On 25 October 2023, Hong Kong’s Chief Executive John Lee delivered the 2023 Policy Address. The ambitious agenda contained almost 200 initiatives, setting out a roadmap for a continuing trajectory of growth and development.
With a focus on innovation, sustainability, and social wellbeing, Hong Kong aims to consolidate its position as a global hub across eight main domains, especially in innovation and technology (“I&T”). The policy address also highlights the importance of housing, healthcare, and education, putting the needs of citizens at the forefront of priorities. From the various economic measures to the host of social welfare initiatives, the comprehensive blueprint tackles pressing issues while charting a sustainable path towards prosperity and stability. Special emphasis is placed on technology’s role as a key driver of Hong Kong’s long-term progress and competitiveness.
Under the institutional framework of “One Country, Two Systems”, the Hong Kong Special Administrative Region Government (“SAR Government”) will continue to give full play to the city’s unique advantages by fostering deeper integration with the mainland. This entails taking an active hand in key national initiatives, including the Guangdong–Hong Kong–Macao Greater Bay Area (“GBA”) and the Belt and Road Initiative.
This article will present the key takeaways from the 2023 Policy Address. In particular, it will detail the range of initiatives and measures introduced to bolster the economy and support businesses.
Table of Contents
Enhancing Hong Kong’s competitiveness
Milestones reached in the past year
In last year’s Policy Address, a spate of measures was introduced to reel in international enterprises, investments, and talents. These efforts have yielded positive outcomes. The Office for Attracting Strategic Enterprises (“OESES”) has made significant strides in attracting overseas enterprises to Hong Kong. 200 strategic enterprises have been approached by the OESES, 30 of which are now actively considering setting up shop in or expanding their operations to Hong Kong.
InvestHK has facilitated the establishment or expansion of operations for over 300 enterprises from the mainland and overseas. This represents a surge of over 25% compared to the same period last year. The combined investment in these ventures amounts to approximately HKD 30 billion. The significant growth in business activities is expected to generate around 10,000 new employment opportunities, further boosting economic prosperity in Hong Kong.
Promoting “headquarters economy”
Aside from its commitment to attracting high-potential enterprises operating in strategic industries, such as advanced manufacturing and new technology, the SAR Government is keen to develop a thriving “headquarters economy”. The strategy seeks to entice overseas companies to establish their headquarters or corporate divisions in the city.
On the one hand, the SAR Government will support foreign enterprises to enter the mainland market. On the other hand, it will aid mainland companies in their international expansion endeavours. In collaboration with mainland authorities, the SAR Government will streamline the process for mainland enterprises to set up their headquarters or corporate divisions in Hong Kong. This involves, for example, implementing investment arrangements relating to capital accounts.
Re-domiciliation in Hong Kong
Earlier in May, the SAR Government launched a public consultation on proposals to implement a new mechanism that would allow companies incorporated elsewhere to re-domicile in Hong Kong. The new proposed regime would enable non-Hong Kong incorporated companies to transfer their place of incorporation to Hong Kong while retaining their legal status as a corporate entity. In other words, they would not be subject to the onerous process of closing their existing corporation and subsequently opening a new one in Hong Kong.
The relevant legislative changes are expected to be presented to the Legislative Council by the first half of 2024. InvestHK and the Hong Kong Exchanges and Clearing Limited will ramp up efforts to encourage prominent Hong Kong listed companies based abroad to relocate their place of incorporation to Hong Kong.
Continuing the trawl for global talents
Hong Kong’s search for top international talents continues at full throttle. The Policy Address outlines the following initiatives to boost recruitment efforts:
- Setting up a dedicated office for the Hong Kong Talent Engage (“HKTE”)
The HKTE is an online platform that provides one-stop digital services for global talents. It provides them with easier access to information on the various talent admission schemes and simplifies the application process. The new dedicated office will offer assistance to new arrivals and organise recruitment-themed summits to foster regional talent exchange.
