The past two years may have been among the most tumultuous in its history, but Hong Kong has risen to its recent challenges in its typically tenacious fashion to position itself at the forefront of the global economic recovery. Fast to respond to the pandemic and quick to identify new opportunities arising from the related seismic global changes, the city is now forging a confident path toward a bright future in which innovation, sustainability and forward-looking development are the keys to success.
Long hailed as one of the world’s most dynamic global financial centers, with an ever-favorable environment in which to invest, fundraise and do business, Hong Kong is driving a variety of bold policies and initiatives to blaze a trail in burgeoning new industries while simultaneously enhancing its traditional strengths. Nascent fields such as biotech and fintech are already thriving in Hong Kong, while the city—from the government and the stock market to property developers and entrepreneurs—are embracing environmental, social and governance (ESG) principles to ensure that sustainability and social responsibility will underpin the territory’s future growth.
Building for the future, both literally and figuratively, Hong Kong has embarked on a number of bold development projects that will further augment the city’s competitive advantages and livability. These encompass the West Kowloon Cultural District, which includes Hong Kong Palace Museum, Lyric Theatre Complex and the eagerly anticipated M+ museum of visual culture; the multibillion-dollar airport expansion, which will reaffirm Hong Kong International Airport’s status as a leading global aviation hub; and the development of SKYCITY into a new and exciting business and entertainment complex.
Leveraging its reputation as the gateway between mainland China and the rest of the world, Hong Kong is also set to be a key city within the Guangdong-Hong Kong-Macao Greater Bay Area, driving economic growth and new opportunities for years to come.
Fundraising: A Dynamic Business Environment Where Fundraising Thrives
Hong Kong has a long-held and well-earned reputation as a world-leading financial hub, and today the city is actively building on its strengths to ensure it remains a leader in this regard. Ranked as the third-easiest place to do business in the world by the World Bank in its Doing Business 2020 report, Hong Kong benefits from stable and transparent laws and regulations, a vibrant and deeply liquid financial market, and the financial and physical infrastructure to support the world’s largest companies and investment firms.
The city provides unrivaled connectivity with mainland China’s financial markets, offering direct two-way access through the Stock Connect and Bond Connect programs, and the new Wealth Management Connect scheme. In early 2021, the Hang Seng Index demonstrated its tenacity by showing impressive early gains after falling just 3.4% in 2020. “Despite significant market volatility around the globe, Hong Kong’s capital markets once again proved their resilience. In many ways our markets came out of 2020 stronger than ever,” said Hong Kong Exchanges and Clearing Limited (HKEX) Chairman Laura Cha at the Asian Financial Forum in January.
“HKEX, and all of Hong Kong, is well positioned to serve as a vital channel for funding growth in the post-Covid world.”
– Laura Cha, Chairman, HKEX
This resiliency and potential for growth, together with Hong Kong’s world-class financial infrastructure, make it a top choice for raising funds, and the city has ranked as the world’s number one IPO venue in seven of the past 12 years. In 2020 alone, HKEX recorded a 24% year-on-year fundraising increase, raising a total of HK$398 billion (US$51.3 billion) from 154 listings. This was the highest amount in a single year since 2010 and included the second-largest listing of 2020 globally: JD.com at US$4.5 billion. HKEX is building on this momentum through innovative initiatives such as its commitment to go paperless for IPO listings—making it the first major financial market in the world to do so.
Following regulatory changes in 2018 that allowed the listing of pre-revenue companies, Hong Kong has swiftly become the world’s second-largest IPO fundraising center for biotech. The city is also a growing hub for fintech, an industry that has seen its adoption accelerate dramatically during the pandemic. “More than 60% of the IPO funds raised in Hong Kong last year came from new economy and biotech companies,” said Cha. “HKEX, and all of Hong Kong, is well positioned to serve as a vital channel for funding growth in the post-Covid world.”
In another forward-looking move, Hong Kong SAR Chief Executive Carrie Lam announced in October that the city was positioning itself as a hub for green finance. This included HKEX’s launch of the Sustainable & Green Exchange (STAGE), an online portal that is the first of its kind in Asia to provide information, access and transparency on a wide range of sustainable investment products, while connecting market participants, issuers and investors.
But while it has already enjoyed tremendous success as an international financial market, Hong Kong is poised to play an even greater role in the future. Highlighting that the global sustainable finance market has attracted about US$30 trillion in investments, and that less than 1% of that had been in Asia, Cha shared her belief that “the potential for Asian sustainable finance investment products is huge,” and that Hong Kong, as Asia’s international financial hub, is ideally placed to realize that potential.
