Mr. Palumbo,

Ladies and Gentlemen:

It is a real delight to join you again at the breakfast meeting of the Walbrook Club.

Last time I attended a breakfast meeting of the Walbrook Club was in 2013. I shared my views with Walbrook members about the developments of China’s financial sector.

Now after seven years, the world, including China and the UK, has changed tremendously. Despite the winds and rains in China-UK relations in the past seven years, the financial sectors of our two countries have seen ever-closer cooperation and have become increasingly interdependent.

These days, many people in the UK have shown strong interest in the National Security Law for Hong Kong SAR. On Monday, I held a press conference to address the public concern for the future of Hong Kong and of China-UK relationship.

Today I would like to discuss this issue with you further. Let me begin by answering three questions:

• First, how important is this Law for Hong Kong SAR and what does it do?
• Second, what is the future like for Hong Kong SAR with this Law introduced?
• Third, what could British financial sector do to promote China-UK relationship and advance prosperity and stability in Hong Kong SAR?

With regard to the first question, I think we should understand the National Security Law for Hong Kong SAR from the following four aspects:

First, this Law is a milestone in consolidating and improving “One Country, Two Systems”.

“One Country, Two Systems” was designed to safeguard China’s national sovereignty, unity and territorial integrity and ensure the long-term prosperity and stability in Hong Kong SAR. “One Country” is the precondition and basis for “Two Systems”.

The National Security Law for Hong Kong SAR opens with these words:

This law is enacted for the purpose of “ensuring the resolute, full and faithful implementation of the policy of One Country, Two Systems under which the people of Hong Kong administer Hong Kong with a high degree of autonomy”.

Therefore, this Law was enacted to provide strong legal support and establish a mechanism for the implementation of “One Country, Two Systems”. It consolidates the foundation of “One Country” while respecting the differences of “Two Systems”. This balanced approach will keep “One Country, Two Systems” on the right track.

What Hong Kong has experienced since June last year poses grave harm to “One Country, Two Systems”. In face of this, the Law will safeguard the authority of “One Country” for the purpose of upholding and improving instead of changing “One Country, Two Systems”.

Second, this Law is a breakwater that defends the long-term security, prosperity and stability in Hong Kong SAR.

National security is the premise of order and stability.

Currently, one outstanding problem in Hong Kong SAR is that the city has been “defenseless” in terms of national security. In particular, since the turbulence last year, anti-China forces seeking to disrupt Hong Kong have carried out successive and violent activities, which trampled on rule of law, hit the economy hard and threatened people’s livelihood.

The National Security Law for Hong Kong SAR plugs the legal loophole and establishes a mechanism for defending national security in the city. This will make Hong Kong a safer, more stable and more prosperous place.

Third, this Law is a guardian that safeguards the statutory rights and freedoms of Hong Kong people.

This Law clearly stipulates this:

“Human rights shall be respected and protected in safeguarding national security in the Hong Kong Special Administrative Region. The rights and freedoms, including the freedoms of speech, of the press, of publication, of association, of assembly, of procession and of demonstration, which the residents of the Region enjoy under the Basic Law of the Hong Kong Special Administrative Region and the provisions of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights as applied to Hong Kong, shall be protected in accordance with the law.”

This Law targets a very few criminals but protects the great majority of Hong Kong people. It outlined four types of criminal activities. They are: secession, subversion, terrorist activities and collusion with a foreign country or with external elements to endanger national security. This Law ensures that Hong Kong is a safe environment for residents to better exercise their statutory rights and freedoms.

Fourth, this Law is an umbrella that protects the lawful interests of foreign citizens and businesses in Hong Kong SAR.

In the past 23 years since returning to the motherland, Hong Kong SAR has been able to give full play to its unique strengths. Now it has become an attractive destination for businesses and citizens from all over the world who have found in Hong Kong a great place to invest or to live.

However, the turbulence of last year has wreaked havoc for Hong Kong. Hong Kong’s business environment deteriorated, the city’s international rating was downgraded, its international image was hit badly, and investor confidence was shaken.

