Tag Archives: China

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Inspection of aquatic products imported from Japan

     In response to the Japanese Government’s plan to discharge nuclear-contaminated water at the Fukushima Nuclear Power Station, the Director of Food and Environmental Hygiene issued a Food Safety Order which prohibits all aquatic products, sea salt and seaweeds originating from the 10 metropolis/prefectures, namely Tokyo, Fukushima, Ibaraki, Miyagi, Chiba, Gunma, Tochigi, Niigata, Nagano and Saitama, from being imported into and supplied in Hong Kong.
 
     For other Japanese aquatic products, sea salt, and seaweeds that are not prohibited from being imported into Hong Kong, the Centre for Food Safety (CFS) of the Food and Environmental Hygiene Department will conduct comprehensive radiological tests to verify that the radiation levels of these products do not exceed the guideline levels before they are allowed to be supplied in the market.
 
     As the discharge of nuclear-contaminated water is unprecedented and will continue for 30 years or more, the Government will closely monitor and step up the testing arrangements. Should anomalies be detected, the Government does not preclude further tightening the scope of the import ban.
 
     From noon on November 14 to noon today (November 15), the CFS conducted tests on the radiological levels of 153 food samples imported from Japan, which were of the “aquatic and related products, seaweeds and sea salt” category. No sample was found to have exceeded the safety limit. Details can be found on the CFS’s thematic website titled “Control Measures on Foods Imported from Japan” (www.cfs.gov.hk/english/programme/programme_rafs/programme_rafs_fc_01_30_Nuclear_Event_and_Food_Safety.html).
 
     In parallel, the Agriculture, Fisheries and Conservation Department (AFCD) has also tested 50 samples of local catch for radiological levels. All the samples passed the tests. Details can be found on the AFCD’s website (www.afcd.gov.hk/english/fisheries/Radiological_testing/Radiological_Test.html).
 
     The Hong Kong Observatory (HKO) has also enhanced the environmental monitoring of the local waters. No anomaly has been detected so far. For details, please refer to the HKO’s website
(www.hko.gov.hk/en/radiation/monitoring/seawater.html).
 
     From August 24 to noon today, the CFS and the AFCD have conducted tests on the radiological levels of 14 274 samples of food imported from Japan (including 9 407 samples of aquatic and related products, seaweeds and sea salt) and 4 110 samples of local catch respectively. All the samples passed the tests. read more

LCQ12: Initial public offering settlement platform “FINI”

     Following is a question by the Hon Robert Lee and a written reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (November 15):
 
Question:
 
     The Hong Kong Exchanges and Clearing Limited will launch “FINI”, a new digitised initial public offering (IPO) settlement platform, on the 22nd of this month. In this connection, will the Government inform this Council:
 
(1) as some members of the industry have relayed that the authorities have not formulated clear guidelines on FINI with respect to accounting issues of IPO share subscriptions and the calculation of liquid capital required under the Securities and Futures (Financial Resources) Rules, causing confusion among brokerage firms, how the authorities will co-ordinate with the regulators and the relevant accounting professional bodies to provide clear guidelines and advice to the industry;
 
(2) whether it knows if the regulators have assessed if the following situation will arise: the overwhelming response to individual IPO share subscriptions under the FINI mechanism has led to excessive financing, which in turn triggers a systematic financial risk; if they have, of the details; if not, the reasons for that; and
 
(3) whether it knows if the regulators will consider setting a minimum deposit ratio for investors in IPO financing and requiring brokerage firms to set aside additional provisions for IPO financing in order to prevent the occurrence of excessive IPO financing?
 
Reply:
 
President,
 
     To continuously strengthen the competitiveness of Hong Kong’s listing platform, the Government has been working with the Hong Kong Exchanges and Clearing Limited (HKEX) and financial regulators to enhance the depth, vibrancy and diversity of Hong Kong’s securities market. Efforts have been made to increase trading and settlement efficiency in the primary market in line with the international trend of going paperless and digitalisation, thereby consolidating Hong Kong’s position as a major international fundraising, risk management and trading hub.
 
