Hong Kong’s Unique Role Reaffirmed at Belt and Road Summit
The Ninth Belt and Road Summit (“Summit”), which kicked off on 11 September 2024, drew in roughly 6,000 prominent leaders from nations and regions participating in the Belt and Road Initiative (“BRI”). Government officials from approximately 10 nations, influential global business leaders, and delegates from 38 mainland Chinese state-owned enterprises were present.
Since its inception in 2016, the Summit, held every year by the Hong Kong Special Administrative Region Government, has emerged as the leading platform for local businesses and overseas investors alike to tap into the BRI.
The attendees delved into the myriad of opportunities and growth prospects as the BRI transitions into its next pivotal decade. Stronger and broader collaboration among participating members is anticipated, particularly in the fields of business, environmental sustainability, green development, innovation, technology, and trade.
The common thematic thread that ran through the Summit was, without a doubt, Hong Kong’s unique position in advancing the BRI. Hong Kong stands out as the top fundraising centre in Asia. The city’s inclusive equity, bond, and currency market provides a conducive environment for corporations and governments to secure funds for various infrastructure projects and sustainability endeavours.
In addition, Hong Kong is committed to harnessing its distinct role and expertise as a global financial, trade, maritime, and professional services hub to generate fresh prospects and value for economies in participating regions.
Hong Kong’s trade with BRI countries has increased by nearly 60 per cent between 2013 and 2023. This represents a growth rate 3.8 times higher than that of its trade with all other economies. In 2023, over 43 per cent of Hong Kong’s foreign trade value came from BRI economies.
China Issues Action Plan to Ramp Up Urbanisation Efforts
China has recently unveiled the Five-Year Action Plan for Implementing the People-oriented New Urbanisation Strategy (“Action Plan”). In the next five years, China foresees a leap in the urbanisation rate of its permanent population to nearly 70 per cent.
The world’s economic behemoth has made substantial strides in urbanisation in recent years, with a sharp rise in the city-dwelling population. However, it is currently encountering challenges, such as the necessity of better assimilation of its rural inhabitants, who make up nearly half of China’s 1.4 billion population, into urban settings.
By the end of 2023, the urbanisation rate of China’s permanent residents had surged to around 66 per cent – a sharp climb from about 53 per cent at the end of 2012. The country’s household registration system facilitated the relocation of 165 million rural dwellers to urban areas over the last decade.
The Action Plan delineates a detailed strategy to tackle these challenges. Key emphasis is laid on upgrading the household registration system, as well as providing better accommodation, social security, and welfare services for urban migrants.
In places with scarce urban development and significant population sizes, the primary focus will be on boosting urbanisation levels. Meanwhile, in regions with high urbanisation rates and sustained population densification, the objective will be to develop modern metropolitan hubs.
Under the new Action Plan, individuals are now permitted to register their place of residence in cities with under 3 million permanent urban inhabitants. Requirements for cities with populations ranging from 3 to 5 million, on the other hand, will be comprehensively eased.
Hong Kong Strengthens Consumer Safeguards for AI-Driven Financial Services
The Hong Kong Monetary Authority (“HKMA”) has recently released a circular to authorised institutions. It outlines the guiding principles for the application of generative artificial intelligence (“GenAI”) in customer-facing platforms, with a focus on safeguarding consumers.
The HKMA has observed a growing trend among banks to incorporate GenAI into their practices. While the incorporation of GenAI into banking activities is still in its infancy, with its use currently limited to banks’ internal operations, such as chatbots and coding, its potential in customer interactions can be further harnessed, leading to wider adoption.
Back in 2019, the HKMA issued a circular, which contained a set of guidelines on consumer protection regarding the application of big data analytics and artificial intelligence by authorised institutions. The guiding principles centred around governance and accountability, fairness, transparency and disclosure, as well as data privacy and protection.
Building upon the guiding principles derived from the circular released in 2019, the HKMA anticipates the expansion and implementation of these principles by authorised institutions in the application of GenAI. In light of the complexities underlying GenAI models, the HKMA has issued additional guiding principles to further enhance consumer protection:
– Governance and accountability
The responsibility of all decisions and operations involving GenAI is to be retained by the board and top executives of authorised institutions, who must carefully assess the possible effects of GenAI technologies on customers with the aid of a suitable committee.
– Fairness
Authorised institutions must verify that GenAI models yield impartial, consistent, ethical, and unbiased outcomes for customers.
– Transparency and disclosure
Customers should be clearly and accurately informed about the workings of GenAI applications by authorised institutions.
