- Hong Kong is back in business in the fast lane and poised to become the go-to listing venue for innovative companies from all over the world.
- China releases 2022 Catalogue of Industries to spur foreign foreign investment.
Hong Kong to become the go-to listing venue for innovative companies from all over the world
On 19 October 2022, the Hong Kong Stock Exchange published a consultation paper on a new listing regime for companies falling into one of the five Specialist Technology Industries: next-generation information technology; advanced hardware; advanced materials; new energy and environmental protection; and new food and agriculture technologies.
The consultation paper dovetails with Hong Kong’s 2022 Policy Address that highlighted the importance of enhancing Hong Kong’s competitiveness in financial services, which, as the city’s biggest pillar industry, accounts for more than one-fifth of its gross domestic product.
The new proposed regime seeks to ease the listing rules for Specialist Technology Companies that do not yet meet the existing profit, revenue or cash flow requirements of the Main Board financial eligibility tests, although their market capitalisation may already be above the minimum threshold for a listing.
Under the new proposed regime, there will be no minimum profits requirement for the listing of Specialist Technology Companies on the Main Board. Subject to the degree of their commercialisation, other eligibility criteria may, however, apply.
Hong Kong is back in business in the fast lane
At the recent “Dialogue with the Chief Executive of the HKSAR” webinar, Mr John Lee emphasised “loud and clear” that Hong Kong was “back in business in the fast lane.”
More than 600 participants joined the virtual dialogue, with many hailing from the United Kingdom and further afield in Europe. Mr Lee reaffirmed the long-standing deep ties between the UK and Hong Kong: the UK is Hong Kong’s number one trading partner in Europe, and merchandise trade between the two reached USD17.7 billion, representing an increase of more than 25% compared to the previous year.
Benefitting from the institutional advantages conferred by “one country, two systems”, Hong Kong’s status as a unique gateway connecting mainland China with the rest of the world was reinforced. In 2021, more than GBP7 billion in merchandise trade between the UK and the Mainland was channelled via Hong Kong.
Mr Lee highlighted that the 2022 Policy Address contained a host of measures to catapult Hong Kong’s economy “back in the fast lane”, notably initiatives closely aligned with national strategies to facilitate Hong Kong’s further economic integration into the Greater Bay Area.
Innovation and technology (“I&T”) will take centre stage in propelling Hong Kong’s growth: the aim is to attract at least 100 I&T companies to set up in Hong Kong over the next five years, which will inject at least USD1.3 billion in investment into the local economy, thereby creating a multitude of local job opportunities.
Hong Kong’s Global Financial Leaders’ Investment Summit ends on a high note
Hosted in Hong Kong by the Hong Kong Monetary Authority (“HKMA”), the three-day Global Financial Leaders’ Investment Summit concluded on a high note on 3 November 2022. The much-anticipated event drew more than 200 international and regional leaders from around 120 global financial institutions and featured 26 renowned “financial heavyweights”, who shared their valuable insights into the intersection between economic, financial, technological and geopolitical developments and the opportunities arising from this complex amalgam of themes.
The Summit on 2 November focused on strategies, operation and investment approaches to navigate an uncertainty-ridden world brought about by stagflation risks and increasing interest rates – against the backdrop of geopolitical turbulence and volatility as well as a pandemic-weary economic climate. The increasing importance of sustainable finance, and innovation and technology as well as their role in reshaping the future of finance were explored in depth.
The “Conversations with Global Investors” seminar held on 3 November was jointly organised by the HKMA and the Hong Kong Academy of Finance, where eight of the world’s leading investment management firms delved into how to manage risks and capture investment opportunities effectively.
Mr Eddie Yue, HKMA’s Chief Executive, remarked “We are encouraged by the overwhelming responses from both the international and local financial communities. The Summit demonstrated the global financial sector’s commitment to Hong Kong… We look forward to seeing more events and activities taking place in the coming months as Hong Kong continues to open up.”
In particular, participants expressed optimism that the Summit heralded a return to normality with Hong Kong putting the pandemic behind it and getting back to business.
In light of the overwhelming success of the Summit, the HKMA intends to host the Summit again in 2023, also to mark the 30th anniversary of the establishment of the HKMA.
China releases 2022 Catalogue of Industries to spur foreign investment
Coming into effect on 1 January 2023, the Catalogue of Encouraged Industries for Foreign Investment (Order No. 52 ) was jointly issued by the National Development and Reform Commission, and the Ministry of Commerce on 28 October 2022. The aim is to step up efforts on encouraging foreign investment and to promote high-quality opening-up.
The 2022 version shall supersede the 2020 version. The newly released version expands the scope of encouraged industries for foreign investment, containing a total of 1,474 items – compared to 1,235 items in the 2020 version.
Notably, new items have been added to the manufacturing of components and equipment: items such as aviation ground equipment, industrial water-saving equipment, key components involved in autonomous driving, high-purity electronic chemicals and organic polymer materials. The move is seen as part of efforts to consolidate China’s position in global industrial and supply chains.
To promote the integrated development of the service and manufacturing sectors, particular emphasis has been placed on encouraging foreign investment in production-oriented services, such as professional design, engineering construction and technical services, design and research and development of marine new energy equipment.
According to the National Development and Reform Commission: “The revised catalogue is an important measure to stabilise foreign investment under the current situation, which is not only conducive to promoting high-level opening-up and speeding up the building of a new development pattern, but also further helps stabilise foreign investment, optimise investment structure and shores up expectation and confidence of foreign capital.”
Preferential Corporate Income Tax policies for enterprises in Nansha District of Guangzhou
The Department of Finance of Guangdong Province and the Guangdong Provincial Tax Service have recently brought preferential corporate income tax policies in Nansha District of Guangzhou into effect retroactively – valid from 1 January 2022 to 31 December 2026.
According to the official Circular, enterprises operating in encouraged industries in Nansha’s pioneering zones, namely the Nansha Bay area of the Guangdong Pilot Free Trade Zone, the Qingsheng Hub Cluster and the Nansha Hub Cluster, can benefit from a reduced corporate income tax rate of 15%. In mainland China, enterprises are generally subject to a standard corporate tax rate of 25%.
In addition, eligible enterprises must meet the following three requirements:
🔵Must be primarily engaged in industries as specified in the Catalogue of Encouraged Industries with Preferential Income Tax Policies in Nansha of Guangzhou (2022 version)*;
🔵Must derive no less than 60% of their total income from an eligible industry; and
🔵Must have substantial operations in one of the above pioneering zones in Nansha.
*Eligible industries include high-tech industries, information technology, biopharmaceuticals, advanced manufacturing, new energy and new materials, shipping and logistics, modern services, and finance.
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