     Hong Kong’s public offering market, developed over years, has gradually promoted a paperless operation, including introducing electronic subscription of initial public offerings (IPOs). To further enhance procedural efficiency, HKEX will soon launch the new digitalised IPO settlement platform, FINI (Fast Interface for New Issuance), to comprehensively modernise and simplify the IPO settlement process. The new platform will facilitate different market participants, including sponsors, underwriters, legal advisors, banks, clearing participants, share registrars, regulators, etc. to deliver their respective duties simultaneously on a single electronic platform and optimise work co-ordination. The arrangement will shorten the lead time between pricing of an IPO and trading of shares from the current five business days (T+5) to two business days (T+2), significantly enhancing the efficiency of IPO settlement and reducing the associated market and operational risks. It will also strengthen the financial market infrastructure, and enhance the attractiveness of Hong Kong’s listing platform to issuers and investors.
 
     On the operational process of FINI, HKEX has completed multiple rounds of testing, market practice sessions and rehearsals with IPO market participants, and will provide ongoing support to them. The new platform will be officially launched on November 22. Relevant materials including the launch arrangements (Note 1); user guides for clearing participants (Note 2), banks (Note 3), sponsors, intermediaries and legal advisors (Note 4); application programming interface user guide (Note 5); transitional arrangements (Note 6); and frequently asked questions (Note 7) are uploaded to HKEX’s dedicated webpage (Note 8).
 
     In consultation with HKEX and the Securities and Futures Commission (SFC), my reply to the three parts of the question is as follows:
 
(1) The Securities and Futures (Financial Resources) Rules (FRR) prescribe the financial resources requirements applicable to licensed corporations. The main function is to ensure that licensed corporations have sufficient liquid assets to address the risks arising from their regulated activities.
 
     Under the FRR, liquid capital is one kind of the financial resources that a licensed corporation is required to maintain, which can be quickly converted into cash to meet liabilities as they fall due. The FRR requires licensed corporations to maintain minimum liquid capital at a certain amount. The computation methods and accounting basis are specified in detail in the FRR and relevant guidelines published by the SFC.
 
     As regards the computation of liquid capital for IPO subscription services, brokers are required to prepare their accounts in accordance with generally accepted accounting principles, and on this basis compute the liquid capital in accordance with the requirements under the FRR. The SFC has issued a circular on November 8 (Circular)  (Note 9) to further explain the requirements to licensed corporations and also the computation basis for liquid capital.
 
     The SFC has proactively communicated with the securities sector over the past few months, so as to understand brokers’ work process as well as their capital and financial computation arrangements, etc. for IPO subscription services upon the launch of FINI, and to consult them on the Circular in draft. At the same time, the SFC has advised the Hong Kong Institute of Certified Public Accountants to provide guidelines to its members when needed, and brokers should also follow the relevant guidelines when preparing the accounts.
 
(2) and (3) To assist the market in managing the risks and costs of IPO settlement more effectively, the FINI platform will enhance the pre-funding mechanism for public offering by introducing a new pre-funding model. Under the enhanced mechanism, a clearing participant responsible for handling the subscription of new shares may opt to lock a maximum of cash balance (pre-funding) equivalent to the highest possible share allotment value in the nominee account of its designated bank before the ballot of new shares. The pre-funding can consist of all cash, or cash together with the funding drawn from the credit facilities committed by the bank.
 
     After the ballot, the clearing participant’s designated bank will only need to transfer funds corresponding to the value of the allotted shares to the issuer’s receiving account for settlement. As compared to the existing arrangement (Note 10), the enhanced pre-funding mechanism will alleviate the situation of liquidity crunch resultant from over-subscription of large-scale IPOs, avoid unnecessary large-scale interbank fund transfers, and reduce potential counter-party and concentration exposures, thereby mitigating financial systemic risks.
 
     In addition, a clearing participant will only need to hold on deposit an amount of funds corresponding to the maximum number of shares that it can be allotted, without locking the entire amount of funds for over-subscription. This model will lower the related funding costs and reduce the settlement default risk for clearing participants.
 
     While FINI will adopt a new pre-funding model, clearing participants must still ensure that their clients have sufficient funds (cash or credit facilities) to settle the full subscription amount for public offerings as present. Based on the risk profiles of different clients, clearing participants can require clients to pre-fund their orders in full, or collect from clients a certain percentage of their subscription values as margin and provide them with credit to cover the rest, alongside appropriate collateral and lien arrangements for any shares that may be allotted to clients.
 
