Managing director of World Alliance of International Financial Centers, Jochen Biedermann, attends the Straight Talk show on TVB, Dec 20, 2022. (PROVIDED TO CHINA DAILY)

HONG KONG – Managing director of World Alliance of International Financial Centers, Jochen Biedermann, is on the show this week.

He says Hong Kong can leverage its position as an offshore RMB hub to develop itself as a digital currency exchange going forward.

Check out the full transcript of TVB’s Straight Talk host Dr Eugene Chan’s interview with Jochen Biedermann.

Chan: Good evening! You are watching Straight Talk with Eugene Chan. And our guest this evening is Jochen Biedermann. Biedermann is the managing director of the World Alliance of International Financial Centers, and managing partner of FinTech Consult. He also founded and is the CEO of Blockchain Asia in Hong Kong. He is an international expert in fintech and blockchain industries. Welcome, Jochen!

Biedermann: Welcome, Eugene! 

Chan: Jochen, I know you are based in Germany, but you do come to this region, Hong Kong and rest of Asia for your businesses. But I know it is supposed your first time back to Hong Kong after the epidemic, right?

Biedermann: This is true. My last trip was January 2020, more than 2.5 years ago.

Chan: Exactly before the epidemic broke out. So, how do you find our new quarantine measures, so-called ‘0+3’ experience?

Biedermann:  Quite convenient. First of all, the arrival at the airport is very well organized, so you don't have to go to the counter in hotels anymore, everything works smoothly. Of course, it includes daily testing and PCR tests, and so on. And for the first 3 days, you are supposed to eat in the hotel, which is not a big issue, right?

Chan: Did it bother you because Hong Kong is a great place for different cuisines?

Biedermann: Yes, of course you want to have a nice Cantonese dinner or enjoy some Shanghai food in the evening, but come on, three days we can survive, right?

Chan: Thank you for your understanding. Something that we would like to be more hospitable to our guests, but at this moment we want to maintain a low level in infections. So, have you found Hong Kong any different prior to the epidemic, like when you were here in the year 2020? Any much difference you see in Hong Kong?

Biedermann: Of course it is less crowded. So many visitors, tourists, international tourists, but of course, also from the mainland. You are missing them. And you know, before I used to work in TST, and then it was difficult, you always have to go zigzag, now you can even go straight for 20 meters, right? This is a big difference. But of course, it will come back.

Chan: Right. I know you represent the World Alliance of International Financial Centers, which is a non-profit organization based in Belgium. So, very briefly, what is this World Alliance and why is it needed?

Biedermann: We organize the collaboration between the leading financial centers. So, we are a membership organization, and all members are either government entities or government bodies, or councils, developing and promoting their national financial centers, like the Financial Services Development Council here in Hong Kong. And yes, we bring them together, we organize the collaboration, while there is also competition of course.

Chan: Right. How are all the financial centers doing post-COVID? I mean for most countries, they are basically treating that it is over, but in Hong Kong and the Chinese mainland, we still want to fight, making sure, ensure the health of our people. Can you give us a bird’s eye view of how all the financial centers are doing post-COVID?

Biedermann: Of course, it differs a lot. In Europe, they are doing pretty well, of course there are geopolitical tensions we are all aware of. But the financial centers are doing well. In Asia as well, you know anyway this is a decade of the Asian financial centers, a lot of growth. And also surprisingly we see more and more aspiring financial centers in Africa, and this is my bet for the next decade, we will see a lot of growth there.

World Alliance of International Financial Centers’ Jochen Biedermann speaks to Straight Talk's Eugene Chan, Dec 20, 2022. (PROVIDED TO CHINA DAILY)

Chan: Right. Do you see any financial centers that are doing better than the pre-pandemic times?

Biedermann: Not really. I think it’s on the same level because the ones who showed extraordinary growth and development before the pandemic, look at the mainland financial centers, of course it has suffered a little bit from the less convenient access, let me put it that way.

Chan: Right. Jochen, I mean let's come back to Hong Kong. This is where we are based. In the latest global financial center index, Hong Kong has dropped a notch to rank number 4. What is your assessment of Hong Kong’s competitiveness now and in the future? And have our strengths enabled us to maintain and have a competitive edge amongst other countries?

Biedermann: Definitely. I think if you look at the global financial center index, the results are very, very tight, and there is competition in Asia. You know, there is Singapore, there is Tokyo, there is the mainland, like Shanghai. But of course, Hong Kong benefits a lot from the strong capital market, in particular the IPO business, it is a venue in particular mainland IPOs, and it also benefits from the well educated people, in particular in the financial industry. And then it also benefits from early decisions by the Hong Kong government, fostering innovation, look at Cyberport, Science Park, and so on.

