«Panel on Financial Affairs Minutes of meeting held on Monday, 3 June 2013 at 9:30 am in Conference Room 1 of the Legislative Council Complex Members ...»
LC Paper No. CB(1)1764/12-13
(These minutes have been seen
by the Administration)
Ref : CB1/PL/FA/1
Panel on Financial Affairs
Minutes of meeting
held on Monday, 3 June 2013 at 9:30 am
in Conference Room 1 of the Legislative Council Complex
Members present : Hon Starry LEE Wai-king, JP (Chairman)
Hon CHAN Kin-por, BBS, JP (Deputy Chairman)
Hon Albert HO Chun-yan
Hon James TO Kun-sun
Hon CHAN Kam-lam, SBS, JP
Hon Abraham SHEK Lai-him, SBS, JP
Hon Jeffrey LAM Kin-fung, GBS, JP Hon Andrew LEUNG Kwan-yuen, GBS, JP Hon WONG Ting-kwong, SBS, JP Hon Ronny TONG Ka-wah, SC Hon Mrs Regina IP LAU Suk-yee, GBS, JP Hon James TIEN Pei-chun, GBS, JP Hon NG Leung-sing, SBS, JP Hon Kenneth LEUNG Hon Dennis KWOK Hon Christopher CHEUNG Wah-fung, JP Members attending : Hon WONG Kwok-hing, MH Dr Hon LAM Tai-fai, SBS, JP Dr Hon Kenneth CHAN Ka-lok Hon CHAN Yuen-han, SBS, JP Hon TANG Ka-piu Member absent : Hon SIN Chung-kai, SBS, JP
-2- Public officers : Agenda Item IV attending Mr John TSANG, GBM, JP Financial Secretary Mrs Helen CHAN, JP Government Economist Mr Arthur AU Administrative Assistant to Financial Secretary Agenda Item V Miss Salina YAN, JP Deputy Secretary for Financial Services and the Treasury (Financial Services) 1 Miss Sara TSE Principal Assistant Secretary for Financial Services and the Treasury (Financial Services) 1 Agenda Item VI Miss Ada CHAN Principal Assistant Secretary for Financial Services and the Treasury (Financial Services) 2 :
Attendance by Agenda Items V & VI invitation Mr Ashley ALDER Chief Executive Officer Securities and Futures Commission Agenda Item V Mr Brian HO Executive Director, Corporate Finance Divisi
Items proposed by the Administration for discussion at the regular meeting in July 2013
3. Members agreed to discuss the following items proposed by the Administration at the next regular meeting scheduled for 5 July 2013 –
Regulation of collective investment schemes
4. Referring to his letter dated 20 May 2013 to the Chairman, Mr Albert HO suggested that the Panel should discuss as soon as possible issues arising from the cancellation of sale contracts of hotel room units at The Apex Horizon as the matter had attracted wide public concern. He noted that the Securities and Futures Commission ("SFC") seemed to have taken enforcement action on the case only after Mr Dennis KWOK had written to SFC to express concern about the investment scheme offered in joint hotel ownership should fall within the definition of collective investment scheme ("CIS") subject to SFC's regulation. Mr HO was concerned that hotel investment schemes of a similar nature might have been offered in the past without regulation. He suggested that the Panel should discuss the matter at the coming regular meeting or a special meeting, and SFC should be invited to clarify its regulation over CIS and explain the progress of its investigation on the case of The Apex Horizon.
Action -7Mr Dennis KWOK said that, according to the written response provided by SFC, issues relating to The Apex Horizon did not involve policy matters but related directly to an individual case that should not be discussed by the Panel. He suggested that the Panel should discuss with SFC policy issues on the regulation of CIS, and requested SFC to provide more information in this regard to facilitate the discussion. Mr Abraham SHEK agreed that the Panel might discuss policy issues concerned but not The Apex Horizon case.
6. Members agreed to discuss "Regulation of collective investment schemes" at the upcoming regular meeting to be held on 5 July 2013, in addition to the two items proposed by the Administration in paragraph 3 above.
