Hong Kong tops ‘Economic Freedom’ ranking as 2024 Policy Address offers further boost

Delivering the 2024 policy address, titled ‘Reform for Enhancing Development and Building Our Future Together’ on 16 October, Hong Kong chief executive John Lee said the city would align itself to “harness the institutional strengths of ‘One Country, Two Systems’ while consolidating and enhancing its status as an international financial, shipping and trade centre”.

The resolution, he said, would also support “Hong Kong’s position to become an international hub for high-calibre talents, to exert a greater role in our country’s opening up to the world, and to deepen collaboration within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) through better harmonisation of rules and mechanisms.”

On the same day, Hong Kong was ranked first in the 2024 ‘Economic Freedom of the World’ report issued by the Fraser Institute of Canada, which measures the degree to which people in 165 jurisdictions around the world are allowed to make their own economic choices.

The report, based on data from 2022, assessed five areas – freedom to trade internationally, regulation, size of government, legal system and property rights, and access to sound money. Hong Kong was ranked first globally in ‘openness to international trade’ and ‘regulation’, and third in respect of ‘access to sound money’.

Hong Kong had a total score of 8.58, which was just ahead of Singapore with 8.55. Switzerland was ranked third with a score of 8.43, followed by New Zealand and the US, with 8.39 and 8.09, respectively. Rounding off the top ten, Denmark and Ireland tied for sixth place, Canada finished eight, and Australia and Luxembourg tied for ninth.

The rankings of other major economies include Japan at 11, the UK at 12, Germany at 16, Taiwan at 19, South Korea at 32, France at 36, Italy at 51, India at 84, Brazil at 85 and mainland China at 104.

The report said: “The strong balance of the evidence suggests that those who live in jurisdictions with greater economic freedom experience higher levels of well-being as measured by factors such as greater productivity, more rapid economic growth, higher income levels, less poverty, less corruption, and fewer conflicts.”

On financial services, the 2024 Hong Kong Policy Address highlighted a number of different areas for development, which included:

• Wealth Management – the government aims to become the world’s largest cross-border wealth management centre, including by:
  • Partnering with sovereign wealth funds in areas connected by Mainland China’s Belt and Road initiative and establish funds to invest in assets in Mainland China and other regions.
  • Exploring avenues to provide tax concessions on qualifying transactions for funds and single-family offices.

• Attracting Talent – the government aims to attract high-calibre talent to Hong Kong, including by:
  • Adding 13 additional universities to the Top Talent Pass Scheme.
  • Attracting students from outside Hong Kong to study in Hong Kong via the pilot arrangement for graduates from the GBA to work in Hong Kong, offering scholarships and other incentives.
  • Increasing the number of quotas for young families to purchase flats under the Home Ownership Scheme in the forthcoming White Form Secondary Market Scheme.
• Securities Market – the government aims to boost the securities market in Hong Kong by:
  • Introducing Exchange Traded Funds (ETFs) for Hong Kong stock indices in the Middle East.
  • Encouraging large-scale Mainland enterprises to list in Hong Kong, optimising Hong Kong’s mutual access with the Mainland’s financial markets.
  • Enhancing market efficiency and reduce transaction costs.
  • Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange (HKEX) to introduce new measures to expedite the vetting process for companies applying to list on the HKEX.
• Gold – the government proposes to establish a global marketplace for gold trading and develop gold storage facilities. It regards the growth of the gold industry in Hong Kong as also driving the demand for related services such as collateral and loan businesses, creating new areas of growth.
• Insurance – the Insurance Authority will conduct a review of its risk management system, including capital requirements for infrastructure investment, enriching insurance companies’ assets allocation for risk diversification, and boosting investment in infrastructure such as the Northern Metropolis of Hong Kong.
• Immigration – to enhance the New Capital Investment Entrant Scheme, investments in residential properties are permitted, with immediate effect, provided the transaction price is at least HKD50 million, while the amount of real estate investment to be counted towards the total capital investment capped at HKD10 million. Fom 1 March 2025, investments made through an eligible private company wholly owned by the applicant will also count towards the applicant’s eligible investments.
• Research and Innovation and Technology (IT) – The government aims to support the IT sector in Hong Kong by establishing:
  • A Research Matching Grant Scheme of HKD1.5 billion to support organisations with research.
  • A HKD10 billion IT Industry-Oriented Fund to invest in specific industries with strategic importance, such as life and health technology, AI and robotics, semi-conductors and smart devices, advance materials and new energy.
  • A HKD1.5 billion fund to invest in start-ups in strategic industries.
  • An IT Accelerator Pilot Scheme with a funding allocation of HKD180 million to attract professional start-up services from both local and overseas to set up accelerator bases in Hong Kong.

• Intellectual Property (IP) – The government aims to enhance Hong Kong’s legislative framework for IP in 2025 by:
  • Extending the Copyright Ordinance to protect AI technology development, conducting a consultation on the registered design regime, and proposing amendments to streamline the IP litigation process for greater efficiency.
  • Introduce a new AI-assisted image search service for users of the Trade Marks Registry to enable public searches in the trademark database.

• Fintech Innovation Ecosystem – The government is to continue to promote the development of innovative financial services including Central Bank Digital Currencies (CBDCs), mobile payment, virtual banks, virtual insurance and virtual asset (VA) transactions, including:
• The Financial Services and the Treasury Bureau (FSTB) is shortly to issue a policy statement on the application of AI in the financial market.
• To promote the use of CBDCs for cross boundary payments, the Hong Kong Monetary Authority (HKMA) is actively testing and exploring technology solutions related to cross boundary trade settlement on the mBridge platform and will further widen the participation of both the public and private sectors.
• To enhance the regulation of Virtual Assets (VA) trading:
  • The FSTB is to complete the second-round public consultation on the regulatory proposals for over-the-counter trading of VA.
  • Set out a proposed licensing regime for VA custodian service providers.
  • Promote real world asset tokenisation and develop a digital money ecosystem – the HKMA is taking forward Project Ensemble, a financial market infrastructure project to explore the application of real-world asset tokenisation and the use of digital money for interbank settlement and will continue to collaborate with different jurisdictions to formulate a mechanism for trade information transmission, promoting cross-boundary data transfer and the digitalisation of international trade.
  • The HKMA will work with the FSTB to introduce a bill on the regulation of fiat referenced stablecoin issuers in 2024.
  • The HKMA is to launch the Digital Bond Grant Scheme to encourage more financial institutions and issuers to adopt tokenisation technology in capital market transactions.

“It’s great to hear more positive news about these government-led initiatives to promote and further enhance the financial services sector and raise the profile of Hong Kong as an international business hub,” said Sovereign Trust (Hong Kong) Managing Director Alan Fong. “I am lucky enough to witness these developments at first-hand and the benefits it brings not only to the local economy, but also internationally.

“The results from the independent report conducted by the Fraser Institute of Canada are no surprise to me because Hong Kong is a dynamic city, which has been able to adapt and overcome the many challenges it has faced in recent years. I believe that Hong Kong provides the best platform for any companies that wish to conduct business on a global scale.”

For any further information on any of the proposals contained in the 2024 Policy Address, contact Alan by phone on +852 2542 1177.