“At HKEX we are optimistic that 2021 heralds a fresh start,” added Cha. “We are well positioned and ready to serve all stakeholders, and to play our role in creating more resilient and sustainable growth for the benefit of all.”
ESG: Hong Kong’s Focus on ESG Paves a Path to a Greener Future
As well as creating unprecedented challenges for governments and businesses, Covid-19 has also given the world a stark insight into the disruption that climate crisis will cause. This in turn has reinforced and accelerated the need for ESG factors to underpin investment and development strategies, and Hong Kong is leading the way in integrating those principles.
Driven by the urgency of climate change, the Hong Kong government has taken a proactive approach to ESG integration, establishing a strong policy framework and regulatory environment. In May 2020, five Hong Kong financial regulators and two government agencies established a steering group to push for sustainable finance policy and to coordinate on matters of environmental risk. HKEX is mandating disclosures on climate change and social issues for all listed companies from this year onward, bringing it in line with its competitors and making it more attractive to international investors. In November, the government pledged to make the territory carbon neutral by 2050.
Hong Kong companies, particularly those in the real estate and retail sectors, are aggressively pushing ESG integration to better meet the needs of both stakeholders and shareholders. Many of Hong Kong’s largest developers have long-established sustainability frameworks and most are committed to decarbonizing the city’s buildings by incorporating strict international green building standards such as LEED, WELL and BEAM, which are increasingly non-negotiable certifications required by corporate tenants.
Sino Land, one of the city’s leading property and real estate developers, last year became a signatory of the United Nations Global Compact, a scheme that commits companies to building sustainable communities. It plans to install 3,200 solar panels across 19 properties and three hotels to generate renewable energy. The company has also pledged to reduce the consumption of single-use plastics across its business by 50% by next year. In 2016, Swire Properties instituted its ambitious SD 2030 plan, a strategy to make it one of the world’s leading sustainable developers by 2030. Two years later, Swire launched the first certified green bond scheme in Hong Kong, with Hang Lung Properties and Landsea quickly following; the latter changed its name to Landsea Green Properties in 2019 to better reflect its commitment to sustainable development.
New World Development is another company that is raising the bar in this regard. As part of its ambitious Sustainability Vision 2030 plan, New World has set targets in four key pillars—Green, Wellness, Caring and Smart—through which it has pledged to achieve a variety of sustainability and social responsibility-driven targets, including halving its carbon emissions by 2030, ensuring all new building projects meet the LEED Gold and BEAM Plus certification standards, and supporting green startups through its Impact Kommons accelerator.
“Companies can no longer address stakeholder’s expectations without integrating ESG and demonstrating social responsibility in its business strategy and operations,” says Ellie Tang, Head of Sustainability at New World, adding ESG integration is key to the company’s long-term success.
“Companies can no longer address stakeholder’s expectations without integrating ESG.”
– Ellie Tang, Head of Sustainability, New World Development
ESG has also had an important role to play during Covid-19, as Tang explains. “In spite of the disruption caused by the pandemic on onsite construction works, we were able to respond quickly and maintain productivity and efficiency by deploying building information modelling (BIM) technology in project management. With the technology, certain construction plans and works were carried out in a virtual or contactless environment, which prevented colleagues and site workers from being exposed to health risks.”
A post-pandemic world provides a unique opportunity to reshape the global economy with ESG at its center, and through government action and proactive adoption by Hong Kong companies, the city is ahead of the curve as it rises to meet the challenges of the future.
Fintech: Hong Kong’s Fintech Industry Booms as Consumers Turn to Mobile Solutions
For most industries, the pandemic has brought a variety of setbacks and challenges, but for others—such as fintech—the need for remote access and increased dependency on mobile technology has accelerated growth. This has been particularly true in Hong Kong, where the fintech industry is dynamic and fast-growing, both in terms of innovation and fundraising, with 60% of funding in the city targeting new economy stocks in 2020.
Since announcing its support of the concept in 2017, the Hong Kong Monetary Authority has licensed eight virtual banks, all of which launched during 2020. Offering features such as near-instant account openings, 24/7 access and a full suite of financial services that can be performed remotely, virtual banks have found an receptive user base in Hong Kong at a time when most bricks-and-mortar banks have had to curtail their physical operations due to Covid-19 related restrictions.
“Hong Kong is a perfect landing pad for fintech companies eyeing opportunities in Asia.”
– Simon Loong, Founder and Group CEO, WeLab
Hong Kong’s only homegrown virtual bank, WeLab Bank, was among the first to launch. Founder and Group CEO of parent company WeLab, Simon Loong, says, “Hong Kong is a perfect landing pad for fintech companies eyeing opportunities in Asia. With its established and vibrant ecosystem, the city has enabled fintechs like WeLab to innovate and develop, and then expand to Greater China and beyond.”