     Given clearing participants’ different financial conditions, the cost of seeking bank credit facilities varies and their clients’ risk profiles also vary. Therefore, the pre-funding model under FINI will provide flexibility for clearing participants to, having regard to their business operations and risk management needs, set appropriate margin levels and adopt necessary measures to ensure that their clients have sufficient funds or credit to pay for the allotted shares. This can better suit industry needs than establishing a uniform ratio for all investors.
 
     Separately, the SFC has pointed out in the Circular that brokers should implement effective risk management for their IPO subscription services, so as to guard against improper high-risk activities such as excessive financing. The Circular also outlines the requirements for risk management measures in respect of client risk control, brokers’ capital arrangement and financial assessment. It reiterates that brokers must formulate a prudent credit policy for IPO financing, and set appropriate credit limits for clients taking into account the brokers’ and clients’ financial capability, the IPO subscription arrangements and the prevailing market conditions.
 
     The SFC and HKEX will, upon implementation of FINI, continue to closely monitor the management of client funds and public offering lending activities by licensed corporations and registered institutions, assess relevant risks, and maintain financial market stability.
 
Notes:
 
1. Please refer to the following link for the presentation: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-Launch-Arrangements-Webinar-EN-(5-July-2023).pdf.
 
2. Please refer to the following link for the user guide: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-User-Guide-for-HKSCC-Participants.pdf.
 
3. Please refer to the following link for the user guide: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-User-Guide-FINI-Banks.pdf.
 
4. Please refer to the following link for the user guide: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-User-Guide-FINI-Sponsors-Intermediaries-and-Legal-Advisers.pdf.
 
5. Please refer to the following link for the user guide: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-API-User-Guide.pdf.
 
6. Please refer to the following link for the user guide: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-Transition-Arrangements-Guide.pdf.
 
7. Please refer to the following link for the frequently asked questions: www.hkex.com.hk/-/media/HKEX-Market/Services/Next-Generation-Post-Trade-Programme/Fini/FINI-Information-Pack-EN.pdf.
 
8. Please refer to the following link for the webpage: www.hkex.com.hk/Services/Platform-Services/FINI?sc_lang=en.
 
9. Please refer to the following link for the Circular: apps.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=23EC54.
 
10. Under the existing arrangement, clearing participants and share registrars are required to transfer their clients’ full subscription amount in cash to the issuer’s receiving account before the ballot, and will receive a refund in respect of the subscriptions that do not receive a share allotment after the ballot. read more

FS continues visit to San Francisco, US (with photo)

     The Financial Secretary, Mr Paul Chan, who is attending Asia-Pacific Economic Cooperation (APEC) meetings and related events in San Francisco, the United States (US), continued his visit yesterday (November 14, San Francisco time).
 
     In the morning, Mr Chan met with representatives of a US enterprise that manufactures advanced medical equipment. He introduced the favourable business environment of Hong Kong and new measures introduced by the Hong Kong Special Administrative Region (HKSAR) Government to promote microelectronics research and new industrialisation. Mr Chan pointed out that Hong Kong enjoys unique advantages under “one country, two systems” and is equipped with a low and simple tax regime; a free flow of capital, talent, cargo, information and data; a vibrant fundraising market; and top research institutions and talent with strengths in scientific research. The HKSAR Government is making great strides to attract enterprises and pool talent, and is willing to co-invest in suitable projects with enterprises. Mr Chan said he welcomes upstream, midstream and downstream enterprises to come to Hong Kong for business development and seek partnerships to develop and seize business opportunities.
 
     In the afternoon, Mr Chan and members of the Chinese delegation went to San Francisco International Airport to welcome President Xi Jinping, who arrived in the US to attend the 30th APEC Economic Leaders’ Meeting.
 
     Mr Chan will continue his visit today (November 15, San Francisco time), and attend events related to the APEC Economic Leaders’ Meeting on behalf of the Chief Executive. He will also meet representatives of the local business sector.