• The National Security Law will address the concerns of the business communities, local or otherwise, over the chaos and terror caused by violent activities.
• It will protect the safety and legitimate rights and interests of foreign citizens and investors.
• It will provide safeguard for the lawful operations and travels by businesses from all countries.
• It will foster an environment with more well-rounded legal safeguards as well as stable and reliable expectations.
• And it will consolidate and improve Hong Kong’s status as an international financial, trading and shipping centre.

Many British businesses, including HSBC, Standard Chartered, Swire Group and Jardine Matheson have voiced their support. This fully demonstrates the strong aspiration of businesses of all countries, including the UK, for a stable and safe Hong Kong.

Now I would like to turn to the second question: what is the future like for Hong Kong SAR with this Law introduced?

I think Hong Kong SAR will remain unchanged in the following three aspects:

First, the city’s role as an important international financial centre will remain unchanged.

Since returning to the motherland, Hong Kong has been one of the freest, most open, most prosperous and most vigorous places in the world.

As an important financial centre, Hong Kong has a unique and important status in the international financial market.

• As of the end of 2019, Hong Kong has a stock market capitalization of close to $5 trillion, the fourth largest in the world after New York, Shanghai and Tokyo.
• Hong Kong was the world’s top IPO market in 2019, having raised $40 billion.
• Hong Kong is the largest international fund management centre and private wealth management centre in Asia, managing over $3 trillion of assets.
• Hong Kong is also an important international banking centre. 70 of the top 100 banks in the world have businesses in this city, with assets exceeding $3 trillion.

Compared with other international financial centres, Hong Kong has a unique strength of its own: the combination of two systems, or in other words, it is a place where China meets the West.

Hong Kong also has a healthy financial eco-system consisting of a sound legal system, a solid tax regime, a rich talent pool, convenient services and effective supervision. This system has withstood many blows, including the Asian financial crisis in 1997 and the international financial crisis in 2008. It has displayed strong resilience, competitiveness and innovative capability.

The National Security Law for Hong Kong SAR will plug the legal loophole in terms of security, improve the financial eco-system of the city, and strengthen the confidence of the international community in the financial market of Hong Kong SAR. The status of Hong Kong as a financial centre will be consolidated. The city will become a safer and more attractive place.

Second, as China continues to open up to the world, Hong Kong’s role as an important bridge connecting China and the rest of the world will remain unchanged.

The biggest strength of Hong Kong is its position between Chinese mainland and the global market.

For 40-plus years since China started reform and opening up, Hong Kong has been an important bridge between China’s market and the world market. International capital crossed this bridge and found its way into China in the early years of the country’s opening up. In recent years, capital flowed out from China via the same way to all corners of the world. In this process, Hong Kong has developed into an international financial centre, and a hub for trade, shipping and aviation.

In recent years, a large part of foreign investment in China has gone in via Hong Kong. Hong Kong also has an important place in the trade between China’s mainland and the rest of the world. It was the third largest trading partner of the mainland in 2019.

China has launched the Shanghai-Hong Kong Stock Connect, Shenzhen-Hong Kong Stock Connect and Bond Connect. China has also lifted the quota limits for QFII (Qualified Foreign Institutional Investor) and RQFII (RMB Qualified Foreign Institutional Investor). And China will continue deepening reform and opening its market wider. All these create opportunities for Hong Kong to have a share of the benefits of China’s development and opening up.

Going forward, there will be greater connectivity between Hong Kong and the mainland. This will further strengthen Hong Kong’s role as an important bridge in China’s opening up.

In particular, I want to mention the Guangdong-Hong Kong-Macao Greater Bay Area. This initiative will enhance the mutually-beneficial cooperation across the board between Chinese mainland, and Hong Kong and Macao SARs. It will also enable the two SARs to participate in the overall development of the nation.

The Guangdong-Hong Kong-Macao Greater Bay Area is one of the areas in China that is the most open, with the most dynamic economy.

• This area has a population of 66 million and covers an area of 56,000 square kilometers.
• It has a combined GDP of over $1 trillion.
• It has a solid industrial foundation.
• It is strong in science, technology and innovation.
• And it enjoys enormous potential and a promising future.

The Greater Bay Area will not only provide new growth points for Hong Kong’s economy but also enable the economy to diversify. This will in turn empower the people of Hong Kong to build better lives and more promising career, and create jobs for the younger generation.