Chan: Right. There has also been a perception that Hong Kong, one of our strength is our rule of law, and there has been a perception by some media that there has been a decline in the rule of law in Hong Kong, and what is your take on that?

Biedermann: No, I don't think so. The law is the same, and also what I hear, the rulings are the same. And I think this is a strength together with, you know, that combination of Hong Kong local, mainland and international talents here in Hong Kong. And besides the rule of law, very important is also business ethics. And people expect here in Hong Kong, they are not cheated, they are treated well, everything is in order. So, this makes Hong Kong strong, also as a financial center.

Chan: I am sure all things have two sides to a coin, I mean thank you for bringing out our strength, but we must have our weaknesses. What are our weaknesses?

Biedermann: First and foremost, but I cannot say this is a weakness, but you know, this is a very competitive area. While the borders are closed, you have Shenzhen in front of your door, which is a very strong tech hub, right? And nowadays finance is not only finance, but it's also tech, it is combined. You see it every day, right? And Hong Kong is excellent in tech, but you know, Shenzhen may be even a little bit better, right? And Hong Kong needs to maintain that speed. For the moment, it is not so important, but as soon as Shenzhen port is opened up again, you will face that competition, which is of course, also an opportunity in the Greater Bay Area later.

Chan: Yes. Let me go back to your specialty, the global financial centers, which we have an index, that Singapore went from 6th place 6 months ago, to number 3 now, which is one place above Hong Kong. And there is always a constant comparison between Hong Kong and Singapore. And you know that our chief executive had a Policy Address recently, and we had some new initiatives. Hope you are aware of them. Do you think that makes Hong Kong a better place as an international financial center? 

Biedermann: If you look at the Hong Kong financial center, there are different elements, right? So one element is the access to the mainland. You know Hong Kong’s role as a portal, as a springboard, to the mainland. And there, you know, the various connect schemes, which even Xi Jinping said this is important and this definitely will be strengthened, more and more securities will be eligible for those schemes. This is very helpful. The other thing in Hong Kong is attracting international business, international treasury of large corporates, and so on. And of course there is competition with other places in Asia, including Singapore. So, there you need to be the most attractive place, you know, it is also about nice living, you know, facilities, and so on and so forth, schools, international schools. Hong Kong is doing very well, but of course, Singapore keeps the competition up, which is also good for Hong Kong. So, I think both places competing which each other make also themselves stronger. 

Chan: Right. Jochen, actually I just came back from Singapore, and I had a site visit there, and talked to the people there. And they said to me, for example, I mean they have a free trade agreement with five countries, including the US and Switzerland. What they do is they exempt a group of citizens from the additional stamp duty that other citizens would have to pay if they are going to buy a property. Hong Kong, John Lee, also has that. But it will be sort of a delay payback in 6-7 years afterwards. So, we are getting closer, but do you still think Singapore is doing so-called very competitive against Hong Kong? What are your suggestion that you would suggest to make Hong Kong going back to number 3, or even number 2?

Biedermann: As I said, they are competing in different areas. You know, Singapore cannot compete with the access to the mainland, this is unique for Hong Kong. And of course, this will even be more important, we will see the digital yuan. You know, Hong Kong is already a very strong offshore RMB hub, and the next thing is also to have the digital currencies, the central bank digital currencies, and the Hong Kong government is doing a lot. On the other hand, Hong Kong has… by that also access to the industrial base of China, which Singapore doesn’t have, you know that hinterland. So, from that point of view, of course, as I said, it is a competition, some assets will be moved back and forth, some headquarters might be moved back and forth. But of course, it's very important to maintain a positive trend because in particular, the international headquarters, they are sticky, they don't go very, very easily. If a location has been selected, they tend to stay there. So, it is about fighting about each company who sets up a new headquarter in Asia, get it to Hong Kong. But as I said, competition makes both sides stronger. 

Chan: Right. Jochen, we have talked about what the government can do, but how about private institutions and even the private sector, all the financial institutions? What can we do to make Hong Kong even a more competitive place?

Biedermann: Currently there are two trends, which play a very important role in financial centers. One is tech, and the other one is sustainable finance. So, financing that fight against climate change, helping the companies to change their production models, but also financing green companies and the transition itself. And this is something which is in the Policy Address, which is very important and Hong Kong should excel in this, and becoming the hub for carbon financing. And this quick fires the private sector, of course there can be a co-financing by the government, but this quick fires the private sector to change their business models and provide the capital for those companies who want to change. 

