Name: Innovation Forum 2024: The Innovation Imperative
Uploaded: 2024-03-27
Duration: 23 min 8 s
Description: The Honourable Paul Chan Mo-po, GBM, GBS, MH, JP, Financial Secretary, Government of the Hong Kong Special Administrative Region In conversation with Alyson Shontell, Editor-in-Chief, FORTUNE

The Honourable Paul Chan Mo-po, GBM, GBS, MH, JP, Financial Secretary, Government of the Hong Kong Special Administrative Region In conversation with Alyson Shontell, Editor-in-Chief, FORTUNE 

Innovation Forum 2024: The Innovation Imperative

Conferences

Good morning everyone. Mr Chan, you fill a room. There's so many people here. It's great to see you all. It is very encouraging. Welcome. Good morning to you all. Good morning. Um So we have some questions about the economy and and your view of it. So I'd love to just start with your snapshot of it. You've recently said the economy is registering positive growth but the growth is not even. So I'm curious from your vantage point, the brightest spots and the most challenging spots. Well, you know, the more challenging part would be merchandise exports, which is affected by the higher for longer interest rate environment as well as geopolitics, both causing dampen the external demand, the brightest spot I would say come to Hong Kong, not just as a tourist or business visitor, but invest here over the past 12 months. We have seen tremendous interest in Hong Kong in terms of strategic business coming to Hong Kong in terms of talent coming to Hong Kong. So to spare some time to explore this city and we have tremendous opportunities to offer. So I want to explore a lot of those opportunities, some of the challenges how we can innovate our way to prosperity, um even further. But first, um the pandemic is something that's been difficult for everybody to uh get over. And it has changed habits in a lot of ways, whether it's been spending or tourism. Um What have been some of the biggest surprises and learnings as you've watched the recovery of Hong Kong. Well, you know, during the pandemic period, we have been very bold in terms of utilizing our financial resources to roll our counter cyclical measures to support the economic growth. Now, in terms of the post COVID level, in terms of public finance, we are entering into a what we call a fiscal consolidation process on the one hand, controlling the expenditure growth to make it below our economic growth. And at the same time, increase of our income by growing the economy and increasing in a very moderate and careful way additional revenue to the government so that in 23 years time, we will be able to return to balance. And at the same time, we would have enough resources to put to the areas that we want to develop like the technology and innovation area and build capacity for Hong Kong, for example, investing in the infrastructure in the northern metropolis. So that is one strategy going forward. And secondly, we see it as a very important move that is to leverage on the technology and innovation sector to diversify our economy, Hong Kong is well known as an international financial center. This is important, we will continue to further develop it to make it even more competitive. But at the same time, we want to grow the technology and innovation sector. So as to offer even more job choices for people as well as bringing our economy to the next level. If it sounds like diversifying the economy, beyond the financial hub that you've really established is a top priority. True. Yeah, wonderful. Um So I wanna remind the audience that at the end, we will have time for two questions. So be thinking hard. I will call on you at the end, but we'll leave a little bit of time for that. Um So Mr Chan Hong Kong's economy has always had its skeptics. Um and also it's always proved to be very resilient uh and decides with skeptics given that the recovery from COVID has maybe not been as swift in all areas as desired. Uh The skeptics are getting louder and there was recently uh op ed that caught a lot of attention in the financial times from a long time, Hong Konger who said um it pains me to say but Hong Kong is over, it's over. I'm sure you have opinions on that. And what do you say to those naysayers? Well, not at all. When you look at the tourist arrival last year, tourist arrival, about 34 million this year, we expect to have at least 46 million people and with the resumption in international fight continuing, I think this will be on the increase. And at the same time, let's share some facts. Look at our asset and wealth management, industry, asset under management, about $3 trillion. Look at our private equity, our venture capital sector, very vibrant altogether. They are managing about $220 billion, $220 billion and hedge fund. In terms of we are Asia number one, in terms of private equity, we are next just to the mainland in Asia. So all these sectors and growing when you look at our banking sector, total banking assets at the moment is about $2 trillion. And our banking sector has a lot of buffer, very resilient. Uh The liquidity ratio at the moment is over 100 and 60%. Whereas the international requirement is only 100% the capital adequacy ratio is over 20% while the international standard minimum is only 8%. So when you look at these figures, you will notice our financial market is still very strong and bonus is here. Our chief executive for the stock exchange, uh the total capitalization of the Hong Kong stock market three trillion uh let's see, $4 trillion and it is growing and we are diversifying our sources of new companies coming for this new capital, coming to use our platform. So I'm optimistic. Um you know, one of the challenges are there are some headwinds that could be long lasting and are just not entirely in your control. Um One of which are geopolitical tensions. Um Hong Kong's superpower has always been being a global super connector where you have this great relationship with China and you're also available to the rest of the world to engage with. Um how do geopolitical tensions uh change that I've had all? Well, you know, the geo geopolitical challenge will continue to be there for quite some time. We have to find a way to navigate all these and find new opportunities. I think that given the current situation, the unique status of Hong