Motion on “Stamp Duty (Amendment) Bill 2022” (2023.01.18)

MR CHAN KIN-POR (in Cantonese): Thank you, President. I support the Bill today. Although the Bill tabled today concerns only technical amendments, it has great strategic significance. With the staunch support of the Central Authorities, Hong Kong has become the world’s largest offshore RMB centre, handling about 75% of the world’s offshore RMB settlement business and possessing the largest offshore RMB liquidity pool of over RMB800 billion. The 14th Five-Year Plan proposes to strengthen Hong Kong’s function as a global offshore RMB business hub, and also gives Hong Kong the mission to actively contribute to the internationalization of RMB.

The Bill today, in simple terms, seeks to waive the stamp duty payable on dual-counter stock transactions made by market makers, so as to optimize the trading mechanism of dual-counter stocks, thereby releasing the potential of the RMB stock market. According to the Government’s explanation, due to a difference in liquidity, there is currently a price difference in transactions made at the HKD counter and the RMB counter for the same stock. Therefore, a dual-counter market maker regime should be established so that the less liquid RMB counter can provide continuous quotes to facilitate investors’ trading, and market makers can arbitrage to keep the prices of the two counters aligned, thereby increasing the trading volume of RMB stocks.

It is encouraging that nearly 20 issuers are already actively considering setting up RMB counters in addition to their HKD counters, which is an indication that the new regime will indeed help boost the business of RMB stocks. The China Securities Regulatory Commission has also announced that it will study the possibility of adding an RMB stock trading counter under the Stock Connect, so that Mainland investors can trade Hong Kong stocks directly in RMB in the future, without the need to worry about exchange rate risks, which will surely increase the trading volume of RMB stocks.

I fully support the development of this new regime. The importance of RMB business to Hong Kong’s financial market is self-evident. Hong Kong is in the midst of an economic tug-of-war between our country and the United States, and some academics believe that will be the new normal in the next 10 years. Inevitably, Hong Kong’s financial markets will come under tremendous pressure. Last year, Hong Kong lost its third position as an international financial centre. Although the ranking may not reflect the reality, it is enough to remind us that Hong Kong’s status as an international financial centre will definitely face many challenges in the future.

Therefore, Hong Kong should continuously improve itself and promote the development of the financial services industry, and promoting the development of RMB business is one of the important strategies. As a matter of fact, the current progress of RMB internationalization is not satisfactory, as settlement in RMB only accounts for a single-digit percentage in international settlement, so there is still much room for growth. I believe it is only a matter of time before RMB becomes an international settlement currency, and when it does, Hong Kong will secure an early opportunity to reap huge rewards. Therefore, further strengthening the RMB business is an important key for the development of Hong Kong’s financial services industry in the future.

From another perspective, while Hong Kong should consolidate its position as an international financial centre, it is more important for it to contribute to the country. Two years ago, when experts sent by our country visited Hong Kong to promote the 14th Five-Year Plan, they repeatedly emphasized that Hong Kong should actively help promote the internationalization of RMB. In fact, it is a national policy for Hong Kong to be the global offshore RMB business hub, and promoting the internationalization of RMB is the task and responsibility given to Hong Kong by the Central Authorities, so we must do our best. As a bridge between our country and the outside world, Hong Kong should leverage its advantages, including its status as a financial centre, to assist the development of our country and serve as a “testing ground” and “firewall” in the process of RMB internationalization, and only in this way can we give full play to the “one country, two systems” principle.

Therefore, the Government should continue to strive for the development of more RMB business in the future, including providing more RMB-denominated investment channels and tools, and it should even consider expanding the scale of cross-boundary use of RMB in the Greater Bay Area to enhance the circulation of RMB, in order to keep strengthening the RMB offshore market in Hong Kong.

Thank you, President.

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