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Shirley Yam

This week Charles Li Xiaojia  has been busy selling. The product is his first strategic plan as the new chief executive of Hong Kong Exchanges and Clearing.
He has talked to investors and the press. He has talked to hundreds of staffers. He talked to senior government officials and regulators at the Securities and Futures Commission. And he will soon talk to officials in Beijing. 
He has to because the task he has at hand is different and difficult. It's not because of its emphasis on  yuan-related products, which we all know is hot air without Beijing's approval.
It's because Li's strategy is no house-keeping list, such as those we have seen in the past decade. It's a war plan that asks for a change in mentality and approach from the top to the bottom, not just in the exchange but in the government and in other key players.
Here is a summary of the plan in Li's words.
The big picture: the yuan's internationalisation.
'The Three Gorges Dam is very good at holding the water,' he said. 'But when the dam is full, you need to figure out how to get the water out ... clearly, the [financial] crisis has not been confidence boosting to Chinese officials [on further financial reform], but in the end physics dictates. Water must come down one way or another. I am not going to predict when it's going to come. I only know it will come and we have got to be ready.'
The opportunity: A much bigger market because once the sluice gate of capital control is lifted, more mainland investors will come to Hong Kong, to be followed by more international investors and issuers. 'It's a global game.'
The challenge: Shanghai and Shenzhen. 
'We never had the entitlement in the first place' to be the only exchange for mainland listings. 'Hong Kong needs to understand that our  blessed position is derived from being open... As soon as people come in here, we like it to be open. As soon as people leave here, we like it to be closed.
'We were never mad or upset when companies went to list in Tokyo, London and New York, because they all had reasons to list there. They will have reasons to list in Shanghai. I am not going to get upset.'
The challenge: Alternative electronic trading platforms.
'They have created enormous pressure on exchanges globally. They have not made any meaningful inroads into Hong Kong because we are not big enough...  But they will not stay on the sidelines forever. As the market gets much larger, particularly with the arrival of Chinese investors, competition can only increase.'
Li's  action list is too long for a column. But first is to add a market development division to the exchange's  operationally focused establishment. It will be headed by several new hires. 
'We are like a very large aircraft carrier...Most are in the engine room and very few are on the deck. It served us well in the past because the market has been blessed. But it's no longer enough. We now need more people on the deck figuring out the future.'
Second, China business is no longer about bringing in more issuers and shaking more hands in Beijing but 'harmonising our business with the internationalisation of the RMB'. It's nothing conceptual, rather it's all about trading rules, IT systems, settlement time, trading hours and many other matters. 
Third is to change many practices that market participants have been comfortable with but which they can no longer continue when alternative trading platforms venture into Hong Kong. These include trading with scrip and the existence of three clearing houses. 
To some, this full embrace of reality and a holistic approach is a no-brainer. But to many in the establishment, it is not.
There are many telling examples. In 2007, Li's predecessor Paul Chow Man-yiu  was strongly criticised by a senior government officials for helping mainland authorities to clear the legal hurdles of listing red chips in Shanghai and Shenzhen. 
In the same year, Chief Executive Donald Tsang Yam-kuen wrote a letter to Beijing warning that the 'returning home' of red chips would add competition to the Hong Kong bourse and jeopardise the city's stability and prosperity.
Last autumn, Tsang sent another two letters to state leaders, opposing the listing of international firms, such HSBC, in Shanghai. 
You may call Tsang politically unwise. But that misses the point. What really matters is the mentality of our administration and the key market players who lobbied Tsang into writing those letters. It's always about what 'jetso' (benefit) we can get from Beijing,  not the other way around.
While financial officials are still cleaning up the fallout from those letters, another tussle has broken out. The Ministry of Finance wants Hong Kong to allow mainland issuers to use mainland accounting standards and mainland auditors. Discussion has been going on for years and the new system was scheduled to begin in January.
But, according to some, the enforcement division of the SFC has 'suddenly' expressed reservations and asked the Ministry of Finance to hand over the audit papers   should a company collapse.  The fact is the enforcement division has not been involved in the discussion until recently.
Now discussion has stagnated and the finger-pointing begins. The real problem is our piecemeal approach toward dealing with the mainland, which results in a lack of consensus and poor communication among different players. 
If this mentality and approach continues, it is hard to see how the exchange alone will make a difference. After all, if our policymakers don't speak with the same voice, what's the chance of getting any deal from market players and Beijing?
To get the HKEx board to climb on his wagon, Li has held two full days of brain-storming sessions in which the management of two international exchanges, one renowned economist and an influential investment banker spoke about what's going on in the world. 
Perhaps, the same should be arranged for those in Upper Albert Road. Just as a start.



Charles Li rallies the troops to support his battle plan