing giving culture, and more than 10,000 registered charities.
Last year, the government outlined eight initiatives in its Policy Statement on Developing Family Office Businesses in Hong Kong. Hui describes the statement as being a “combo” of measures, reflecting the diverse needs of family offices.
Most of them have already been implemented, says Hui, including a tax concession provided to family-owned investment holding vehicles managed by single family offices in Hong Kong, and the enhanced application process for recognition of tax exemption status of charities. “It seems that right now, I receive less enquiries about that process because people have been given more certainty and more transparency on how this whole approval process is being conducted,” says Hui.
The Network of Family Office Service Providers has also been launched under InvestHK, providing a two-way channel between the government and the industry.
All of the measures, he adds, come together to reinforce the robustness of Hong Kong’s family office ecosystem, and to send out a key message. “They make sure that not just Hong Kong, but the whole region, even the world, will know what we can serve them as a family offices hub.”
Risk-based approach
A question that Hui gets asked often is about the government’s policy positioning amid a rapidly growing and volatile virtual asset industry. “People always challenge us whether there is a U-turn. But in fact, we haven’t had any U-turn at all. We have been taking on a tentative path in terms of growing this segment sustainably.
“After all, it is an evolving sector, so we need to be ensuring that whatever the risk that we’re going to generate from these sectors can be managed well through our financial regulation. That’s why the principle that we adopt has been very consistent throughout, which is ‘same risk, same regulation’.”
Hong Kong’s approach, says Hui, reflects an international consensus. “The emerging global consensus is that these sectors need to be regulated. And also to ensure that they are regulated in a way that investor protection will be taken into account.”
While the licensing regime for virtual asset trading platforms has been implemented since last June, the government continues to gradually build a regulatory framework that covers key segments. It is currently working on licensing requirements for virtual asset operations, including over-the-counter trading services and the issuance of stablecoins.
That “same risk, same regulation” principle will continue to permeate throughout. “Virtual assets exhibit themselves in different forms – in the form of a virtual asset for trading, or virtual asset ETFs, or virtual asset futures ETFs. That’s why as we try to grow this, we really look at what are the specific risks that we need to consider, and also try to regulate well to ensure that the whole sector can grow sustainably,” says Hui.
“With stablecoins, we have to look at it from the payment angle to ensure that the virtual or the stablecoins being created will be underpinned by sufficient reserves, to ensure that they are well-backed by fiat currencies. This is just one of the many measures that we have in place to ensure that whatever new products that we offer to the market in the virtual asset space, there will be commensurate risk management and regulatory measures in place.”
Musicians of the business world
With the view of bringing more investment opportunities to Hong Kong, the FSTB has been looking at establishing an inward re-domiciliation regime that draws in foreign companies. In July, it published the public consultation conclusion and latest legislative proposals for the company re-domiciliation regime, incorporating the views collected.
Underpinning the need for such a regime is a global trend of offshore companies facing increasing regulatory pressure to ensure that they have economic substance, Hui explains. “With the need for economic substance to be demonstrated, and with the future introduction of the global minimum tax rate, many of the companies which originally opted for re-domiciliation in these offshore jurisdictions may no longer see the benefits of doing so,” he says.
To Hui, the ultimate pull factor for non-Hong Kong enterprises to transfer their domicile to the city, is Hong Kong being a robust financial and commercial centre. “Now, more than 9,000 companies with international headquarters have a presence in Hong Kong. We have very low taxation. We have very competent professionals including accountants. We have everything it takes for companies to grow and to develop their business here,” he says.
Another key advantage that the regime can bring for companies is certainty on their profits tax obligations after re-domiciliation. “If they want to do their business here in Hong Kong, step into Mainland China, while domiciling their companies here, this regime will afford them much convenience, as they just have to deal with Hong Kong alone, in terms of taxation and their businesses. That’s why I feel this makes a lot of sense.”
“Accountants are like musicians who understand the notes on the scores. So in a sense, it is something needed in different industries and companies.”