- Extending eligibility for the Top Talent Pass Scheme
The scheme targets talents who earned an annual salary of HKD 2.5 million in the previous year. It is also open to graduates from the world’s top 100 universities with a minimum of three years’ work experience within the last five years. The addition of eight leading mainland and overseas universities brings the total number of participating institutions to 184.
- Easing visa requirements
The employment visa policy and the requirements for obtaining “multiple-entry visas” for Vietnamese talents shall be eased. Laotian and Nepalese talents seeking employment, training, or study at institutions funded by the University Grants Committee will also benefit from a more relaxed visa policy.
On a separate front, since 26 October 2023, foreign talents employed by companies registered in Hong Kong have been able to apply for “multiple-entry visas” to the mainland. These visas will be valid for a period of two or more years, facilitating the travel of foreign talents to the mainland for business-related purposes. Moreover, their applications will be given priority, thereby ensuring a more efficient and speedier process.
- Piloting the Vocational Professionals Admission Scheme
To tackle the manpower gap in various trades, a pilot scheme has been introduced for non-local students enrolled on specified full-time professional Higher Diploma programmes offered by the Vocational Training Council. From the 2024/25 admission cohort onwards, students will be permitted to remain in Hong Kong for one year after completing their studies to explore employment opportunities in their respective fields.
Consolidating Hong Kong’s “eight centres”
In line with the 14th Five-Year Plan, Hong Kong is committed to strengthening its “eight centres” to give full scope to its unique multifaceted role. The “eight centres” encompass various established and emerging industries that contribute significantly to the city’s overall development, namely the following:
- International I&T centre
- East-meets-West centre for international cultural exchange
- International trade centre
- International financial centre
- Regional intellectual property trading centre
- International shipping centre
- International aviation hub
- Centre for international legal and dispute resolution services in the Asia Pacific region
International I&T centre
In December 2022, the SAR Government released the Hong Kong I&T Development Blueprint to transform the city into a global I&T hub. According to the 2023 Emerging Ecosystems ranking, Hong Kong has claimed the coveted top spot in Asia and the second position worldwide. To execute the Blueprint, measures to be implemented include the following.
- Establishing the New Industrialisation Development Office
The office’s role is to facilitate the advancement of new industrialisation in Hong Kong. It aims to bolster the growth of strategic enterprises in the city, support the modernisation of the manufacturing sector by leveraging I&T, and assist start-ups.
- Launching a New Industrialisation Acceleration Scheme
The SAR Government will set aside HKD 10 billion worth of funds to cultivate emerging industries, such as life and health technologies, AI and data science, advanced manufacturing, and new energy technologies. Under the scheme, qualified enterprises that establish production facilities will be granted government funding equivalent to 50% of their total investment, up to a maximum of HKD 200 million.
- Accelerating the commercialisation of research and development (“R&D”) outputs
Launched in October 2023, the Research, Academic and Industry Sectors One-plus Scheme aims to support the conversion and commercialisation of local universities’ R&D achievements. The SAR Government will increase the maximum amount of funding allocated to the Technology Transfer Office of each eligible university to HKD 16 million. This move is expected to provide universities with greater support in the areas of technology transfer and marketing services.
- Setting up the Hong Kong Microelectronics Research and Development Institute
The Institute will provide a collaborative platform for universities, R&D centres, and industry players to promote the R&D of microelectronics. It will focus on unleashing the potential of third-generation semi-conductor core technology, harnessing the GBA’s extensive manufacturing supply chains.
International trade centre
To further cement Hong Kong’s position as a global trade hub, the SAR Government will continue its endeavours in strengthening relations with European and American markets and fostering regional connectivity. The aim is to broaden Hong Kong’s presence in Belt and Road markets, including those in ASEAN, Central Asia, Africa, and the Middle East.
Fostering closer regional ties, particularly with ASEAN markets, remains one of the SAR Government’s key focuses. It continues to vie for Hong Kong’s early accession to the Regional Comprehensive Economic Partnership. With a coverage spanning nearly 30% of the world’s population and contributing to around 30% of global GDP, the RCEP stands as the most extensive free trade agreement.