Chan: Jochen, we have to take a break now, but, viewers, please stay with us. We will be right back.

Chan: Thank you for staying with us. Jochen Biedermann from the World Alliance of International Financial Centers is with us this evening. And we have been talking about if Hong Kong is attractive as a financial center. So, Jochen, in the first part, your message is quite clear that you felt Hong Kong has a lot of niche in maintaining to be a world-class financial center. And one area that Hong Kong has been talking about a lot recently is about our talents. Do you think Hong Kong has all the financial talents that we need to continue moving?

Biedermann: In the moment, yes. But of course, Hong Kong needs to stay agile. Hong Kong has very strong excellent universities, but now a new breed of talents is needed. It is, again in tech, but it's also in sustainable finance. Now everyone talks about ESG, which is environment, social, and corporate governance. So, this is a new scoring for companies, how they perform in terms of sustainable finance. And this is a need everywhere, all over the world, this talent is missing. So, this is something the Hong Kong universities have to focus on and they do already. 

Chan: Right. Since you mentioned ESG, this is another topic in the financial industry that is very hot at the moment. And what are the two most important topics that are always talked about amongst financiers in Europe within the very broad ESG arena?

Biedermann: First of all, the European Union was the first one coming up with the word taxonomy on that topic. The EU taxonomy, which basically stipulates what is green and what is not, so what kind of business practice production is green or not. So and by defining so, then you can start rating companies, to what extent they fulfil that criteria, and then have a score, let’s say from 0 to 100, how sustainable a certain business is. And now in the European Union, it's not only required for a large company to report that score and report what they are doing, but also for asset managers, institution investors to check the risk in their portfolios, basically check the scoring and then see how they are doing, and then investors have demands on this.

Chan: All right. Thank you for your take on the ESG. Let's go back to the term you have just also mentioned: geopolitical influences. This is an area that we have been sort of looking at on Straight Talk. I mean we want to ask how it is affecting us. So, as a finance person and all your friends in the financial world, do you have problem getting access to major markets like the US and the Chinese mainland?

Biedermann: No, I think this is doing fine, I see other issues. One issue is we had a strong uptake in financing against climate change, for instance by issuing green bonds. And we saw, in the last quarter, a little bit of a dip, particularly in Europe. It is now recovering, but of course, if you have other major issues and maybe, you know, climate change, which is very much in the focus… it moved a little bit out of the focus. So, it's important for Europe, but also in other parts of the world to focus on climate change again because it’s not waiting. The other issue is and this is more a long-term trend: supply chains changing. You know geopolitical tensions make the companies to rethink their suppliers, whether everything is safe, whether there might be sanctions, and so on. And you cannot just depend on one supplier anymore, so the large corporates, they rethink their supply chains, and also finance goals into this. So, this is, of course, we will have a long-term effect on certain finance centers.

Chan: Right. But for Hong Kong, I mean we’re used to be a gateway to the mainland, do you think Hong Kong still… Hong Kong’s position right now, still give us that advantage of being the access to the mainland market?

Biedermann: Definitely, I think this would not go away. And then in the Greater Bay Area, you can, as I said, complement your capabilities of Shenzhen, of the whole Guangdong region, which is very strong in logistics, you know, let's not forget you have some of the largest harbors here in this area, logistics play a very important role. And this is where, you know, finance and logistics interlink supply chain, if you have those changes need to be financed, and at the same time become more digital.

Chan: As you know that with the mainland’s restrictions on COVID quarantine, I mean it is making Hong Kong sort of being the place to go for the time being. Do you think Hong Kong’s role will be kind of diminished or reduced when all the restrictions are relaxed in the mainland?

Biedermann: Definitely not so fast. But of course, there will be competition coming up from the mainland, in particular Shanghai, but to less extent also Beijing. As financial centers, they are not that international yet, but I can tell you in Frankfurt, in Germany where I live, there are also representatives from Shanghai, and they are also very active and promoting Shanghai as a financial center. So, there is competition coming up, of course the lockdowns have not helped Shanghai, to be fair, but if you are talking long term, Hong Kong needs to be agile because the mainland financial centers will catch up.

Chan: You know kind of in the… by and large, in the financial industry, as I understand, it’s about matching opportunities to investors and financial resources. With the geopolitical tension that we mentioned, and of course, a lot of lingering uncertainty with the Russ-a-Ukraine conflict, how are all the different financial centers around the world carrying out their functions?