Photo  
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LCQ15: Structural safety of old buildings

     Following is a question by the Hon Starry Lee and a written reply by the Secretary for Development, Ms Bernadette Linn, in the Legislative Council today (November 15):
 
Question:

     Pursuant to the building collapse at No. 45J Ma Tau Wai Road on January 29, 2010, the Buildings Department (BD) immediately launched a special operation to inspect all private buildings aged 50 or above in Hong Kong, with a view to determining whether these buildings were structurally safe. On the other hand, it has been reported that in recent years, a number of incidents involving old buildings with concrete fallen off and even cracks appearing on external walls had happened in Hong Kong, posing serious potential hazards to the personal and property safety of members of the public. In this connection, will the Government inform this Council:

(1) whether the BD inspected all private buildings aged 50 or above in Hong Kong again after 2010, so as to update the structural conditions of such buildings; if so, of the following information relating to the relevant inspections: (i) the respective percentages of buildings with conditions under the categories of “Require emergency remedial works”, “Obvious defects found”, “Minor defects found” and “No apparent defect”, as well as (ii) the items and scope of inspection, and whether the indoor common areas of the buildings were covered and structural inspections (including concrete carbonation tests) were conducted; if not, the reasons for that;

(2) given that according to the Report on the Inspection of Buildings aged 50 or above published by BD in 2010, among the buildings inspected, the condition of 1 030 buildings was categorised as “Obvious defects found”, whether, after excluding those already demolished or planned for demolition, the remaining buildings have completed statutory investigations and repairs; if not, of the reasons for that;

(3) as it is learnt that the Urban Renewal Authority (URA) has established the Building Care Management Information System to collect information on the conditions and maintenance of buildings in old districts, whether the Government has exchanged information with the URA in order to grasp additional and more updated information on the conditions of buildings, thereby facilitating the discharge of duties and setting of work priorities by government departments; if not, whether the Government has established a database on the conditions and maintenance of all buildings in Hong Kong; and

(4) whether the authorities have conducted or planned to conduct random concrete carbonation tests for old buildings (e.g. buildings aged 30 or 50 or above) in Hong Kong, so as to ascertain the structural conditions of those old buildings and whether their conditions meet the expectation of the statutory design?

Reply:
 
President,

     Regarding the Member’s question, having consulted the Urban Renewal Authority (URA) (in respect of part 3 of the question), my reply is as follows:
 
(1) In response to the building collapse incident at Ma Tau Wai Road in January 2010, the Buildings Department (BD) launched a special operation in the same year to inspect about 4 000 buildings aged 50 years or above in Hong Kong, with a view to ascertaining the structural safety of these buildings. 
 
     However, this was a special operation. If government departments were to take the lead in launching this kind of territory-wide inspection on an ongoing basis, this would require temporary deployment of a large number of in-house staff, which will affect the daily operation of the departments. With the increasing number of ageing buildings, this mode of handling building inspection and maintenance is not only unsustainable, but also may not be the best way to utilise limited public resources. A more proactive and sustainable approach is for the Government to strengthen owners’ awareness of the need to take good care of their own properties and to take responsibility for the building safety and maintenance of their properties by adopting “risk-based” approach through the three-pronged approach of enforcement, support and, where necessary, proactive intervention.
 
Enforcement and support
 
     The Mandatory Building Inspection Scheme (MBIS) fully implemented in 2012 upholds the concept of “prevention is better than cure”, under which the BD serves statutory notices to owners of private buildings aged 30 years or above, requiring them to carry out prescribed inspections and repairs for their buildings before the specified deadlines. The scope of inspections and repairs covers the common parts of the buildings, external walls, prescribed projections and signboards erected on the buildings. Generally speaking, Registered Inspectors (RIs) will carry out visual inspections and/or by non-destructive means, such as hammer-tapping, and exercise professional judgement to ascertain whether there is a need to carry out detailed investigation and testing of the building structure or some of its components, having regard to the actual conditions of the building (see reply to part 4 below). Subsequently, the Government has since 2018 injected a total of $6 billion for the URA to launch the Operation Building Bright 2.0 (OBB 2.0) to support owners to comply with MBIS notices and to carry out proper inspection and repair works as early as possible. As at May 2023, the BD had issued MBIS notices for the common parts of about 7 000 target buildings, of which around 5 000 are buildings aged 50 years or above, accounting for about 60 per cent of the buildings of this age.
 
     Expired MBIS notices that have not been complied with involve about 3 800 buildings, of which about 1 100 buildings have been selected as Category 2 buildings (Note 1) under the OBB 2.0.
 
