Hong Kong’s Paul Chan urges closer Europe ties, dialogue to work out differences

Hong Kong’s finance chief has called for deeper cooperation and dialogue with Europe despite disagreements on some issues, saying such engagement is crucial amid growing geopolitical uncertainty. Writing in his weekly blog on Sunday after a five-day trip to France, Belgium and Switzerland, Financial Secretary Paul Chan Mo-po said European political and business leaders were increasingly seeking strategic autonomy, diversified partnerships and stronger economic resilience in response to geopolitical tensions and rising unilateralism. “We see pragmatic opportunities for mutually beneficial cooperation between Hong Kong and Europe in areas including trade, investment and innovation and technology,” Chan wrote. He said exchanges with European financial institutions suggested strong interest in Hong Kong’s financial market, including its investment opportunities, cross-border regulatory cooperation and financial innovation initiatives. “Representatives from the [European] financial sector pointed out that their current asset allocations were overly weighted towards US dollar assets, creating a problem of excessive risk concentration,” Chan added. While Europeans “possessed wealth amounting to tens of trillions of euros and ranked among the world’s highest in savings rates,” much of the money remained parked in “conservative” bank deposits and fixed-income markets with modest returns instead of being channelled into innovation and growth industries, he said. The finance chief said Hong Kong could help address such concerns by offering diversified investment opportunities, a mature capital market and access to mainland China’s technology and advanced manufacturing sectors. “As one of the world’s most active stock markets and a hub for venture capital, private equity and wealth management, Hong Kong offers a wide range of investment products and risk management tools,” he wrote. He added that representatives from the asset management, venture capital and private equity sectors had raised detailed questions during meetings about licensing requirements in Hong Kong, market conditions and engagement with regulators, reflecting serious interest in establishing or expanding operations in the city. Chan also said European counterparts were interested in Hong Kong’s experience in promoting market connectivity and developing “patient capital” ecosystems to support emerging industries. On financial innovation, Chan said the use of blockchain and artificial intelligence in finance was an inevitable trend, although it also created governance challenges such as money laundering and terrorism financing risks. He said Hong Kong was ahead of Europe in areas such as digital asset regulation and could contribute to global governance efforts while strengthening cooperation with European partners. Chan acknowledged Hong Kong and Europe held different views on some issues, but this underscored the importance of maintaining dialogue and communication. He said Europe was concerned about trade balances with China, particularly deficits in goods trade, but argued that comparative advantages ultimately shaped consumer choice. Chan added that despite Europe’s trade deficit with China, nearly 40 per cent of goods produced by European companies investing on the mainland were exported back to Europe, meaning “the trade surplus may be in China, but profits belong to European investors”. He also noted that Europe maintained export restrictions on China in some sectors, while the bloc had recorded a surplus in services trade with China for more than a decade. “Keeping communication and dialogue is even more important when differences exist,” he wrote.