Regulation of automated trading services
7. Referring to his letters dated 20 and 24 May 2013, Mr Albert HO said that the Panel should discuss issues arising from the voluntary surrender by the Hong Kong Mercantile Exchange ("HKMEx") of its authorization to provide automated trading services ("ATS") in view of the wide public concern.
The Chairman advised that the item on "Regulation of automated trading services" had been incorporated in the agenda of the meeting under agenda item VI.
8. At the invitation of the Chairman, the Financial Secretary ("FS") briefed members on the latest economic situation by highlighting the following salient points –
9. The Government Economist ("GE") gave a powerpoint presentation on the details of the latest development of the Hong Kong economy, the updated economic forecasts for 2013, and the latest situation of low-income households.
Improvement to the business environment and support for the small and medium enterprises
10. Given Hong Kong's small and outward economy, Mr James TIEN opined that Hong Kong was more susceptible to volatilities in the external environment. In order to maintain a business-friendly environment and provide support to enterprises, in particular the small and medium enterprises ("SMEs"), he considered that the Government should adopt a more forward-looking approach in working out support measures in this area.
Mr Jeffrey LAM expressed concern about the difficult operating environment faced by SMEs due to rising costs in labour and materials. He urged the Government to step up efforts to assist SMEs and avoid implementing new measures that would suffocate the business environment.
11. Mr Andrew LEUNG pointed out that the measure of doubling the ad valorem stamp duty ("AVD") for property transactions (including commercial property transactions) would increase the business cost of SMEs which were already facing numerous problems including the sluggish export demand in the advanced economies, inflationary pressure and labour shortage, etc.
Furthermore, the business environment remained uncertain as US was expected to end the quantitative easing measures gradually while Japan had just launched its qualitative and quantitative monetary easing ("QQE"). Mr LEUNG enquired about the Government's measures to support SMEs in facing a new market order.
12. FS stressed that SMEs were a major driving force of economic development and employed about half of the local workforce in the private sector. The Government had always attached great importance to strengthening support for SMEs. He concurred that the current economic outlook was uncertain amidst concerns about US's exit from quantitative easing and depreciation of the yen under Japan's QQE. To help SMEs raise capital and tap new markets, the Government had proposed a number of support measures in the 2013-2014 Budget including, extending the application period for the special concessionary measures under the SME Financing Guarantee Scheme, and introducing a "Small Business Policy" scheme by the Hong Kong Export Credit Insurance Corporation for Hong Kong enterprises with an annual business turnover of less than $50 million to provide exporters with more flexibility in taking out insurance cover.
Action - 12
13. Mr WONG Kwok-hing expressed concerns about calls from the business sector for importing labour in some sectors such as the construction sector with relatively higher unemployment at 5.8%, and sought FS's views on the matter. FS said that the Government would continue to consider applications for importation of workers from employers who faced genuine difficulties in recruiting local qualified workers under the established mechanism.
14. Ms CHAN Yuen-han considered that the problem of working poverty was becoming more serious. The Chairman suggested that the Government should implement measures that could release the potential manpower resources, such as by promoting family-friendly policies for employment.
15. Mr TANG Ka-piu noted from Table 5.4 of the First Quarter Economic Report 2013 that the unemployment rates for various skill segments of the labour market had increased. In particular, the unemployment rate of "craft and related workers" in the lower-skilled segment stood at a high level of 5.5% in the first quarter of 2013. He queried why there was a higher unemployment rate in this segment despite the construction, vessel and lift repair and maintenance sectors were facing shortage of labour.
16. FS said that the Administration recognized the long standing labour shortage situation in the construction and related sectors because jobs in these sectors failed to attract young people vis-à-vis white collar jobs. To support the manpower development needs of specific industries, the Government had been collaborating with institutions like the Vocational Training Council to provide quality and diversified vocational and skills training programmes for the construction sector with a view to enhancing job prospects and promoting the attractiveness of jobs to the younger generation. As regards the 5.5% unemployment rate for craft and related workers, it was likely that the relatively higher rate was partly attributable to job mismatch.