Kong under the one country two system becomes even more important and more apparent by coming here, you have convenient and even priority access to the mainland market. And at the same time, Hong Kong's unique character as an international city has been there. And we continue to be here like the rule of law, the common law legal system, the FIFA of capital goods, talent data and the separate currency, the Hong Kong dollar pack to the US dollar and it is freely convertible. So all these make Hong Kong very unique. So I think for us on the one hand, we need to communicate with the international community, coming to Hong Kong. You are in China, but we are different from the rest of China in terms of our way of doing things in business, our standards, which is best international standards. This is a natural platform for you to get access to the mainland market and as a springboard for the Asian market. And at the same time, I think we have a lot of attractions for talent and this going forward will be one of our key competitive advantages because whatever business you are in talent is the basis of competition. And I think we have very strong attraction for those of you coming to Hong Kong for this conference to find some time to explore this city. Uh Well, say for example, if you like wine and dine, we don't have any tax on wine. We have over 200 Michelin recommended restaurants. And you can also go to some of the mom and pop shop, which is also very interesting. So a lot to offer uh also in terms of lifestyle. So I'm very confident that if we continue to do the right thing, we will remain relevant and very attractive. Um Just one more point before we move on. Uh you know, one of the questions also in the article was um Hong Kong's ability to have autonomy to distinguish itself from some of these greater headwinds has always been a key part um with the passing of recent legislature, some of that has been called into question. Do you think it needs to be? I think you mean the reason and end of article 23. It is a constitutional responsibility, it is to compete uh one of the remaining work for Hong Kong as part of China to safeguard national security. And in fact, this piece of legislation, when you scrutinize it, it is no different than those in leading jurisdictions like the United Kingdom. So what we have in mind is that, well, we went through the difficulties, social unrest in 2019. Subsequently, we had the national security law enacted. We want to at the one hand ensure political stability and safety in this city and at the same time, so that we can concentrate our efforts to develop our economy. That is the idea and we appeal to you to work with us and to engage with different sectors in our community. And I am sure Hong Kong will remain one of the safest cities in the world and for the business sector, political stability is important. Thank you. Um So I want to talk about innovation, that's why we're here, right? Uh the innovation imperative. Um I'm curious for what do you think are some of the biggest bets? Um Hong Kong should make right now in innovation to set itself up for a path of prosperity. Well, innovation can be in a number of forms not necessary technology innovation. So for example, innovation in business models and the way we see it is that number one, the digital economy would be one of the driving force for innovation because it changed business models, transform businesses. But that assign we also need to focus on technology and innovation. Number one, as a sector to grow. Number two, as a means to transform and modernize the different sectors in our economy. And specifically when it comes to an sector of its own, we choose four areas to concentrate our energy. One is artificial intelligence and big data analytics. The second one is health science and health tech. The third one is fin tech and the final one is new materials, advanced manufacturing. We see these four areas offer tremendous opportunities. Say for example, for A I, we are building the infrastructure, increasing our computing capabilities. And more importantly, we are in a very aggressive mode of attracting companies in the A I space to come to Hong Kong to set up their business. I think A I I mean you you can't have any conversation with anyone in the world that lasts more than 10 minutes without us going into A I. It is so important. Um It has been called even though the Lisa Chat JP T was referred to as the Sputnik moment. Um the whole world is clamoring to create this amazing future. How do you um view Hong Kong's position now that we're on the precipice of this? Great A I change. How can you position this to be a big winner? I think the fundamental advantages began over as a hub for A I sector is the one country two system. Uh It is because here you can have convenient access to mainland data and international data and data is very important for this sector. Number one, number two is talent attracting different talents. Number three is our determination to grow this sector by increasing the computing capabilities. Say for example, in the budget, we talk about building a supercomputing center, here we are also inviting companies to come to grow a sector. And in this area, it may be interesting to note that if we marry A I with some other sector, say for example, the health science, the drug pharmaceutical sector that offers tremendous opportunities for pharmaceutical companies in the US or in Europe. If they want to tap the mainland market, where can they get the bio data of the Chinese? Where can they conduct clinical trial in order to enable their products to be registered and then be able to put on sale on the main market which offers 1.4 billion people. So in this area, I think we have uh we have a unique value proposition to offer. That is why in the budget we mentioned about hey along the border with sen uh not much of loop, let's develop that sector in the into a technology and innovation sector, bringing in those A I companies bring in those health science companies there. So that in in that particular song, we we try to work with the mainland authorities to get the approval to have more convenient or even free, full of data talents and capital. So that with these key factors of key elements, we can grow this sector more vibrant and build an