January 2022 / Hong Kong

January 12 2022

Opening up new opportunities for SMEs

Innovation and technology is taking the world into a new era, opening up fresh opportunities in the upcoming economic powerhouse: Guangdong-Hong Kong-Macao Greater Bay Area (GBA). For companies setting their sights on this vibrant region, a range of support is at hand in Hong Kong. Among them is global banking giant HSBC’s US$1.13 billion “GBA+ Technology Fund”, and US$700 million “GBA+ Healthcare Fund”, which provide flexible financing support for new-economy companies in the region.

HSBC possesses insights on how enterprises can achieve success in the GBA, where it had started operating when the Pearl River Delta began to develop.

“The development of Hong Kong and Guangdong are inseparable,” remarked Frank Fang, Head of Commercial Banking, Hong Kong, HSBC.

“We opened the first representative office in Shenzhen as early as 1982. To date, we have around 50 branches in 21 cities in the Guangdong province,” he said.

“The advantage of having comprehensive coverage in the Greater Bay Area is that no matter which GBA city the Hong Kong customer has business or investment in, we can serve them all the same. On the other hand, we can also reach more customers in Mainland China and help them expand overseas markets through our services.”

After years of deployment, HSBC has become the largest international bank with the widest network in the GBA, Mr Fang said.

Hong Kong-Guangdong collaboration

Throughout the decades, the opening up of the mainland has catalysed Hong Kong's transformation from a manufacturing base into a service-oriented economy and an international trade and financial centre, laying a solid foundation for its development into an innovation and technology hub. Mr Fang said Guangdong province and Hong Kong have respective and complementary advantages in innovation and technology, while China’s 14th Five-year Plan and Guangdong-Hong Kong-Macao Greater Bay Area Development Plan will drive the cooperation of the two locations in innovation and technology to the next level. "The biggest advantage of Guangdong province lies in production. Industrialists there can quickly commercialise new concepts from around the world and optimise products after launch,” Mr Fang said. “For its part, Hong Kong provides outstanding talent. It has first-class universities, and indeed one of the world’s highest concentrations of world-class education institutes,” he added. There are 16 “state key laboratories” (SKL) and six local branches of the Chinese National Engineering Research Centres in Hong Kong. In the 2021 Global Innovation Index (GII) report, Hong Kong’s ranking in the world jumped from 13th to 11th. “Hong Kong gathers together professional service talents who can help obtain technology patents and conduct intellectual property trading, creating favourable conditions for scientific research,” Mr Fang noted. "However, Hong Kong needs to rely on the production advantages and huge market of the GBA. “There is this ‘0 to 100’ model, in which Hong Kong is responsible for the 0-to-1 phase, or product conception, leaving the commercialisation and production process, or the 1-to-100 stage, to Guangdong. “This can greatly accelerate the commercialisation of scientific research results and increase the value of goods. In this way, the two places can complement each other to achieve a win-win situation," Mr Fang said.

Enterprise links

To build on Hong Kong’s potential for technological innovation, HSBC launched "GBA+ Technology Fund” in 2019. The fund supports fast-growing innovation and technology companies in the Greater Bay Area, be they local or international. Sectors covered include e-commerce, financial technology, robotics and biotechnology. To accommodate growing customer demand, HSBC recently upsized the Fund from US$880 million to US$1.13 billion. HSBC also rolled out a US$700 million debt financing scheme to support fast-growing, early-stage healthcare companies in GBA, covering sub-sectors of healthcare tech, healthcare services, pharmaceutical, medical device, contract services and third-party medical institutions. Together, HSBC has earmarked over US$1.8 billion in facilities for new economy companies in the vibrant city cluster. “These young, high-growth companies engaged are unable to provide several years of financial reports to banks,” Mr Fang said. “In order to assist them in financing, we have some innovative ideas: The ‘GBA+ Technology Fund’ offers flexibility. “When evaluating applications, in addition to being flexible, we will also consider other factors such as future capital injection, potential investors. In terms of ‘lending to borrowers without bricks’, we are ahead of the industry," Mr Fang said. As start-up customers lack business experience, HSBC would line up professionals to help them solve operational issues and focus on production. "These 'one-stop services' are actually beyond the scope of banking services, but we are happy to go the extra mile to help customers grow."

Helping SMEs connect to the world

Mr Fang noted that online shopping has ushered in innovative technologies and spawned a new economy, creating an e-commerce market and stimulating market demand for related payment and digital banking services.

"In recent years, e-commerce has developed rapidly in the mainland and Hong Kong, while cross-border transactions between the two places have grown especially fast,” Mr Fang said.

Through its “Account Connect”, “Credit Connect”, “Payment Connect” and “Service Connect” services, HSBC brings an integrated service experience to Greater Bay Area enterprises.

“In order to meet the increasing demand for cross-border payments in the region, HSBC has increased the speed with which it processes payments from Guangdong to Hong Kong. Payment instructions can now be completed within two minutes, efficiently connecting companies to opportunities in the GBA,” he said.

