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Summary of PwC's Recommendations for Hong Kong's 2022 Policy Address

Core Content

PwC has presented a comprehensive set of recommendations aimed at reinforcing Hong Kong's position as a global financial and business hub. These recommendations are structured around several key areas: financial services, tax system competitiveness, digital economy development, and sustainable finance. The goal is to enhance Hong Kong's attractiveness to investors, businesses, and talent, while addressing internal and external challenges to economic growth.

Main Recommendations

1. Upholding Hong Kong's Status as an International Financial Centre

• Diversify Capital Market: Accelerate the development of a tailored listing regime for advanced technology companies and re-engineer the GEM to attract SMEs and start-ups by relaxing listing requirements.
• Infrastructure Financing Hub: Develop Hong Kong as a regional infrastructure financing hub under the Belt and Road Initiative (BRI), focusing on the use of infrastructure REITs to raise capital for projects like the Northern Metropolis and Lantau Tomorrow.
• Support RMB Internationalisation: Reboot RMB IPOs and introduce more RMB-denominated investment products. The Government should work with the CSRC to support yuan-denominated stock trading desks and expand cross-border investment channels.
• Digital Reporting: Implement digital reporting for listed companies to improve transparency and regulatory efficiency, aligning with global standards.

2. Building Asia’s Sustainable Finance Hub

• Promote ESG Transformation: Expand the range of ESG-linked financial products and encourage the adoption of localised ISSB standards for public and private entities.
• Carbon Market Development: Accelerate the development of Hong Kong's carbon market through the 'CarbonConnect' initiative with Mainland China and the region, leveraging the expertise from the Mainland's pilot zones.

3. Increasing International Competitiveness of the Tax System

• Strategic Tax Policies: Introduce business-friendly and commercially viable tax incentives to attract foreign and Chinese multinational corporations, and support R&D and technology activities in Hong Kong and the GBA.
• Tax Incentives for ESG and Green Projects: Allow tax exemptions and fiscal measures to encourage investment in ESG and green projects.
• Tax Policies for Emerging Industries: Explore new tax policies for emerging sectors such as crypto assets, the metaverse, and Web 3.0.
• Non-Tax Measures: Use government grants and subsidies to attract investments and talent.

4. Developing Hong Kong as a Trusted Digital Economy Hub

• Digital Infrastructure: Ensure all new development areas are 'digital ready' and support the city's transformation into a smart city.
• Secure Cross-Border Data Flow: Establish a robust framework for secure data flow between Mainland China and other regions, leveraging Hong Kong's unique position as a part of China but with separate governance.
• Cybersecurity and Emerging Technologies: Address cybersecurity threats and develop a strategic plan for the adoption of AI, the metaverse, and other emerging technologies, including the installation of 5G infrastructure in new and rural areas.

5. Attract, Nurture and Retain Talent

• Integrate with GBA: Create a new Hong Kong package to integrate with the Greater Bay Area (GBA) and attract, nurture, and retain talent.
• Enhance Policymaking: Improve the effectiveness of policy-making to ensure focused and result-driven outcomes.

Key Information

• Hong Kong's competitive advantages include its financial infrastructure, legal system, and talent pool, but these are under threat from global uncertainties and internal constraints.
• The introduction of a tailored listing regime for advanced technology companies and re-engineering the GEM can help diversify the capital market and attract more investment.
• Infrastructure REITs offer a promising avenue for financing large-scale projects and can be expanded by leveraging existing infrastructure and aligning with international practices.
• RMB internationalisation is crucial for Hong Kong's role as an offshore RMB centre, with the potential to increase its attractiveness to global investors.
• ESG-linked financial instruments and carbon market development are key to supporting Hong Kong's transition to a low-carbon and climate-resilient economy.
• Tax incentives should be more practical and business-friendly, with a focus on R&D, technology, and emerging industries.
• Strengthening cross-border data flow and digital infrastructure is essential for Hong Kong to become a trusted digital economy hub.
• A strategic and integrated approach is needed to address cybersecurity and promote the adoption of new technologies.

Conclusion

PwC's recommendations provide a roadmap for Hong Kong to maintain its competitive edge in the face of global and local challenges. By enhancing financial services, promoting sustainable finance, improving the tax system, and developing a robust digital economy, Hong Kong can solidify its role as an international financial and business hub, ensuring long-term economic growth and stability.