ecosystem. And as you mentioned too, attracting global talent is a top priority for the chief executive for you for the whole team. Um How are you bringing the talents in? Why should entrepreneurs come here to build the start ups of the future, the biotechs of the future A I as a future? Well, you know, we have a dedicated office for this purpose. If I can, I may share with you some figures since December 2020 this office has was set up up till now. We have received over 220,000 applications. We we have approved about 100 and 60,000 of them and about 100 and 10,000 people have already arrived in Hong Kong. And among these people, there is one category we call them top talents, meaning that people earning about more than 2.5 million Hong Kong a year or those who graduate from the global top 100 universities without asking any questions, they can come. They do not need to find a job beforehand. And so far the response has been overwhelming and then we zoom in those who have arrived in Hong Kong. The top talents usually relatively young in the age group of 35 to 50 young family and these people have an average income double than a median income in Hong Kong. So we are very optimistic. I think Hong Kong's attraction is here. On the one hand, you are part of China, but on the other hand, the international character, the lifestyle and when I talk to those people coming, particularly with young families, they said the education here is excellent. Five of our universities are among global 100. And imagine how many international schools we have here? Over 50 offering curriculum in the US UK, German Swiss, Italy, Singapore, Japan, Korea. So this is indeed a an excellent hub for people who is interested to pursue a career. But at the same time, maintain the international character and have pop style lifestyle. Thank you. I want to give the chance to the audience to ask a question. If anyone has one, you can raise your hand. If not, I will continue to happily ask. Don't be shy. We have one right here in the corner, right. Go ahead. Yep. He's, he's coming with the mic right now. Thank you very much. Hi. Uh Lovely to see you here. I'm Brian. I'm an assistant professor at HKU. My question essentially concerns Hong Kong's relationship with the Middle East with ASEAN and also other parts of the world. I mean, historically Hong Kong had benefited off this vibrant Sino Western Sino American engagement and relationship which obviously due to geopolitical headwinds is no longer necessarily the case. But the reason why I'm not necessarily pessimistic is because I do think that as you, we self affirmed previously, we're actively engaging partners in Middle East in Southeast Asia, where Indonesia is now the fourth largest country in the world by population and also Central Asia, West Asia, Latin America and beyond. So, could you perhaps share with us here in the room? You know, what are the plans and initiatives you've got in mind for engaging the world beyond the West and also beyond the conventional partners on Gong had? Thank you very much. Yeah, thank you, Brian. I think for us in Hong Kong, uh us Europe, very important market, very important sources of investment so that we need to reinforce. But at the same time, we need to open up new opportunities. I went to the Middle East in October 2022. And in that particular visit, I made an effort to visit all the key ministries involving in innovation, technology, finance and investment. And I realized they also saw the need of diversification and they are interested in this part of the world. But traditionally the focus of investment uh in the US and Europe. So this part of the world is less familiar to them. That is why we reach out and we invite them to come and we even consider using the Hong Kong investment company to see some of the investments together with them. The idea is to open up new capital sources and new sources of quality issuers coming to Hong Kong for listing the same applies to ASEAN in particular quality issues, quality companies coming to Hong Kong. And we talked about geopolitics. Earlier on we observe because of geopolitics, the industry chain has been changing and manufacturers on the mainland, quite a number of them try to diversify and have certain parts of their operations, moved to Asia. Then Hong Kong can play a very unique role as a supply chain management center and Trade Finance Center. That is why in the budget, we said we are going to develop ourselves as a multinational supply chain center here. And ASEAN for us is good market and sources of quality companies. We also want to attract those talents to come to Hong Kong to work. When I went to the University of Malaya and University of Singapore, talk about the the opportunities here. I can feel the energy and we welcome them by open up. So as you look ahead, what do you think is the most important thing for Hong Kong to get? Right as we head into this new technological era um to come out on top and what is the last advice you would leave to executives in the room or who may be watching this, who are thinking about is now the right time to invest in Hong Kong. Well, for us, the one country two system is very important. We have to preserve that the legal system, the law of law, very important, the free movement of goods, capital, data and talents and the international character and dimension of Hong Kong is something that will continue to communicate with the international business community. We know that there has been some misunderstand misunderstanding about the situation here, even sometimes some uh narrative which is not very fair about us. Uh that is understandable. So we we would reach out but at the same time, invite people to come. And most importantly, if people can come and to make an investment and can make money and for people to come to work here, they have carried development and enjoy the lifestyle, then we will be able to succeed. So we will continue to work hard on that and on different funds. Be it IFC be it International Trading Center, uh be it the innovation and technology. We keep asking ourselves how to in a way how to work better, how to collaborate with different uh different people, different investors and different funds. Yeah, Mr Chen. Thank you so much. Thank you. Thank you. Thank you. I appreciate it.