Loong also believes that the fintech industry’s runway for growth is substantial. He points to customers’ evolving financial needs and mindset, and the benefits brought about by tech-enabled features that are changing people’s habits. “We’ve already seen customers taking advantage of the 24/7 fully remote access and user-centric experiences presented by virtual banks,” he says. “Virtual banks will become the norm in the next five years.”
The regtech pioneer iFinGate, which focuses on compliance and regulatory automation, is a Hong Kong-based company that recorded impressive growth in 2020, onboarding more than 500 financial institutions and licensed corporate clients. “Clients in Hong Kong have become more receptive to online services and regulatory compliance,” notes CEO William Lam.
Lam also highlights the support of Hong Kong Cyberport Management, the Hong Kong Trade Development Council and the University of Hong Kong as crucial to this success. He also points to the “well recognized legal system, and easy access to excellent talent resources in multidisciplines, which provide a strong backbone for Hong Kong to build and position as an important fintech hub.”
Airwallex—a digital global payment platform—is another company thriving in Hong Kong’s vibrant fintech scene. “From day one, we set out with a purpose to empower businesses of all sizes to grow beyond borders,” says Lucy Liu, Cofounder and President of Airwallex.
“We also see the incredible opportunities Hong Kong presents…in addition to its robust and transparent legal and regulatory framework.”
– Lucy Liu, Cofounder and President, Airwallex
Liu says the company was attracted by “Hong Kong’s status as an international financial center, which is key for our global expansion.” She adds, “We also see the incredible opportunities Hong Kong presents as the bridge of financial innovation between China and the rest of the world in addition to its robust and transparent legal and regulatory framework.”
During the pandemic, Airwallex’ s growth continued apace. “With more businesses now operating online, Airwallex has been at the center of this evolution,” Liu says. In the second half of 2020, Airwallex saw a 50% increase in its global customer base while its net revenue doubled.
Building on that momentum, the company plans to fill more than 300 open roles this year to support its global expansion, using Hong Kong as its base. “The fintech industry—in Hong Kong and the rest of the world—is primed for growth, as fintechs will play an integral part of economic recovery post-2020,” Liu says.
Biotech: Right Mix of Government Support, Finance and Talent Make Hong Kong a Major Biotech Hub
Faced with the greatest global healthcare crisis in a century, the biotech industry has flourished during the pandemic, as demand for Covid-19 test kits, antiviral drugs and vaccines has skyrocketed. Because of its unique advantages, Hong Kong is ideally placed to capitalize on the boom in this sector.
Hong Kong is a natural home for biotech, with five universities inside the top 100 of the QS 2021 World University Rankings, and the medical schools of the University of Hong Kong and the Chinese University of Hong Kong ranked among the 50 best globally in the same rankings. Building on that strong academic base is the Hong Kong Innovation & Technology Commission (HKITC) and the biomedical research cluster at Hong Kong Science & Technology Parks Corporation (HKSTP), which together have backed hundreds of ventures including successful local biotech startups such as Acaderma Asia and Sanwa BioTech.
“HKSTP has given us tremendous support during our early years.”
– Kelvin Chiu, CEO, Sanwa BioTech
“HKSTP has given us tremendous support during our early years as a small-scale startup and provided us with an international platform to accelerate our success,” says Kelvin Chiu, CEO of Sanwa BioTech, a diagnostics solution innovator with an advanced microfluidic-technologies platform in Asia. Chiu says HKSTP and HKITC provide startups with several funding schemes, such as the Innovation & Technology Fund, on top of offering world-class facilities at existing sites and investing in new locations such as the Advanced Manufacturing Centre (AMC) in Tseung Kwan O Industrial Estate, which is slated to open in 2022. Sanwa BioTech will base its new manufacturing facility at AMC, and Chiu believes the move will help the company scale by expanding its manufacturing capacity to enable it to supply its diagnostic products to Asia and other markets around the world.
This dynamic support structure and generous funding environment has attracted a slew of international businesses, including ACT Genomics, an integrated biomarker solution leader in Asia for precision cancer management with operations in Taiwan, Japan, Singapore and now Hong Kong. In 2019, ACT Genomics decided to open a facility in Hong Kong due to HKITC and HKSTP “actively promoting the biotech industry,” says the company’s Chief Financial Officer Victor Chan. “When we started considering establishing a world-standard [next-generation sequencing] lab in Hong Kong, we got strong support from HKSTP in terms of site preparation, infrastructure and facilities,” Chan adds.