     For the remaining some 2 700 target buildings with expired MBIS notices that have not been complied with, the BD had issued letters to relevant RIs, owners and owners’ corporations (OCs) in batches before the end of September this year, requesting them to report progress and concrete work plan within one month. To date, the BD has received more than 1 900 responses so far. More than half of them have made substantive progress in the past few months following the Government’s stepped-up efforts to follow up the cases. The BD will, depend on the content of the responses, take appropriate follow-up actions, such as making referrals to the URA or the Home Affairs Department (HAD) to provide appropriate assistance. For buildings for which responses have yet to be received, the BD and HAD will make further attempts to contact the RIs, owners and/or OCs concerned.
 
     In addition, a standing communication mechanism led by the Development Bureau has been set up to co-ordinate the BD, the HAD and the URA to enhance tripartite co-operation. The three parties will continue to proactively provide information, co-ordination as well as technical and financial support to OCs and owners.
 
     For cases without reasonable excuse and with poor progress, the BD will take prosecution action against the OCs or owners concerned from this quarter onwards. If there are cases in which owners show an intention to procrastinate, the BD will deal with such cases with priority and instigate prosecution proceedings as soon as possible. We would like to take this opportunity to appeal to the relevant owners and/or OCs again to take immediate follow-up action for their non-compliant MBIS notices, failing which they will be liable to prosecution.
 
Proactive intervention when necessary
 
     For the aforesaid some 1 100 higher-risk buildings selected as Category 2 buildings under the OBB 2.0, the BD will exercise its statutory power to carry out prescribed inspections and repairs on behalf of the owners and recover the costs from them afterwards.
 
     In addition, since early August, the BD has proactively arranged special inspections by drones of external walls of buildings with non-complied MBIS notices and with higher potential risks (e.g. older buildings, buildings with balconies/canopies of cantilevered slab structures, etc), and has also arranged for government contractors to carry out emergency works on behalf of the owners, and recover the costs from them afterwards. As at the end of October, the BD has completed the inspection of the external walls of about 100 buildings with higher potential risks, and will endeavour to deploy manpower and arrange for outsourced service to identify more buildings for emergency external wall inspection.
 
     Apart from MBIS, through large scale operations (LSOs), the BD selects each year target buildings in dealing with dilapidated or defective external walls and common parts of buildings as well as unauthorised building works (UBWs) to require owners to carry out repair works and removal of UBWs by issuing repair and removal orders. In addition, the BD will also follow up public reports on individual cases of dilapidated and defective buildings. 
 
     To further safeguard building safety and expedite compliance with the MBIS notices by owners or OCs, the Policy Address announced a comprehensive review of the MBIS policy in three directions. First, adopt a more precise approach in selecting target buildings for issuance of the MBIS notices. Second, proactively identify higher-risk buildings, and enhance the capabilities of the BD to inspect such buildings and carry out emergency repair works through outsourcing. Third, review the workflow of various stages of OBB 2.0 to assist and urge owners or OCs who have applied for the subsidy to expedite actions, such as streamlining the procedures for engaging building inspection professionals. We will put forward specific proposals in the first quarter of next year. 
 
(2) The special inspection operation in 2010 identified 1 030 buildings with obvious defects, of which 319 had been demolished and the owners concerned of 338 had carried out repair works by themselves. For the remaining 373 buildings, the BD issued a total of 706 repair/investigation orders. (Note 2) As at the end of October this year, among the 706 repair/investigation orders issued, a total of 702 repair/investigation orders have been complied with. The BD has also exercised its statutory power in respect of the building involved in another investigation order to carry out the necessary investigation and repair works on behalf of the owner. The BD is now arranging for the acceptance of the works, and will recover the relevant costs from the owner later on. As the owners of the remaining three investigation orders have not commenced the required investigation works by the deadline, the BD has initiated prosecution action against the owners in two cases and is initiating prosecution against the owner in one case.
 
(3) The URA’s building information system maintains information on the building conditions of private residential or composite buildings aged 30 years or above to facilitate the URA’s urban renewal and building rehabilitation work. The relevant information is mainly derived from visual inspection of the conditions of internal and external common areas of buildings, which is normally carried out once every few years. Each time, a few thousand private residential or composite buildings aged 30 years or above are selected and statistical modelling is used to predict the conditions of the remaining buildings that have not been selected. To improve building safety, the BD has previously obtained information on the relevant system of the URA. When considering actions or strategies related to building safety, such as the selection of target buildings for MBIS, the BD will combine the information from URA’s system with information from the BD for comprehensive analysis, so as to select target buildings in a more focused and precise manner.
 