– Data privacy and protection
Authorised institutions should put in place strong security measures to protect customer information.
Hong Kong Relaxes Listing Requirements for Specialist Technology Companies
A joint announcement by the Hong Kong Exchanges and Clearing (“HKEX”) and the Securities and Futures Commission (“SFC”), made on 23 August 2023, has introduced alterations to the Hong Kong Listing Rules. The changes shall be effective for three years – from 1 September 2024 to 31 August 2027. Specifically, the modifications pertain to the listing rules governing Specialist Technology Companies (“STCs”) and Special-purpose Acquisition Companies (“SPACs”).
STCs are defined as companies that focus mainly on research and development, alongside the commercialisation and/or sale of products or services in specific technology fields recognised by the HKEX.
The minimum market capitalisation for STCS, with a revenue of no less than HKD 250 million in their latest audited financial year, has been lowered to HKD 4 billion, from HKD 6 billion previously. For companies that fall short of the revenue requirement, the minimum will be adjusted from HKD 10 billion to HKD 8 billion.
These changes will be applicable to STCs to be listed from 1 September 2024 onwards, provided that the listing applications are lodged by 31 August 2027.
SPACs, on the other hand, are essentially shell entities that raise capital through their public offering, with the intention of acquiring another company within a set period of time. This process is commonly known as a de-SPAC transaction.
Following the amendment, the minimum independent third-party investment for de-SPAC transactions will now be the lesser of either the amount determined under Listing Rule 18B.41 or HKD 500 million. In addition, independence criteria for third-party investors have been modified to align with the definition of Sophisticated Independent Investors for STCs.
Brazil and China Celebrate 50 Years of Diplomatic Relations
Last month marked the 50th anniversary of the establishment of diplomatic relations between the two economic powerhouses, Brazil and China. According to Brazilian President Luiz Inácio Lula da Silva, over the past half a century, the two states have forged a strategic partnership, deepening cultural, commercial, technological, and scientific linkages between their peoples.
The partnership between Brazil and China is primarily rooted in their complementary economies. The economically symbiotic relationship has fostered a consistent and continuous flow of trade and investment between the two nations. As a result, China has emerged as Brazil’s largest trading partner, providing a substantial boost to the Brazilian economy.
Brazil’s cornucopia of natural resources, ranging from agricultural produce, such as soybeans and meat, to mineral oils, fuels, and distillation products, dovetails with China’s ever-growing demand. Since 2018, Brazil has been China’s leading supplier of agricultural imports. Based on data from the Chinese Ministry of Agriculture and Rural Affairs, 58.618 billion dollars’ worth of agricultural products were earmarked for China in 2023. This made up roughly 25 per cent of China’s total agricultural imports in that year.
To mark this momentous occasion, Brazil and China have held a slew of celebratory events and activities since the beginning of the year. These include the unveiling of a commemorative logo incorporating the number 50 and the colours of both national flags, hosting seminars and conferences, and collaborating on the establishment of a Brazilian consulate general in Chengdu, among other efforts.
New “Negative List” Further Widens Foreign Investment Access in China
On 8 September 2024, China’s National Development and Reform Commission and Ministry of Commerce promulgated a new version of the “negative list” regulating foreign investment access. The move marks the latest initiative by the world’s second largest economy to further open its economy to global investors. The latest version will come into force on 1 November 2024.
Its predecessor, the 2021 edition of the “negative list”, had become effective on 1 January 2022. In the latest iteration, the number of restricted sectors for foreign investment has been cut to 29, compared to 31 in the previous version.
The 2021 national version had retained two restrictions for the manufacturing sector, related to the fields of printing, publication, along with the production and application of traditional Chinese medicinal remedies. In contrast, curbs on foreign investment in the manufacturing sector had already been removed in the 2021 free-trade zone version.
The most recent update to the negative list abolishes the two remaining restrictions on foreign investment in the manufacturing sector. Notably, this represents the first instance where all entry barriers in the manufacturing sector have been lifted entirely.
In addition, the revised negative list eliminates constraints on foreign ownership of cloud services and certain value-added telecom services in pilot zones, especially in key areas, such as Beijing, Hainan, Shanghai, and Shenzhen. This encompasses content delivery networks, internet data hubs, and internet service providers.
On a separate front, China will permit the establishment of wholly foreign-owned hospitals in key metropolitan areas. Foreign investors will also be allowed to engage in the provision of human stem cell and gene therapy services within pilot free-trade zones.
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