22 January 2019
HKMA chief executive Norman Chan should discuss how to ease regulatory restrictions for crowdfunding. Photo: HKEJ
HKMA chief executive Norman Chan should discuss how to ease regulatory restrictions for crowdfunding. Photo: HKEJ

Government holds key to promotion of technology innovation

Norman Chan Tak-Lam, chief executive of the Hong Kong Monetary Authority (HKMA), wrote recently in his blog that technological innovation can foster “financial inclusion”.

At first glance of the article, I was happy to see top government officials, including Chan, being enthusiastic in promoting technology development. But it turns out he is focusing on a single thing — the video teller machine (VTM).

VTM is a typical automated teller machine with a video camera as well as an ID card and document scanner, offering a relatively wide range of basic banking services.

I’m not saying it’s not an innovative technology, but the authorities should not only do micro management to promote technology development.

The government should play a key role. They need to show the way for innovations to develop.

Sharing economy and financial technology (fintech) are two good examples.

Many successful startups, like Uber, have shocked vested interests in various industries. Some authorities tend to maintain existing rules in the wake of protests from vested interests.

On the other hand, many have started to clear the way for innovators. Many states in the United States have legalized ride-sharing practices, for example.

Another case is fintech, also known as internet finance.

While the internet has made ride-sharing cheaper and easier, it has also made crowdfunding more accessible.

Many welcome the internet platforms that allow them to raise funds for their businesses much more easily.

The popularity of internet finance in mainland China is partly due to flaws in the country’s financial system. Financing is especially difficult for private small businesses in China.

However, regulatory uncertainties have hindered the industry’s development. Many places in developed countries, as well as China, have started, or considered starting, reviewing the rules to better regulate crowdfunding activities.

Hong Kong has a more mature financial system, but it doesn’t mean there’s no demand for crowdfunding in the city.

I hope HKMA’s Chan could discuss how to ease regulatory restrictions for crowdfunding in the city when talking about promoting technology development.

This article appeared in the Hong Kong Economic Journal on Feb. 23.

Translation by Myssie You

[Chinese version 中文版]

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Assistant Professor at the Department of Economics, The Chinese University of Hong Kong

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