Eddie Yue: Digital trade and finance in Hong Kong - reasserting
global leadership
Keynote speech by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary
Authority, at the International Chamber of Commerce - Hong Kong (ICCHK) Digital
Trade Forum "Digital Trade and Finance in Hong Kong: Reasserting Global
Leadership", Hong Kong, 30 November 2023.
* * *
Good afternoon everyone. Thank you for inviting me to speak today. It is a great
th
pleasure to celebrate the 25 anniversary of the ICCHK with the very distinguished
audience here today, and the HKMA is very pleased to support today's event.
At last year's ICCHK event, I shared our thoughts on how connecting digital islands can
contribute to a more digitally integrated trade finance system, thereby addressing the
pain points in trade finance and improving SMEs' access to financing. Today, I would
like to share our thoughts on a more holistic approach to digitising trade and finance in
Hong Kong and how we can reaffirm our global leadership through accelerated
digitalisation.
The issue is particularly relevant to Hong Kong, where the trade industry and the
financial services sector account for about 18% and 21% of the city's GDP respectively.
By digitising trade and finance, we are essentially adding fuel to these two major growth
engines and taking our city's economic development to the next level.
In recent years, we have witnessed a remarkable transformation in the way business
and trade are conducted. The emergence of novel technologies and their growing
adoption have revolutionised industries, reshaped customer behaviour, and redefined
the nature of commerce. As we stand on the edge of a new digital era, we need to
ensure that Hong Kong maintains its competitiveness on the global stage, and it is
critical that we embrace and accelerate the progress of digitalisation in trade and
finance.
The benefits of digitalisation are clear - enhanced efficiency, reduced human error,
savings in costs, speed to market, and full traceability. Digitalisation offers a multitude
of opportunities to enhance Hong Kong's status in international trade and finance. To
capitalise on these opportunities, we have identified five key elements in digitising trade
and finance. Just as the Five Elements in Chinese culture or "- (gold) (wood) (water)
(fire) (earth)", these elements tend to strengthen, support and reinforce one another
throughout our digitalisation journey.
The first key element that comes into play is the government. The digitalisation of
government services plays a crucial role in facilitating digital trade and finance. By
digitising government services, we can make government processes easier, more
efficient and accessible. For instance, importers and exporters will find it much easier
to lodge trade documents with the government through the one-stop online platform
called Trade Single Window.
The government is also spearheading the development of Hong Kong's digital economy
by setting up the Digital Economy Development Committee last year, and it brings
together industry experts, relevant academics and government officials for discussion
and strategy formulation. The Committee is now conducting studies on issues such as
digital infrastructure and digital transformation of enterprises, and it will put forward its
recommendations early next year.
To accelerate digitalisation, it is also imperative to provide open access to government
data. A government-led data sharing initiative will be launched by the end of this year,
which will not only enhance data sharing among government departments, but also
open up more types of government data for banks to access through the HKMA's
Commercial Data Interchange, or CDI as we call it. For instance, the Companies
Registry is set to become the first government data source to be connected to CDI later
this year, providing banks with more streamlined access to corporate information of
registered companies for Know Your Customer (KYC) purposes.
Building upon the foundation laid by the government's work to drive digitalisation, the
second element focuses on enhancing cross-border collaboration. In an interconnected
world, collaboration is essential for unlocking the full potential of digitalisation and
data. At the HKMA, we recognise the importance of fostering strong cross-border
partnerships, especially in the area of data sharing. By establishing secure frameworks
for data exchange and building digital trade corridors, we can promote trust and
facilitate seamless transactions, enabling businesses to expand their global reach and
capture emerging opportunities. For instance, under a recently signed Memorandum of
Understanding, we are exploring the possibility of connecting CDI with the SME
Financing Platform developed by the Abu Dhabi Global Market, hoping to facilitate
cross-border trading by addressing potential pain points in cross-border banking
services. If successful, I hope this could be the start of more data linkages with our
trading partners.
