Hong Kong

Overview

Official name : The Hong Kong Special Administrative Region (SAR) of the People's Republic of China

Government : Special administrative region of China , with its own constitution (the Basic Law), guaranteeing a "high degree of autonomy" for the next 48 years. Headed by a chief executive appointed by China

Head of State : President Xi Jinping

Head of government: Chief Executive Carrie Lam (since 1 July 2017)

Capital City : Beijing

Main towns : Hong Kong Island , Kowloon , New

Territories, Outlying Islands

Land area : 1,097 sq km

Population : 7.451m (2018)

Climate : Sub-tropical

Currency : Hong Kong Dollar (ISO currency code: HKD )

Exchange rate : USD 1=HKD 7.75 (August 2020)

Measures : UK imperial system changing to metric system. Local measures are also used

Language : English and Chinese (mainly Cantonese)

Time : GMT +8 hours

Regulatory Scheme

Hong Kong imposes no controls on foreign exchange, and the government does not require disclosure of any information on cross-border remittances of any size. The Hong Kong Monetary (HKMA) controls local liquidity and interest rates in order to keep the Hong Kong dollar stable. The Hong Kong dollar is pegged to the U.S. dollar at a rate of about 7.78 HKD to one USD. The Office of the Financial Secretary, which oversees the HKMA, is the ultimate government authority controlling the financial system and relations with Beijing .

Banking

Hong Kong is the world's ninth largest international banking center in terms of volume of external transactions. In 1993 the government set up the Hong Kong Monetary Authority, by merging the Office of the Exchange Fund and the Office of the Commissioner of Banking. The HKMA oversees monetary management and supervision of the banking sector, however it does not print currency. Notes are printed by the Hong Kong and Shanghai Banking Corporation (HSBC, which owns Hong Kong Bank and Hang Seng Bank), Standard Chartered Bank and the Bank of China. There are around 151 licensed banks in Hong Kong. In addition, there are around 48 restricted-license banks, 61 deposit-taking companies, 263 authorized banks, and 118 other banking institutions that have representative offices in the SAR. Of the licensed banks,123 are incorporated outside Hong Kong. A small number of banks with large branch networks dominate the market for retail bank deposits, while the other banks and financial institutions rely mainly on the interbank market for funds. All licensed banks are required to be members of the Hong Kong Banking Association (HKBA) which supervises banking standards and to regulates charges and interest rates.

Stock Exchange

The Stock Exchange of Hong Kong (SEHK) was formed in 1986 through the merger of four previously existing exchanges. In March 2000 SEHK merged with the Hong Kong Futures Exchange to form Hong Kong Exchanges and Clearing Limited (HKEC), which is itself a listed company. The SEHK is now the largest stock market in Asia (excluding Japan). The market is not heavily regulated and there are no restrictions on foreign ownership of shares on the HKEX. In 1993 the HKEX was opened up to Chinese-incorporated companies via listings known as H-shares. In addition to H-shares, "red chips", or Chinese-controlled companies incorporated in Hong Kong, are also traded. In November 1999 the Growth Enterprise Market (GEM) was launched. The GEM is aimed at companies with strong growth potential, particularly high-tech and high value-added industrial companies. The criteria for companies wishing to list on the GEM are less stringent than those required for firms wishing to issue shares on the SEHK's main board. In addition, HKEC offers four derivative products based on local stock market indices and foreign-exchange futures, as well as individual stock and interest rate derivative products. The products are all traded on the Hong Kong Futures Automated Trading System (HKATS). Despite recent efforts by the Hong Kong government to increase liquidity, the local debt market remains relatively underdeveloped. The Hong Kong Mortgage Corporation (HKMC) was founded in March 1997 to help foster the development of a secondary mortgage market. There has also been a recent movement to modernize the HKEX starting with the Securities and Futures Commission (SFC) which was established in 1989 to oversee the clean-up and modernization of the stock exchange.

Insurance

T he Office of the Commissioner of Insurance is the main regulatory body that oversees the Hong Kong insurance sector. The minimum paid-up capital is HKD10 million, or HKD20 million for a composite insurer or for an insurer wishing to carry on statutory classes of insurance business. Solvency margins are typically very small. Foreigners are subject to the same authorization requirements as local insurers, and there is no restriction on foreign ownership of insurance companies. There are around 115 direct insurers in Hong Kong . The share of top 5 is around 25% of the market. General liability is the largest line of non-life insurance accounting for around 35% of the market premiums. The most important line of life insurance are individual whole life policies (non-linked savings-type products) which account for around 35% of the market.