One of the respondents of the consultation was the Hong Kong Institute of CPAs. Hui considers the Institute as a key source of constructive advice when forming policies to generate opportunities for the overall economy. “Accountants are like musicians who understand the notes on the scores. So in a sense, it is something needed in different industries and companies. No matter what musical instruments you play, you need the scores,” says Hui.
“But not very often people know how to read the notes and interpret them in a way that will allow them to make proper investment or business decisions. So I see accountants as a very important conduit here, who are able to understand these complexities, and explain them to the business world.”
Because of this, the accounting profession’s growth and continuous relevance in the business world is immensely important to Hui. “Looking at the Accounting and Financial Reporting Council, we have entrusted them by law to develop the profession, to make sure this is one of the very missions that they have,” he says. “At the same time, with the reform already in place to our accounting regulatory system, we’re also very much looking to the HKICPA for more efforts in terms of enriching the talent and expertise of the sector. And, more broadly, to accountants to better leverage their expertise and experience to help us to grow Hong Kong together.”
Growth of green fintech
In the financial services space, sustainable and green finance is growing in significance. And with that, Hui says that the financial services agenda is changing. “As that evolves, our fintech solutions and fintech agenda also need to evolve to serve the needs of financial services sector. And in recent years, you can see that sustainability or green finance has taken increasingly strong foothold in the financial services agenda.”
It’s believed that the integration of green finance and fintech, or green fintech, has a significant part to play in supporting transition finance, which allows for the shift toward decarbonization. “Infrastructure or the traditional businesses also need to embrace green. And as these types of activities become more prevalent, people will ask about how they can ensure that the money going into these sectors, or these new projects, are really green,” Hui explains.
This all reflects the importance of assurance certification, he adds, and therefore the role of the accounting profession. “That’s why the government sees HKICPA as a very key stakeholder here. We already have HKICPA on many of our government committees to make sure the roadmap that we are going to develop on green disclosures will be something that accountants can provide assurance on,” he says.
Staying relevant
Hong Kong takes the lead in green finance and innovation, highlights Hui, mentioning the government’s second green bond issuance earlier this year. “Leveraging our role as an international financial centre, we’ve issued green bonds in multiple currencies: Hong Kong dollar, US dollar, euro, and renminbi,” he adds.
However, Hui has his sight set on the future, and wants to see Hong Kong continue to be relevant in the global green ecosystem. It is why he values the professional input of the Institute, and believes that another key role the profession can play is as an ambassador for Hong Kong’s green agenda. “So that regionally and globally people will be aware of what’s being offered in Hong Kong, and that what we are doing is up to international standards,” he says.
“After all, for a small economy like us to thrive we need to command trust regionally and globally. And trust basically is derived from the robustness of our regulation and professional standards. And here, accountants, or specifically the HKICPA, play a key role.”
Hui has often seen the strengths of the profession play out when it comes to facilitating foreign investment and bringing in family offices to Hong Kong. “Many of these companies, the financial intermediaries, or even general investors, come to accountants first in terms of seeking advice about some of the fundamentals of investments,” says Hui. “A lot of these business activities do carry with them risk, and a lot of the decisions accountants make are underpinned by a very articulate risk and benefit analysis. So that’s why I think growing the profession, having the next generation of accountants is very important.”
To young people weighing up future career options, Hui shares why he thinks accounting could be a meaningful choice. “Increasingly, with this uncertain world, people will look for an anchor, in terms of business standards and also professionalism. Accountants have always been an upholder of very high standards,” says Hui.
“What you are doing here as accountants is not just something confined to your room, but carries a much broader meaning for Hong Kong’s continued relevance on the global stage.”
On 7 February, the Hong Kong government announced the offering of around HK$6 billion worth of digital green bonds, attracting subscription by a wide range of institutional investors globally. This marked the second digital bond issuance following the government’s inaugural tokenized green bond issued in February 2023.
