25 May 2019

HKEJ Today: Highlights

Following is a summary of major news and comments in the Hong Kong Economic Journal, the parent publication of EJ Insight, on Friday, Dec. 6:

Chinese authorities tighten grip over bitcoin

The People’s Bank of China and four other Chinese regulatory agencies have jointly stepped in to control the bitcoin market, sending the value of the digital currency down over 30 percent to 4,521 yuan (US$742.34) on Thursday from the intraday high of 7,050 yuan on the mainland trading platform BTC China at one point. Authorities have banned the use and circulation of the bitcoin in physical markets, but allowed it to retain its status as an online transaction medium. Financial institutions and payment services providers are not allowed to invest in or run any businesses related to the bitcoin. Online stores using bitcoin for transactions are required to register their users in real names in a bid to combat potential money laundering.

Hong Kong urged to reform corporate tax regime

Hong Kong Chamber of Commerce chairman Chow Chung-kong has called on the government to establish a two-tier taxation system for corporate income tax. While lowering the standard tax rate, the government should reduce the tax burden on small- and medium-sized enterprises to help boost the city’s competitiveness, he said. Chow suggests lowering the standard tax rate to 15 percent from the current 16.5 percent, and put a 10 percent levy on the first HK$2 million (US$257,933) taxable income of companies. Hong Kong’s existing effective corporate income tax rate stands at 17.6 percent, compared with Singapore’s 6 percent, Malaysia’s 7.5 percent and Taiwan’s 12.7 percent.


Credit expansion, financial regulation in Asia remain challenging

Financial regulation and credit expansion in Asia is still facing challenges although some countries, such as China and India, have been implementing reforms to support the banking sector, said HSBC Holdings Plc. (00005.HK) Group Chief Executive Stuart Gulliver. The substantial increase in capital requirements both locally and internationally has suppressed lenders’ ability in extending credit, limiting their loans to small to medium-sized enterprises. Gulliver expects the number of global banks to drop to just a few from about 30 in 2007.

Cathay Pacific raises staff salary by 4.5 percent

Cathay Pacific Airways Ltd. (00293.HK) has reached an agreement with its crew to raise their salaries by an average 4.5 percent for next year, compared with the staff union’s request for a 7.5 percent increase. The airline also agreed to grant its staff a bonus equivalent to one month salary this year. Market observers expect Cathay’s salary hike will set a benchmark to other employers in the city.

Increase in electricity tariff in Hong Kong may be lower than last year

The two power companies in Hong Kong may be allowed to raise their tariffs at a rate lower than last year, given lesser pressure in fuel costs, sources said. CLP Power Hong Kong Ltd. increased its tariff by 5.9 percent last year while Hongkong Electric Co. Ltd. raised it by 2.9 percent. The government has recently decided to keep the power companies’ allowed returns at 9.99 percent a year.


Hong Kong govt slammed for treating mainland officials’ reform views as law

The Hong Kong government was criticized for using elaborations by mainland officials in the consultation document on the city’s universal suffrage. Legal experts said the government’s move was made as if the remarks by the mainland officials were law. They cited the remarks made by National People’s Congress senior member Qiao Xiaoyang about the composition of the nomination committee for the 2017 chief executive election. Qiao said the composition could copy the structure of the 2012 Election Committee for the CE election. University of Hong Kong law professor Johannes Chan said the legal basis for political reform must be the Basic Law.


China sends warning of bubble in curbs on bitcoin

Five Chinese financial and monetary regulatory bodies have taken a joint move to curb the bitcoin market as speculation bubble of the virtual currency has reached a dangerous level. Chinese investors have become the biggest players in the global bitcoin market. No one has an answer as to whether virtual currencies such as bitcoin would become the most common means of transaction and have great potential in the future. But the move by the five mainland regulatory bodies has sent a clear warning to the “Chinese Dama {大媽}”, or mother investors, about the risks of bitcoin.


Beijing promotes high-speed railway technology to help build China brand

China’s “high-speed railway diplomacy” has hit international headlines after British Prime Minister David Cameron said during his visit in Beijing that Britain welcomed Chinese investment in high-speed railway projects in his country. While boosting China’s soft power and luring foreign investments, Chinese leaders’ promotion of high-speed railway technology during foreign trips would help show the country’s ability in high-tech and high-quality products, international affairs analyst Ling Kim-ho wrote. An important strategic thinking behind “high-speed railway diplomacy” is to promote the brand of Chinese products.

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