19 September 2019
The EU has already granted Hong Kong 'EU equivalence' status in areas such as central counterparties and credit rating agencies, Lord Jonathan Hill says. Photos: Reuters, Bloomberg
The EU has already granted Hong Kong 'EU equivalence' status in areas such as central counterparties and credit rating agencies, Lord Jonathan Hill says. Photos: Reuters, Bloomberg

Hong Kong remains gateway to China for EU funds

This week, I am in Hong Kong to meet ministers, regulators and businesses.

My goal? To discuss how we can build on the strong links we already enjoy between the European Union and Hong Kong.

The EU is Hong Kong’s second-largest trading partner – second only to mainland China.

In commercial services alone, that trade is worth nearly €20 billion (US$21.6 billion) a year.

Each of us is a big investor in the other, and there are many EU companies playing their part in Hong Kong’s banking, insurance and securities sectors.

My main message is a simple one: Europe is open for business.

I am keen to explore ways we can work together to boost investment and stimulate growth and jobs.

This is the European Commission’s top priority.

It is what lies behind our commitment to strengthen the single market, to promote free trade and to encourage more investment in European infrastructure.

Our trade commissioner, Cecilia Malmström, recently set out a comprehensive trade and investment strategy.

This includes a commitment to a strategic engagement with Asia.

The free trade agreement with South Korea is already the most ambitious trade deal the EU has ever implemented; now we are working on a deal with Japan.

In due course, we want to open negotiations with the Philippines and Indonesia.

And I hope we can complete discussions with China on an investment agreement and explore launching negotiations for a similar agreement with Hong Kong.

In my own area of financial services, there are also good examples of where we are working well together.

We have already granted Hong Kong “EU equivalence” status in areas such as central counterparties and credit rating agencies.

Meanwhile 70 percent of the funds in Hong Kong are Undertakings for Collective Investments in Transferable Securities – EU funds with a strong reputation that makes them attractive around the world.

This openness and exchange is good for both sides.

Hong Kong stands to benefit a great deal from this greater strategic commitment: not least given its status as a regional hub and gateway to China and much of Asia.

Europe needs investment to modernize its infrastructure.

To raise the sums needed will require the involvement of the private sector, not just from within the EU, but beyond.

Our €315 billion investment plan aims to crowd in private finance – and kickstart a major program of investment in infrastructure.

But we also need to put the right framework in place for the longer term.

That’s why, for example, we are adjusting the rules that apply to insurance companies, to promote investment in infrastructure as an asset class.

It is also why I am leading a drive to support the growth of capital markets.

The European economy is as big as the American one, but Europe’s equity markets are less than half the size, its debt markets less than a third.

A more diverse economy, less dependent on bank funding, will be more resilient and stable and also offer growing businesses new sources of financing.

We are not the only part of the world to see the attraction of diversifying our funding strains to promote growth and stability – another reason why it makes sense for us to work together in international bodies to ensure policy and regulatory responses are joined up.

And indeed, in that regard, I am looking forward to working with the Chinese presidency of the Group of 20.

Reforms in Europe are starting to bear fruit.

Our forecasts last week projected growth in all countries of the EU bar one; countries that were once in International Monetary Fund programs are now growing strongly.

In the one remaining country, Greece, we have taken a significant step forward in agreeing a new program over the summer, which now needs to be implemented.

I hope that continued reform can see confidence return in Greece and a return to normality and growth.

Meanwhile, the EU is strengthening the foundations of its economic and monetary union, as well as the single market on which so much growth depends.

I see great opportunities in this visit: opportunities for trade, opportunities for investment, opportunities to learn from each other and strengthen the relationship still further.

If we pursue greater reform and openness, I am sure that there is much we can achieve.

The author is visiting Hong Kong between Nov. 12 to 14.

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EU's Commissioner for Financial Stability, Financial Services and Capital Markets Union