HSBC has also launched a mobile digital platform dedicated to addressing the cross-border business needs of small and medium-sized enterprises (SMEs). The HSBC GBA WeChat Mini Programme delivers a simple and unified digital service experience and provides customers with direct access to GBA-related market insights and knowledge together with other functions. Customers can also make real-time balance enquiries for both mainland and Hong Kong accounts.

  Source: HKTDC    
January 19 2022

HK grows as green finance hub

The Greater Bay Area lies at the heart of the world’s sustainable-development hotspot and Hong Kong has a key role to play.

The fast-growing and densely populated Asian region is home to half the world’s population and the source of 50% of greenhouse gas emissions, making centrally located Hong Kong a natural base for efforts to counter global warming.

At the same time, many emerging markets in Asia have yet to achieve or enjoy wealth in line with developed economies, giving the continent the double challenge of expanding economies and improving the living standards of its citizens while simultaneously reducing carbon dioxide emissions.

Sustainability hub

Jonathan Drew, Managing Director, ESG Solutions in the Global Banking division of HSBC, pointed this out during a panel discussion titled “Sustainable Development in the Greater Bay Area: Opportunities for Hong Kong” at the Asian Financial Forum earlier this month. He explained why the global bank had chosen to base its worldwide environmental, social and governance (ESG) efforts in the city. “Hong Kong has role in providing finance in the GBA and Asia generally,” he said.

Introducing the discussion, Laurence Li, Chairman of Hong Kong’s Financial Services Development Council, said the financial services industry was seeing a rapid and broad-based transformation to bring climate change measures on board.

As of 2020, assets being managed under sustainable development strategies amounted to a staggering US$35.3 trillion, a 15% increase from two years previously and accounting for more than one third of global assets.

He said more than 130 countries and regions had committed to cut carbon dioxide output. Mainland China had committed to reach peak output by 2030 and achieve net zero by 2060. The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) was looking towards becoming a comprehensive green and sustainable development site requiting Rmb2.2 trillion (US$347 billion) in Guangdong. This has prompted Hong Kong to consider its role in this context.

Connector role

As China's international financial centre with extensive links to the world, Hong Kong has a natural connector role to play. The city can serve sustainable investments on both sides. To capture long-term opportunities, Hong Kong can look at carbon markets, which will soon reach US$50 billion globally. The European Union is a leader in this space, while the United States and Mainland China are increasingly active. As the world transitions towards net zero, demand for capital will increase, Mr Li pointed out.

Panel moderator Dr King Au, Executive Director of the Financial Services Development Council, pointed out that China’s 14th Five Year Plan named Hong Kong as a green financial centre and set 2060 as its net-zero carbon goal, which means the country might need as much as US$15 trillion in green project investment over the next 30 years. An estimated 75% of this funding will need to come from the private sector, Dr Au said.

The Hong Kong government has been responding to the challenges, and since the establishment of green bonds the instrument had gone from strength to strength in the city, turning Hong Kong into a green bond hub. ESG bonds make up 21% of bond offerings, the highest proportion in Asia-Pacific. The government plans to issue US$20 billion in green bonds within the next five years and introduce retail green bonds later this year.

Smart cities

Posing a question to Thomas Pang, Partner in smart-city solutions provider Venturous Group, Dr Au first explained that Hong Kong government began looking at sustainability as early as 2003, establishing the Council for Sustainable Development along with the Sustainable Development Fund. In May 2020 the government also established a green and sustainable finance cross-agency steering group with the Hong Kong Monetary Authority and Securities and Futures Commission as co-chairs and including such bodies as the Mandatory Provident Fund Authority. Smart cities are also regarded as a solution – so how, Dr Au asked, would Venturous Group contribute?

Mr Pang said sustainable city technologies are probably the best for addressing sustainability problems. Rapid urbanisation and climate change challenges have become the main concerns of governments, which are the most important players in sustainability issues.

The mainland is now most important economy for smart-city development, he said. Three converging factors led to this. The mainland’s rapid technology development, and the fact that almost all citizens eschew cash; the mainland is rapidly urbanising, probably at the fastest pace in world; and there is also a growing middle class and younger generation. Mr Pang said since 2004, about 800 smart-city projects had been announced with most of these having a data collection bureau.

Carbon trading

Dr Au asked HSBC’s Mr Drew about Hong Kong’s prospects as a carbon credit trading hub.

Mr Drew said Hong Kong could establish carbon markets through a localised carbon dividend scheme, taxing at one point and redistributing as a per capita dividend – this, he explained, would be the simplest approach.

Another alternative is cap and trade – compliance markets where the right to emit is allocated and becomes transferable. The mainland’s power sector has a national market in this, covering 40% of emissions. The baselining concept is critical and tough, with emitters needing to compensate if they deviate from the baseline.

He said in order to really cut emissions a twin approach was needed – decarbonising emissions and also demonstrating support for low-carbon alternatives. He added that offsets through trading may not be appropriate.

Janet Li, Wealth Business Leader for Asia at investment company Mercer, said her firm had looked at carbon trading programmes. In July last year, for example, the mainland launched a national emissions trading programme. She pointed out that carbon trading programmes faced opposition from critics who saw them as a distraction and half-measure.

Ms Li said Mercer expected this area to develop but the company did not have a complete platform yet.

Source: HKTDC