Hong Kong SAR Finance Minis­ter’s Statement

Author: IFLR Correspondent | Published: 24 Sep 2019
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The Hong Kong economy expanded further in 2018 at a growth rate of 3%, a mild moderation from 2017. The labour market remained robust, with the unemployment rate declining to a 21-year low of 2.8%, while inflationary pressures increased slightly.

The Linked Exchange Rate System (LERS), which has been in place for 35 years, continued to serve as an anchor for Hong Kong's monetary and financial stability, and withstood the test of an outflow of funds from Hong Kong in 2018. Amid rising US interest rates and increased carry trade activities, the 7.85 weak-side Convertibility Undertaking was triggered last year. In accordance with the design of the LERS, the Hong Kong Monetary Authority (HKMA) purchased a total of HK$103.5 billion (US$13.2 billion) from the market, which was about 10% of total inflows since the global financial crisis. The Hong Kong dollar has been effectively maintained within the range of 7.75-7.85 against the US dollar, demonstrating the robustness of the LERS.

Despite heightened uncertainties in the global economy, the Hong Kong banking system maintained its strong capital and liquidity positions. Asset quality remained good, while banks' profitability continued to grow. Apart from prudential supervision, the HKMA has also been fostering a sound culture in the banking industry. Supervisory measures were introduced last year to ensure the effective implementation of culture enhancement measures.

Good progress has been made on the 'New Era of Smart Banking' initiatives announced in September 2017. The successful launch of the Faster Payment System (FPS) was a case in point. The FPS, a unique retail payment platform that provides an instant, round-the-clock fund transfer service among various e-wallets and bank accounts, has been well received by the public. Just six months after its launch, a total of over 2.58 million registrations were recorded. In an effort to drive fintech and bring about new customer experiences, the HKMA had granted eight virtual bank licences by April 2019 and published an Open Application Programming Interface (Open API) framework to encourage the wider adoption of Open API in the banking industry.

Another key initiative was the launch of eTradeConnect, a distributed ledger technology (DLT)-based trade finance platform which enhances banks' efficiency in processing trade finance applications and reduces the risk of frauds. The HKMA is actively exploring the feasibility of connecting eTradeConnect with other platforms to facilitate cross-border trade financing.

Hong Kong's status as the global offshore renminbi business hub was firmly underpinned by the vibrant renminbi financial activities taking place in Hong Kong. Meanwhile, the development of the Guangdong-Hong Kong-Macao Greater Bay Area is set to give new impetus to Hong Kong's economy and its financial sector.

Great effort has been made on opening new opportunities and further strengthening Hong Kong's financial platform. Notably, the HKMA has been working with the Hong Kong SAR Government in developing the green finance market in Hong Kong. The successful global offering of the inaugural green bond under the Government Green Bond Programme in May 2019 sets an important new benchmark for potential issuers in Hong Kong and the region.

Looking ahead, heightened uncertainties will continue to cloud the global economy. We will remain vigilant and implement timely measures to safeguard Hong Kong's financial stability, while maintaining Hong Kong's competitiveness as an international financial centre.