(4) Carbonation tests on concrete primarily reflect the effect of carbonation on the pH value of the concrete cover, which diminishes the protection that concrete provides against corrosion to steel reinforcing bars. During follow-up on reports on building dilapidation or defects, or in the course of LSOs, if elements of higher risk (such as cantilevered slab canopies) are found defective and require detailed investigation, the BD will issue investigation orders to the owners concerned, requiring them to appoint an Authorised Person to carry out investigation on the defective building elements and, depending on the actual condition of the buildings, to conduct necessary testing on a sampling basis (including carbonation tests on concrete).  In addition, under the MBIS, RIs will, based on the actual conditions of the buildings (e.g. the defects are found to be not caused by normal deterioration, or the extent or causes of the defects cannot be ascertained at the time of inspection) and exercise of professional judgment, determine whether detailed investigation and testing, such as sampling for carbonation tests on concrete, test on chloride and cement content and coring, etc, are required, so as to comprehensively assess the concrete condition and formulate the relevant repair proposals.

Note 1: The Government allocated $6 billion for the URA to implement OBB 2.0 to subsidise eligible owners in co-ordinating inspection and repair works in respect of common parts under the MBIS. Buildings that are able to co-ordinate the works among themselves may apply as Category 1 buildings. The BD will exercise its statutory power in carrying out the necessary inspection and repair works on behalf of the owners with the cost to be recovered from the owners after completion of works, for Category 2 buildings.  Eligible owners can apply for OBB 2.0 subsidy for reimbursement of part or all of the cost of the works.
 
Note 2: As at times there could be more than one Deed of Mutual Covenant for a building, each building may be involved in more than one repair/investigation order. read more

LCQ3: Facilitating the development of electronic payment platforms

     Following is a question by the Hon Mrs Regina Ip and a reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (November 15):
 
Question:

     There are views pointing out that the increasing flow of people between the Mainland and Hong Kong has led to a growing demand for efficient and convenient electronic payment (e-payment) platforms. However, Octopus, as the e-payment platform with the highest customer penetration rate in Hong Kong, deploys specialised technologies which do not conform to the standards of the International Organization for Standardization (known in abbreviated form as “ISO”) system, thus constraining its interoperability with e-payment platforms in the Mainland and hindering the development of cross-boundary e-payments. In this connection, will the Government inform this Council:

(1) of the Government’s role in promoting the interoperability of e-payment platforms between the Mainland and Hong Kong, in particular the application of such platforms in the public transport systems, and the details of the relevant measures;

(2) as it is learnt that Octopus does not support Near Field Communication (known in abbreviated form as “NFC”) mobile payments on certain models of mobile phones locally, whether the Government will, in respect of using mobile phones for NFC mobile payments, formulate the relevant certification standards; if so, of the details and implementation timetable; if not, the reasons for that; and

(3) as it is learnt that as Octopus is unable to upgrade its technologies in a timely manner and its stored value limit is capped at only $3,000, the scope of its application is over-concentrated in Hong Kong, such as paying fares for public transport and making retail payments of a relatively small spending value, whether the Government will formulate measures to facilitate the technological replacement of the payment platform; if so, of the details and implementation timetable; if not, the reasons for that?

Reply:

President,

     The HKSAR Government is committed to promoting the development of the local electronic payment (e-payment) market and providing the public with safe, efficient, convenient and diversified e-payment options by enhancing financial technology (fintech) infrastructure and implementing a robust regulatory regime. Hong Kong has a well-developed e-payment ecosystem with a number of non-cash payment options available to the public. A research report (Note) shows that the penetration rate of e-payment in Hong Kong is over 90 per cent.

     In consultation with the Innovation, Technology and Industry Bureau, the Transport and Logistics Bureau, the Hong Kong Monetary Authority (HKMA) and the Octopus Cards Limited (OCL), my reply to the three parts of the question is as follows:

(1) The HKSAR Government attaches great importance to the development of fintech and has introduced different measures to promote mutual access of e-payment between the Mainland and Hong Kong.