Boosting support for SMEs
Central to government policy is increasing the provision of support for small and medium-sized enterprises (“SMES”) and tiding them over challenging times. To this end, the following measures have been introduced.
- Encouraging SMEs to leverage opportunities in e-commerce
In light of the worldwide surge in e-commerce, the Commerce and Economic Development Bureau intends to set up an inter-departmental E-commerce Development Task Force. Policies will be devised and implemented to help Hong Kong’s SMEs thrive in the mainland e-commerce sector.
Key initiatives include launching flagship e-commerce events to showcase Hong Kong brands and introducing the “E-commerce Easy” scheme to encourage SMEs to try their hand at e-commerce. Additionally, efforts are directed towards accelerating the roll-out of the Single E-lock Scheme and the Trade Single Window. These initiatives aim to streamline customs clearance and e-commerce delivery procedures.
- Catering to SMEs’ financing needs
A portion of SMEs have resumed their regular repayment schedules following the end of the application period for the principal moratorium arrangement under the SME Financing Guarantee Scheme.
However, considering the cash-flow problems often faced by SMEs, the SAR Government plans to offer greater flexibility in repayment options. During the designated period, eligible SMEs will be permitted to repay 10%, 20%, or 50% of the original principal amount due monthly. This measure will grant enterprises additional time to transition to their regular repayment schedules, thereby alleviating their financial strain.
- Supporting SMEs in embracing digitalisation
The Digital Transformation Support Pilot Programme to be launched will provide financial assistance to SMEs in adopting e-payment methods and other digital tools. It is especially geared towards SMEs operating in the retail and food and beverage sectors.
International financial centre
Hong Kong has long established itself as a premier financial hub in the international arena. The city also serves as a hub for offshore renminbi, asset management, and risk management businesses. In addition to deepening ties with international investors and markets, the SAR Government will broaden mutual access and strengthen cooperation with the financial market on the mainland. Some of the measures contained in the Policy Address to further enhance the city’s competitiveness include the following.
Lowering the rate of stamp duty on stock transfers
The rate of stamp duty on stock transfers will be reduced from 0.13% to 0.1% of the consideration or market value (whichever is higher) of the stock being transferred. This reduced rate will be applicable to both the buyer and the seller, as stamp duty is borne by the buyer and seller each separately. The legislative procedures are expected to be finalised by the end of this November.
To find out more about stamp duty in Hong Kong, read our Hong Kong Tax Guide.
- Promoting financial integration within the GBA
The various financial reform initiatives implemented in the Qianhai–Shenzhen–Hong Kong Modern Service Industry Cooperation Zone can be leveraged to optimise the functioning of Hong Kong financial institutions operating in Qianhai.
Key measures include allowing Hong Kong’s limited partnership funds to qualify for the Qianhai Qualified Foreign Limited Partnerships programme. The scheme provides an important channel for investors to engage in private equity investment activities in mainland China. Additionally, plans are underway to establish the Shenzhen–Hong Kong Financial Cooperation Committee in collaboration with the Shenzhen authorities in the first half of next year.
- Bolstering offshore RMB business
For easier trading of RMB-denominated Hong Kong stocks, the SAR Government is committed to continuing the incorporation of RMB counters under the Southbound Trading of Stock. In addition, it plans to launch offshore mainland government bond futures and expand the range of RMB investment products. The expansion is set to consolidate Hong Kong’s role as the world’s largest offshore RMB centre. Currently, the city holds approximately RMB 1 trillion in deposits and processes around 75% of all RMB payments made outside mainland China.
- Establishing Hong Kong as a green fintech hub
In the first half of 2024, a proof-of-concept subsidy scheme aimed at promoting green fintech will be introduced. Its focus is on fuelling the development of innovative solutions and providing funding for green fintech projects in the pre-commercialisation stage. The goal is to foster the growth of the local green fintech ecosystem and position Hong Kong as a leading green fintech hub.
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