Biedermann: They are doing very well. Also during the pandemic, you know, usually governments want to help their citizens, want to help their corporates and the financial centers. They are very in between and helping in the transmission of their funds going to the people, then to the corporates in need. This worked everywhere very well, and also there were a lot of short-term measures to help those people and corporates who suffered. So, I think it's doing well and the geopolitical tensions don’t have any immediate impact, with some notable exception, of course. For instance, Moscow was a member of our association, they voluntarily suspended their membership in March, which was a right move to do because, of course, if you have sanctions in place, then it's very difficult to continue doing business and staying in contact.

Chan: All right. Jochen, earlier, we saw that the German Chancellor, Olaf Scholz, visited President Xi Jinping in Beijing, and he being the first leader of the G7 countries visiting China since the pandemic. Also we saw President Biden and President Xi met up as well. Do you think this is a sign of goodwill? Because for financial investors, the perception of the outlook is very important. Do you think that there are better things to come?

Biedermann: I think the minimum we can expect from our leaders is that they talk with each other, right? So, if you don't talk to each other, how can you solve any problems? Of course they are always smaller and bigger problems to discuss. You know this is what we are also doing in our association. The leaders of the financial centers also should talk with each other, should coordinate their actions, as much as possible, for the benefit of everyone. So, I am personally very positive that this dialogue continues, and Germany and China, they have regular government consultation. I think there is a very strong dialogue because both are very strong trading partners. And some of this goes via Hong Kong, which also benefits Hong Kong. So, from that point of view, I am positive, but of course, there are always some minor issues to be discussed.

Chan: Okay. Let's move on to the area in your specialty about major trends in financial sector. You have talked green finance, climate change, and all that. And I understand you also put out a white paper on the future financial centers. In that you said that fintech and innovation in the financial industry are of the utmost important. So, how is Hong Kong doing in these areas?

Biedermann: Very well from my point of view. You have a notable number of fintech companies. It's always a little bit difficult to count, but I think around 600 was the latest number I heard. I also privately maintained a list of the fintech companies, which are of interest for me in Hong Kong, they are 350 on my private list. What worked very well here very ,very early must be roughly 30 years ago, there were already the hubs created, the Cyberport, Science Park, and so on. Not only fintech founders, but also startups can meet, have offices, and get the necessary support. So, from that point of view, this works very well. And also the regulatory authorities and the monetary authorities, but also SFC, they accommodate the fintechs and help them. On the other hand, what is a little bit difficult for the fintechs in Hong Kong is the overall market in Hong Kong is really small, right? Eight million people for, let’s say, a B2C fintech, which needs to have clients look at the virtual banks, this is pretty small. So, they have to expand beyond the borders of Hong Kong. And there are two directions, either the mainland or international countries, like ASEAN and so on. 

Chan: Jochen, I mean since you mentioned the fintech are the virtual banks to me, fintech are usually the disruption to existing businesses, just like your virtual banks to the banking industry. So, if this is correct, does it mean that there will be losers in the rise of the fintech? And who would they be? And how can they minimalize risks, especially for Hong Kong?

Biedermann: Let me take a little bit the experience from Europe if you don't mind, which started slightly earlier, open up our banking. Now the banks in Europe, by law, there is a regulation in Europe that requires them to open up the account data. You know, if you have a bank account, this bank cannot unreasonably withheld the access, which of course with your consent to your bank account by a third party provider, right? So, maybe wants to give you a loan and wants to see how much money is coming in and out, and if you got permission, then this access is possible. So, in Europe, you see a lot of cooperation between banks and fintech, not so much competitions.

Chan: In the last part, last 30 seconds of the show, I would like to ask you: Central Bank digital currency is another huge topic in the financial world. And you know digital RMB very well, and what is its importance, especially to Hong Kong? 

Biedermann: Hong Kong, as I said, as a strong offshore RMB hub, could take the role of exchange in that currency because if you look at the different countries, there are also European Central Bank is working on Central Bank digital currency, as I call it. People’s Bank of China, here the Monetary Authority, Singapore the MAS, there are many more. They all have their plans, and some are even bit advanced, like the PBOC. But they all bank on different technology, different technology solutions. So, we know already, from the coins and bills, there need to be someone to exchange that, right? And Hong Kong could be the place where you exchange the international Central Bank digital currency against the digital Yuan.

Chan: All right. We have to leave it here. And Jochen, thank you for sharing with us your perspective of the various international financial centers, and how Hong Kong can continue to be successful. As before, Hong Kong people will not be complacent and rise to the challenges ahead. Have a pleasant evening and good night!