     The major e-wallet and retail payment operators in Hong Kong, including the OCL, AlipayHK, WeChat Pay HK and UnionPay, have provided cross-boundary retail payment services to users so as to better meet the daily payment needs of Hong Kong people in the Mainland. According to the figures from the two e-wallets commonly used by the Mainland visitors (Alipay and WeChat Pay), each operator has an average of over 150 000 retail merchants in Hong Kong accepting its Hong Kong and Mainland versions of e-wallet. The merchant number is six-folded compared to that of five years ago.

     As regards public transportation, the HKSAR Government has been promoting the introduction of a variety of e-payment systems by public transport operators to enhance the travel experience of the public and visitors, and facilitate the efficient integrated development of the Mainland and Hong Kong.

     To provide further convenience to the Mainland visitors, the Chief Executive has put forward in the 2023 Policy Address that government services commonly used by the Mainland visitors, including leisure, immigration and medical services, will support payment with the Mainland e-wallets by Q3 2024. Cyberport will launch the Digital Transformation Support Pilot Programme to subsidise small and medium enterprises in the retail and beverage sectors to adopt e-payment and other digital packages.

     Cross-boundary fintech collaboration is very important to promoting mutual access of e-payment between the two places. The Digital Currency Institute of the People’s Bank of China and the HKMA are carrying out the second phase technical testing on the use of e-CNY in cross-boundary payments, involving more banks in Hong Kong and the use of the Fast Payment System to top up e-CNY wallets. e-CNY will provide residents of both places with an additional payment means for cross-boundary retail consumption which is safe, convenient and innovative, thereby enhancing efficiency and user experience of cross-boundary payment services.

     As I announced at the Hong Kong FinTech Week 2023 earlier this month, the OCL and the Bank of China (Hong Kong) (BOCHK) will seek to explore new e-CNY application scenarios, with a view to benefitting both inbound Mainland visitors to Hong Kong and outbound Hong Kong residents visiting the Mainland. Earlier this year, the OCL has partnered with the Bank of China Shenzhen Branch to facilitate purchase of e-CNY hard wallets by Hong Kong residents, via Self-service Card Issuing Machines in Lo Wu, Shenzhen using the Octopus mobile application. The BOCHK has also launched e-CNY services facilitating inbound Mainland visitors to pay retail merchants with e-CNY wallets in Hong Kong, and offering Hong Kong customers with a convenient option to top up e-CNY wallets from their Hong Kong personal bank accounts. Subject to regulatory approval and technical readiness, we welcome the OCL to provide an inbound solution facilitating Mainland tourists’ use of e-CNY in Hong Kong through topping up Octopus cards in tourist mobile application.

(2) The second part of the question is about the compatibility of the mobile version of Octopus. As far as we know, the contactless technology deployed by the Octopus is in line with the specialised technology standard of the International Organization for Standardization (ISO). At present, the mobile version of Octopus can be used for Near Field Communication (NFC) mobile payments in the mobile phone brands commonly used by Hong Kong people, including Huawei, Apple and Samsung. The OCL will actively look into ways to overcome technical limitations, especially in Android mobile phones, with a view to further promoting universal access to the mobile version of Octopus and the application of NFC mobile payment.

(3) The third part of the question is about the stored value limit of Octopus, which is currently HK$3,000. Currently, members of the public are generally not required to register user identity when purchasing and using Octopus cards.

     As a stored value facility (SVF) licensee, the OCL has to comply with the relevant regulatory requirements including the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). According to the relevant requirements, if the maximum value of a stored value payment facility that can be stored on the device-based facility exceeds HK$3,000, the relevant customer due diligence requirements will apply. This arrangement seeks to strike an appropriate balance between mitigating money laundering risk and providing customer convenience. In other words, SVF licensees are allowed to offer SVF products with maximum stored value exceeding HK$3,000 to verified customers (i.e. whose identities have been obtained and verified). As such, the OCL may decide whether the stored value limit of Octopus cards held by verified customers should be adjusted having regard to the market needs, as well as its technical and other operational considerations.

     Thank you, President.

Note: The “Fintech Adoption Index” published by the School of Accounting and Finance of the Hong Kong Polytechnic University and Asklora in April 2023. read more