Hong Kong and Mainland Join Hands to Promote New Industrialisation
On 19 September 2024, the Hong Kong Special Administrative Region (“HKSAR”) Government and the Ministry of Industry and Information Technology (“MIIT”) signed a cooperation agreement to cultivate innovative productive forces and foster new industrialisation efforts. In addition, the pact seeks to enhance collaboration between Hong Kong and the Mainland in the development of industry, information technology, and in fields where both regions hold distinct competitive advantages.
Prior to the signing ceremony, both signatories exchanged updates on their most recent policy measures aimed at advancing the development of new productive forces and accelerating new industrialisation. Both sides also explored opportunities for deeper collaboration. In particular, they discussed how to drive innovation and technology development in alignment with broader national strategies.
According to the HKSAR Government, it is dedicated to enhancing new high-quality productive capabilities, boosting new industrialisation, and promoting closer integration into the national industry and innovation network.
Furthermore, the cooperation pact underscores Hong Kong’s vital role in the wider framework of national development. The international financial centre boasts competitive strengths in artificial intelligence, new energy, and new materials, while also benefitting from access to global capital and a rich pool of research and development talent.
China Facilitates Domestic and Overseas IPOs of Sci-Tech Enterprises
On 18 September 2024, the Chinese government announced it was considering a slew of measures aimed at widening access to venture capital funding, as well as supporting domestic and international public listings among sci-tech enterprises. A comprehensive reform package will be unveiled to tackle the different challenges faced throughout the venture capital cycle, ranging from fundraising, financing, post-investment oversight, and exit.
To foster the robust growth of venture capital, it is essential to bolster the institutional framework, enact relevant reforms in the capital market, optimise market functions, and further invigorate the venture capital ecosystem.
Government representatives at the executive meeting underscored, in particular, the necessity of streamlining investment processes and eliminating barriers in the venture capital cycle. Such efforts are pivotal to enhancing the efficiency and accessibility of funding for innovative enterprises in high-growth, sci-tech industries.
In addition, emphasis was placed on assisting eligible sci-tech companies in their efforts to initiate public offerings both at home and abroad. This includes promoting equity transfers, mergers and acquisitions (“M&As”) activities, and the implementation of pilot initiatives for shares-in-kind distribution. Further, measures are to be introduced to incentivise private capital entities to establish Funds of Funds, aimed at facilitating market-driven M&As and creating secondary market funds to support venture capital investments.
Earlier this year, in June, a raft of measures and policies were approved in a government circular to stimulate the high-quality and sustainable development of venture capital. Additionally, the circular further called for the consolidation of enterprises’ role in spearheading the development of innovative productive forces.
Hong Kong Signs Tax Treaty with Türkiye
On 24 September 2024, Hong Kong signed a Comprehensive Avoidance of Double Taxation Agreement (“CDTA”) with Türkiye. This marks the 51st CDTA agreement that Hong Kong has signed.
Türkiye is among the key participating economies involved in the Belt and Road Initiative (“BRI”). The two signatories’ commitment to enhancing tax cooperation under the BRI is evidenced by the signing of the CDTA at the Fifth BRI Tax Administration Cooperation Forum. Through improved connectivity, the CDTA will strengthen economic and trade ties between the two jurisdictions, and facilitate the development of the BRI.
Under the Hong Kong-Türkiye CDTA, Hong Kong-based companies can benefit from double taxation relief. Specifically, any taxes paid in Türkiye – directly or through deductions – shall be credited against the tax owed in Hong Kong on the same income.
The CDTA will take effect once the necessary ratification procedures have been concluded by both sides.
HKMA Launches Phase 2 of e-HKD Pilot Programme
On 23 September 2024, the Hong Kong Monetary Authority (“HKMA”) launched the second phase of the e-HKD Pilot Programme, which was first introduced on 18 May 2023. Now newly designated “Project e-HKD”, the programme is shifting towards a more holistic exploration of innovative applications for digital currencies from both public and private sources. These include use cases for e-HKD and tokenised deposits, which can be capitalised by individual and corporate users alike.
In the second phase, 11 consortia of enterprises from a wide range of sectors have been identified to delve into novel applications for e-HKD and tokenised deposits in three core areas: settling tokenised assets, programmable functions, and offline payment mechanisms. In addition, the chosen companies are tasked with evaluating the commercial viability of new digital currency models that could be made accessible to individuals and businesses.
The findings from the second phase will provide valuable insights into the practical difficulties that are likely to be encountered in establishing, executing, and managing a digital currency ecosystem.
Akin to Phase 1, an e-HKD sandbox will be made accessible to participants to expedite the process of prototyping, developing, and testing. Over the next year, the HKMA will collaborate extensively with participating institutions to disseminate the key learnings from Phase 2 to the public by the end of 2025.