Speaking of banking services, let us turn our attention to the third element - digitising
banking processes, which is vital in enhancing efficiency and reducing friction in trade
and finance. By streamlining banking processes in areas such as credit approval and
Know Your Customer (KYC), we can enable businesses to access financing more
efficiently, minimise duplication of effort and improve customer experience. We are
committed to leveraging technology to transform banking operations. For instance, by
enabling more direct access to commercial credit reference data through CDI, we can
enhance the speed and accuracy of credit assessments conducted by banks, facilitate
smoother trade financing, and support the growth of businesses across various sectors.
The fourth element centres around digitising supply chain and manufacturing platforms
while connecting these isolated digital networks. The digitisation of supply chain and
manufacturing platforms is essential to optimise operations and drive productivity
gains. By embracing technologies such as the Internet of Things, blockchain and
artificial intelligence, we can create a seamless flow of information, goods and services
across the entire value chain. We can also enhance visibility and traceability
throughout the supply chain by integrating and connecting siloed digital networks. This
will enable businesses to collaborate more effectively, reduce costs, improve inventory
management and respond more swiftly to changing market conditions. To achieve this
synergy, we are also exploring the possibility of connecting CDI with the supply chain
platform developed by the Fung Group, hoping to further digitise trade and trade
financing through the use of innovative technologies.
Finally, the fifth element that I would like to talk about focuses on exploring more
advanced digital payment options. As digital trade continues to evolve, it is crucial to
embrace innovative payment solutions. By exploring innovations such as
programmable money and smart contracts, we can help businesses reduce transaction
costs, mitigate risks, and develop new business models. Programmable money can
enable automated and secure transactions with preset conditions, while smart contracts
can ensure trust, efficiency and transparency in transactions. At the HKMA, we are
actively exploring payment innovations such as central bank digital currencies at both
wholesale and retail levels through Project mBridge and Project e-HKD. These
advanced payment options have the potential to further enhance Hong Kong's
competitiveness in the global marketplace.
Now that I have introduced all five elements in digitising trade and finance, it is
important to note that they are not isolated, but rather interconnected and mutually
reinforcing. At the HKMA, we are working hard to connect these key components
through CDI, with a focus on achieving interconnectivity and
interoperability. Digitalisation of government services and open government data
provide the foundation for enhanced collaboration and more seamless data sharing via
CDI. This, in turn, will support further digitisation of banking processes. With CDI, we
continue to explore new business use cases by connecting isolated digital networks
such as supply chain platforms and payment services providers, which can also serve
as prospective data providers in the CDI ecosystem. When a more comprehensive
data ecosystem is formed, we can further examine how advanced digital payment
systems can contribute to more robust digital trade and finance.
Before I close, let me share with you the story of a real case -- Mr Wong, who has
founded a Hong Kong-based company that designs, develops, manufactures and sells
collectible figures locally and abroad. Mr Wong has always wanted to take full
advantage of growing business opportunities by developing new collectible figures, but
research and development called for extra cash flow and resources. This led Mr Wong
to apply for funding from banks, but the application took a long time to process, and he
was forced to delay parts of his expansion plan. However, things took a turn when he
was introduced to CDI. Through CDI, his company shared alternative data with banks,
such as its electronic trade declaration records that show imports of materials, sales,
inventory value and scale of operations, almost real time. And with all these alternative
data, a bank was able to give him the funding for business expansion with a much
shorter processing time and even a lower interest rate.
This story is just one example of how businesses can benefit from progress in one or
two areas of the five elements I mentioned. Now imagine how a more robust landscape
can be created when we really get all five elements to materialise. By harnessing the
power of technology and embracing these interconnected elements, businesses in
Hong Kong can reap the benefits of digitising trade and finance, and together we can
create a thriving digital economy, and consolidate Hong Kong's position as a global hub
for trade and finance.
I have just given you a central banker's perspective on our path towards the
digitalisation of trade and finance. I am sure you would all agree that this is a broad and
complex topic, and the views of great minds from across different sectors are always
needed and valued. With a panel discussion to follow, I will now hand over to experts
from other sectors to share their insights on digital finance and trade, and how to
reinvigorate growth in Hong Kong.
Once again, thank you for having me today, and I wish you a fruitful and successful
event.