Property market and land supply
17. Dr LAM Tai-fai queried the effectiveness of the demand management measures (i.e. doubling the AVD, enhancing the Special Stamp Duty ("SSD") and introducing the new Buyer's Stamp Duty, etc.) in addressing the overheated property market and achieving the target of helping Hong Kong Permanent Residents ("HKPRs") to purchase flats at affordable prices. Instead, these measures had caused stagnancy in the property market, violated the principles of a free trade economy and deterred foreign investment in Hong Kong. In his view, the demand management measures were means employed by the Action - 13 Administration to cover up its inability in increasing land and flat supply in the short term to meet the surge in housing demand.
18. Mr James TIEN and Mr Abraham SHEK concurred with the concern about adverse impact of the demand management measures on the investment sentiment, in particular investment from foreign companies to acquire properties in Hong Kong as accommodation for their staff deployed to work in Hong Kong. Mr Jeffrey LAM pointed out that some chambers of commerce had already raised concerns about the adverse impact of the increased AVD rates and enhanced SSD on the investment environment. He said that the Government should strike a proper balance between the interests of various stakeholders by flexibly adjusting or withdrawing the demand management measures when necessary and appropriate.
19. Mr Abraham SHEK remarked that the Government had not conducted comprehensive assessment on the impacts of the demand management measures on the property market. He pointed out that while the number of property transactions had dropped since the introduction of SSD in 2010, the impact was largely on the secondary property market rather than the first-hand flats. Moreover, the measures had not achieved the designed purpose of bringing down property prices at all. As observed, flat prices had surged by about 35% from 2010. Even the sale prices of newly completed home ownership scheme flats in the New Territories had risen to historic high level exceeding $9,000 per square feet. Mr SHEK took the view that the Government had benefited the most from the demand management measures and when the property market rallied which had led to increase in income from land premium and sale proceeds from subsidized housing flats.
20. FS said that the crux of the housing problem at present lied with shortage of land supply in the short and medium term. The Government would continue with its efforts to increase land and flat supply to tackle the problem through a multi-pronged approach. The initiatives included releasing suitable industrial land, "Government, Institution or Community" ("GIC") sites, and deserted or formed sites in green belt areas for housing development. Where possible and having regard to town planning requirements and standards, the development density of unleased or unallocated residential sites would be increased for expediting housing development. As a result of the Government's sustained efforts, the total supply of flats in the coming few years was forecast to increase to 67 000 units estimated as at end of March 2013. As it would take time to increase flat supply, implementation of the demand management measures would be necessary in the short term to address the exceptional circumstances of an exuberant property market and accord housing priority to HKPRs. FS added that the demand management measures were effective in curbing speculative activities in the property market as illustrated by the Action - 14 reduction in number of short-term resale. He assured members that the measures would not be implemented on a permanent basis. The Administration would closely monitor market situations in reviewing the measures.
21. Dr LAM Tai-fai pointed out that the demand management measures had affected not only the livelihood of estate agents but also the viability of property-related sectors, viz. decoration, repair and maintenance for buildings, cleaning services, and retailing of furniture and fixtures. Mr Abraham SHEK shared Dr LAM's observation. At the request of Dr LAM, FS undertook to provide information on assessment of the recent employment and business performance of the above sectors.
(Post-meeting note: The Administration's response was circulated to members vide LC Paper No. CB(1)1457/12-13(01) on 5 July 2013.)
22. Referring to paragraphs 3.9 to 3.11 of the First Quarter Economic Report 2013, Mr Ronny TONG noted that the sale prices of retail shop space, office space and flatted factory space had surged by 2%, 5% and 10% respectively between December 2012 and March 2013 while the rentals in these segments increased by 1%, 3% and 2% respectively in the same period.
The number of transactions for retail shop space, office space and flatted factory space also grew. He enquired whether the Government had studied the impact of the high sale and rental prices of commercial properties on the competitiveness of Hong Kong, and considered measures to help bring down the prices.