Interview with Paul Chan Mo-po, Financial Secretary of Hong Kong SAR
Asia House’s research report, The Middle East Pivot to Asia 2024 explores key economic trends emerging between the Gulf and Asia. As part of the research, Freddie Neve, Lead Middle East Associate at Asia House, spoke to Paul Chan Mo-po, Financial Secretary of Hong Kong SAR to discuss Hong Kong-Gulf trade.
Mr Chan is a Certified Public Accountant. He is a former President of the Hong Kong Institute of Certified Public Accountants. Before joining the Government, Mr Chan held a number of public service positions including member of the Legislative Council and Chairman of Legal Aid Services Council. Mr Chan served as Secretary for Development from July 2012 to January 2017. He has been Financial Secretary since 2017.
Our report finds that Hong Kong-Gulf trade has nearly tripled since Hong Kong Chief Executive John Lee visited the UAE and Saudi Arabia in February 2023. What accounts for this surge? Do you expect this trend to continue?
In 2023, Hong Kong's total merchandise trade with GCC countries reached US$22 billion. This marks an increase of 10.8 per cent compared to 2022 and a remarkable 34 per cent compared to 2021. Notably, this growth has accelerated from an average annual increase of just 2.9 per cent during the five years leading up to the pandemic (2015-2019).
To foster closer ties with these economies, the Chief Executive as well as myself and other key officials from the HKSAR Government have visited the Gulf. Our goal was to strengthen trade, investment and people-to-people connections. We highlighted Hong Kong's unique advantages under the “one country, two systems” framework, particularly our strategic role in linking markets and investment opportunities in China and Asia with the rest of the world. We actively promoted the “Hong Kong brand”, showcasing our top-tier financial and professional services; excellent project design, construction and management services; innovative solutions by our tech sector; extensive international networks; business practices that adhere to the best global standards, and more.
Many Gulf countries are working to diversify their economies, as seen in initiatives like Saudi Arabia's Vision 2030. They are also looking to diversify their investments geographically, particularly to Asia which is fast rising as a key economic powerhouse. Hong Kong is ideally positioned as a gateway and platform for the Gulf countries to expand their market presence in this part of the world to facilitate their business expansion and investments into this region.
Looking ahead, we anticipate that our trade, investment and cultural relationships with the Gulf countries will continue to strengthen
You were recently in Riyadh for the Future Investment Initiative. What does the future hold for Saudi-Hong Kong ties?
Saudi Arabia's Vision 2030 seeks to transform the country through industrial diversification, green transition, digitalisation, and more. This resonates well with our country’s far-reaching Belt and Road Initiative and Hong Kong’s own strengths and advantages. In many areas, Hong Kong can contribute to Saudi Arabia’s development, creating mutually beneficial opportunities.
Building on the solid foundation laid by the entire Hong Kong SAR Government team, I led a 100-strong delegation to Riyadh in October 2024. We made good progress in a number of fronts, including:
- Launch of ETFs: We celebrated the listing of two ETFs on the Saudi Exchange tracking Hong Kong stocks, one of which has become the largest ETF in the Middle East.
- Co-investment fund with Saudi Arabia’s PIF: HKMA and PIF signed an agreement to establish a US$1 billion investment fund aimed at investing in the enterprises from Hong Kong and the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) expanding into Saudi Arabia.
- Institutional cooperation: HKSTP and the Hang Seng Indexes Company Limited each signed cooperation agreements with their Saudi counterparts, namely the FII Institute and the Saudi Tadawul Group, to enhance collaboration, knowledge sharing and capacity building.
- Startup partnerships: Several Hong Kong startups signed MoUs with Middle East enterprises to explore joint ventures; another startup signed business deals with its local partners.
- Regulatory cooperation: Financial regulators from both regions have agreed to explore further collaboration in product and services development, talent training and regulatory matters.
These outcomes highlight the significant breadth and depth of our bilateral cooperation. Our partners in Saudi Arabia do recognise the value of the “Hong Kong brand”. We see more exciting opportunities to further enhance our financial connectivity, foster innovation and technology collaboration, cooperate on the digital economy and green transition, and strengthen people-to-people exchanges.
Which sectors do you see as having the most significant growth potential in terms of trade and investment between Hong Kong and the Gulf? How is Hong Kong positioning itself as an investment destination and capital market for Gulf investors?
One area with tremendous growth potential between Hong Kong and the Gulf countries is financial services. We will open up more conduits of financial connectivity and encourage companies in the region to list on the Hong Kong Stock Exchange. We will also support cross-listing and trading of a wider range of financial products such as ETFs, REITS (real estate investment trusts), etc. Other areas such as asset and wealth management, family offices, fintech, and green and sustainable finance, also show great promise.
With the increasing use of the RMB in trade settlement, Hong Kong’s offshore RMB services will offer Gulf countries and their enterprises a wider portfolio of investment, risk management and treasury tools.
As our innovation and technology firms and startups strengthen ties with their counterparts in the Middle East, technology collaboration will be another key focus. Quite a number of Hong Kong startups, ranging from fintech to greentech, have already gained market entry into the region. Some have even set up production bases there. We will continue to encourage businesses in Hong Kong and the GBA to expand their manufacturing and operational facilities there.
Enhancing the awareness of Hong Kong’s offerings and competitive advantages among our Gulf partners is a crucial part of our strategy. We will strengthen exchanges and deepen our presence and visibility in the region. This includes arranging and supporting more reciprocal visits by delegations, and setting up an Economic and Trade Office in Riyadh, in addition to the existing one in Dubai. Meanwhile, HKEX has also announced plans to open an office in Riyadh in 2025.
This interview is taken from The Middle East Pivot to Asia 2024 report, which highlights key trends emerging in Gulf-Asia trade. Read the report here.