The HKMA also plans to set up an e-HKD Industry Forum to provide a collaborative space for participating institutions to address shared concerns and consider the potential scalability of digital currency adoption. Furthermore, programmability-related issues will be addressed by industry-led working groups established under the auspices of the forum.
China to Gradually Raise Statutory Retirement Age
On 13 September 2024, the Chinese government granted formal approval to a draft proposal aimed at incrementally increasing the legal retirement age, starting from 1 January 2025. The potential adjustment of the statuary retirement age and its concomitant implications have been a topic of dynamic discourse for many years. In particular, discussions around demographic shifts and workforce sustainability have been rife.
As labour legislation currently stands, the mandated age for retirement for male employees in China is 60 years old. For female employees, on the other hand, the statutory retirement age is 55 and 50 years old for those in managerial and non-managerial roles respectively. Under the new proposal, both male and female employees in managerial roles will see their prescribed retirement age raised by one month for every four-month period. In the case of female employees employed in non-managerial capacities, the official retirement age will be increased by one month for every two-month span.
The adjustment will take place incrementally over a period of 15 years, during which the retirement age will progressively rise to 63 for male workers, and 55 for non-managerial female workers and 58 for managerial female workers. In addition, the employer and employee may mutually decide to delay retirement by a maximum of three additional years.
Another noteworthy amendment is the incremental rise of the minimum contribution period for basic pension eligibility from 15 to 20 years. An increase will occur every six months on an annual basis, commencing in 2030.
Companies operating in China are well advised to accurately ascertain their employees’ ages and strictly adhere to the statutory retirement age. This will enable the timely conclusion of the employment contract and the efficient handling of relevant procedures.
HKMA and Cyberport Unveil GenAI Sandbox
In partnership with Hong Kong Cyberport, the HKMA has recently launched a new Generative Artificial Intelligence (“GenAI”) Sandbox. Its foremost aim is to create a controlled setting conducive to the rapid development, testing, and piloting of groundbreaking AI solutions in a variety of real-world banking applications.
The blistering advancement of technology in recent years has transformed the financial services sector by leaps and bounds. The change has presented fresh avenues to boost efficiency, refine decision-making, and enhance customer interactions. Of all the technological developments, the potential of GenAI is distinguished by its capacity to re-sculpt operational and customer engagement practices.
Authorised institutions are being invited to submit their applications for participation in trials to explore a wide array of potential AI uses. This encompasses an emphasis on retrieval-augmented generation, the optimisation of existing models, and the construction and training of new models.
In addition, the HKMA seeks to foster the growth of Hong Kong’s fintech ecosystem. Therefore, it is encouraging AI-developing entities to partner with fintech companies in crafting use cases for sandbox initiatives. A directory of fintech companies, language model developers, and GenAI solution providers has been made available as a resource by Cyberport for interested parties to reference.
The deadline for submitting applications for sandbox trials is 15 November 2024. Applicants should submit their applications via the Survey Tool pilot platform on the HKMA’s Supervisory Communication Website. Candidates must furnish specifics that include sophisticated design outlines, relevant modelling approaches, initial risk analyses, and details of their proposed partners.
China Promulgates Regulations for Network Data Security Administration
On 30 September 2024, China issued new Network Data Security Management Regulations (“Regulations”), due to take effect on 1 January 2025. The Regulations seek to strengthen protective mechanisms governing data security and privacy, imposing compliance obligations on data handlers, whether they are based domestically or operate from abroad.
Notable highlights include more rigorous informed consent standards, more precise delineations and responsibilities related to data deemed important. Additionally, new provisions have been introduced to allow for exemptions, permitting some data transfers to proceed without the need for assessment.
Data-handling organisations, particularly those dealing with personal information of over 10 million people, are required to appoint a dedicated person to oversee data security and form a specialised management body. Such personnel are tasked with devising and executing security protocols. This encompasses developing robust and extensive systems for managing data security and responding to security incidents. In addition, they must routinely conduct risk evaluations and handle complaints relating to data breaches or potential vulnerabilities.
Under the Regulations, data processors are mandated to provide clear and easily obtainable information prior to processing personal information. For example, this must include the processor’s name, contact details, the aims and techniques of data processing, the types of data being handled, and the reasons for handling sensitive data.
It is imperative for businesses engaging in data-processing activities in China to thoroughly review their privacy policies, data-handling contracts, and internal protocols to ensure compliance with the latest Regulations. Upon review, non-compliant data-handling entities are well advised to take swift action to resolve any issues, so as to avoid or mitigate possible penalties for minor infractions.
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