(June 10): Hong Kong Financial Secretary Paul Chan said the city would attempt to “inspire the confidence” of Chinese authorities, after Beijing’s sweeping crackdown on illicit overseas investment cast a chill over banks in the city.
His comments came weeks after Beijing moved against three popular brokers used by mainland Chinese citizens to invest overseas, threatening as much as HK$250 billion (US$32 billion or $41 billion) of assets in the city, according to estimates by Citic Securities. That was part of a broad clampdown on illicit capital flows.
Hong Kong has for years been a hotspot for mainland Chinese investors looking to park their money overseas, something that has buoyed the city’s wealth management sector and its banks. Chan said that Chinese officials are still supportive of Hong Kong, stressing the importance of the cross-border capital flows going through official channels.
“I do think when we put this into the proper channel, we can inspire the confidence of the mainland authorities about the unwarranted leakage of foreign exchange reserve,” he said at the Bloomberg Invest conference in Hong Kong. “Then, with that trust, we can move forward on a more sustainable basis.”
Hong Kong has made a push under Chan’s watch to attract global businesses and executives. The government has cut red tape for family offices, embraced cryptocurrencies and proposed a tax exemption on so-called carried interest earned by hedge fund managers — meaning a big chunk of their annual compensation may soon be tax-free.
But the escalating tax crackdown has cast a pall. Some banks in Hong Kong have already tightened their scrutiny of mainland clients opening savings and investment accounts in the city, placing a drag on one of their biggest client bases.
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“The central authorities are very supportive of Hong Kong,” said Chan. “They want Hong Kong to succeed as an international financial centre.”
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