Chan says Hong Kong’s location, on the doorstep of mainland China and as an integral part of the Greater Bay Area economic zone, is another reason that biotech companies are flocking to the territory, not only for the potentially huge market, but also the chance for regional collaboration fostered by the city’s innovation agencies. “HKITC and HKSTP have provided a very attractive environment, both physically and intellectually, for partners to interact for further scientific and innovation advancements,” he says.
Outside of government support, Hong Kong’s world-class financial infrastructure is also proving a boon to biotech. With the focus on R&D, biotech startups rarely generate meaningful revenue, let alone profit, and this can prove an obstacle in raising capital. But a recent rule change by HKEX has made the city a mecca for biotech listings.
In 2018, HKEX allowed qualified biotech businesses to list on the exchange before earning revenue, and the resultant change has seen dozens of companies go public, including Innovent Biologics, CanSino Biologics and Alphamab Oncology. With billions of dollars raised and more companies looking to list, Hong Kong has, in less than three years, become the second-largest biotech fundraising center in the world after the U.S.
Art & Culture: Hong Kong’s Cultural Events Show Resilience as well as Innovation to Adapt
Hong Kong’s arts ecosystem has grown rapidly in size and sophistication over the past decade, with events such as Art Basel raising the city’s global profile while catalyzing the expansion of the broader cultural landscape. Although the pandemic forced the cancelation of many in-person events, Hong Kong has demonstrated resilience and innovativeness to find alternatives that turn adversity into opportunity.
Art Basel, for example, hosted its Online Viewing Rooms in March in an effort to provide an alternative platform to showcase art works that galleries were planning to bring to the physical fair. Adeline Ooi, Director Asia, Art Basel, says this allowed galleries to engage remotely with Art Basel’s global network of patrons and promote their artists to new collectors and buyers.
“We believe that digital platforms cannot replace the experience of seeing art in person or visiting the fair itself,” says Ooi. “However, digital tools and platforms such as Online Viewing Rooms have helped galleries build momentum among collectors and to stay connected at a time when it has not been possible to travel and meet.”
“The pandemic has hastened the digital evolution in the industry, with a new approach to client engagement.”
– Francis Belin, President, Christie’s Asia Pacific
The auction sector has taken many of its events online in the past year. Christie’s held a hybrid in-person and online New York-Hong Kong auction in December that was watched remotely by 500,000 people. Meanwhile, the auction house’s online-only sales rose more than 260% last year to a record US$311 million. Digital tools such as Augmented Reality, audio tours and virtual viewing rooms were employed to enhance the online auction experience.
“The pandemic has hastened the digital evolution in the industry, with a new approach to client engagement, marketing, sale formats and remote selling tools,” says Francis Belin, President of Christie’s Asia-Pacific. “Collectors will increasingly transact across multiple channels, not just live auctions, and auctions can be hosted more nimbly, tapping the level of demand and shifts in tastes throughout the year.”
S. Alice Mong, Executive Director of Asia Society Hong Kong Center (ASHK), has been active in supporting the city’s art ecosystem during the pandemic through ART Power HK, a campaign that brings together more than 150 partners from across the local arts community. Launched in February 2020, ART Power HK provides an online platform where stakeholders can share art offerings through virtual exhibitions, tours, talks and videos.
In addition to being Covid-safe, ART Power HK’s virtual nature has the added benefit of giving its content a much larger—and truly global—reach. Since going digital in 2020, says Mong, ASHK has been able to connect to a global audience of 500,000, compared with an audience of 15,000 the year before. “It made art very accessible,” she says, adding, “I think these virtual and online shows and events are here to stay, to enhance our experience of the arts, and serve as a wonderful accompaniment to the in-person arts and culture offerings.”
While some organizations have adapted their operations to continue during the pandemic, others have found new opportunities amid the “new normal.” Hong Kong’s first purpose-built Covid-responsible entertainment offering, The Grounds at AIA Vitality Park, is one such example. Hosting movie screenings, live music, family activities and wellness classes that guests can enjoy from the safety of their own private pod, The Grounds serves as a blueprint for socially distanced events.
Simon Wilson, Managing Director and Cofounder of The Grounds, explains they had to completely reimagine the event experience from a Covid-responsible perspective, which includes temperature checks, mandatory hand sanitization and contactless food and beverage ordering, in addition to the socially distanced design.
Wilson says the response from guests has been overwhelmingly positive, with most events selling out, and he believes the format’s popularity will continue even after the pandemic has passed. “Guests are starting to see these sorts of event features as a premium plus point,” he says. “The pandemic has shifted consumer habits, and I think people will prefer an intimate experience to mass gatherings for some time to come.”