Looking forward, the Greater Bay Area will provide increasingly stronger support for both the development of Hong Kong itself, and its status as an important platform and hub connecting the two markets -- the one in China and the other in the world.

Third, Hong Kong’s role as an important bond for China-UK financial cooperation will remain unchanged.

Hong Kong has been the basis and stepping stone of many British financial institutions when they explore China’s market in search of cooperation with Chinese partners.

Hong Kong will remain an important bond for China-UK financial cooperation in the following three areas:

First, RMB internationalization.

In offshore RMB trading, London is the world’s largest centre and Hong Kong is the second largest.

In offshore RMB clearing, Hong Kong is the world’s largest centre and London is the second largest.

Hong Kong and London could combine their strengths and encourage innovation in RMB financial products. This will ensure the two cities continue playing a leading role in RMB internationalization.

Second, Belt and Road cooperation.

China and the UK are natural partners in Belt and Road cooperation. With its mature and professional services, financial expertise and business network, Hong Kong has a unique place in the development of the Belt and Road Initiative (BRI).

Hong Kong and London, the two financial centres, could serve as platforms for closer China-UK cooperation on BRI, including in the areas of infrastructure, investment and financing, insurance and third markets. They could work together to boost the economic growth and improve people’s wellbeing in countries along the BRI routes.

Third, FinTech and green finance.

Both Hong Kong and London are developing FinTech hubs and expanding the markets for green finance. Next year, China and the UK will host COP15 and COP26 respectively.

Our two countries could leverage the innovative strengths of Hong Kong and London to enhance cooperation on FinTech and green finance. This will create new growth points for both sides.

Now let me turn to the third question: what could the British financial community do to promote China-UK relationship and advance prosperity and stability in Hong Kong?

I would like to share with you my three hopes.

First, I hope you will be supporters for the prosperity and stability in Hong Kong.

Hong Kong is home to more than 300,000 British citizens and over 700 British businesses. A prosperous and stable Hong Kong is in the interests of both China and the UK.

It is my hope that the British financial community will see the National Security Law for Hong Kong SAR from a fair, objective and reasonable perspective. I hope you will maintain confidence in the future of Hong Kong. And I look forward to your positive contribution to helping Hong Kong get back on the track of prosperity, stability and security.

Second, I hope you will be promoters for China-UK cooperation.

Since the handover, Hong Kong has been an increasingly important bridge and bond connecting China and the UK. It has made positive contribution to the growth of China-UK relations.

The National Security Law for Hong Kong SAR will end chaos and restore order in Hong Kong. As we put Covid-19 behind us and bring our economies back on track, China and the UK face enormous opportunities.

It is my hope that you will seize these opportunities and leverage your strengths to promote deeper and more substantial cooperation between our two countries. This will deliver win-win results.

Third, I hope you will be upholders of China-UK relationship.

Seventy years ago, the UK was the first major Western country to recognize New China. Over the years, despite twists and turns, China-UK relationship has continued to grow.

The most important lessons we have learnt from the past 70 years are:

• mutual respect for each other’s sovereignty and territorial integrity,
• non-interference in each other’s internal affairs,
• equality and mutual benefit.

These are the basic principles enshrined in the UN Charter and the basic norms governing international relations. They are also important principles endorsed by the Joint Communiqué of China and the UK on exchange of ambassadors.

The past 70 years have told us that when these principles were upheld, China-UK relationship would make progress; otherwise, this relationship would suffer setbacks or even retrogression.

Now, China-UK relationship once again stands at a critical juncture. I hope the people with a vision, including British financial and business communities, will appreciate the importance of bearing in mind the big picture of China-UK relationship. I hope you will weigh in behind China-UK relationship, help it tide over the current difficulties and challenges, and work together for its sound and steady development.

Ladies and Gentlemen:

In conclusion, I wish to share with you a Chinese proverb. It goes like this:

A tree grows tall is a tree that has strong and solid roots.

I was told that there is a similar British saying, which goes:

There is no good building without a good foundation.

I am confident that as long as the National Security Law is implemented smoothly, Hong Kong will enjoy long-term prosperity and stability.

As long as the basic norms governing international relations are observed, China-UK relationship will achieve steady and sustained development.

Let’s work together to make this happen!

Thank you!

Now I would like to take your questions.