Closer ties ‘will benefit not hinder’ Hong Kong: top Chinese official lashes Moody’s credit downgrade

Top minister latest to defend city as Moody’s points to mainland risk in outlook downgrade

PUBLISHED : Tuesday, 15 March, 2016, 6:14pm
UPDATED : Wednesday, 16 March, 2016, 10:52am

Top Chinese official says Hong Kong will benefit from closer ties with the nation, hitting back at Moody’s decision to cut the city’s long-term debt outlook because of its increasing linkages between the two sides.

The financial market between the mainland and Hong Kong will also see closer cooperation as the much-anticipated plan connecting the Shenzhen and Hong Kong stock exchanges will likely be launched in the second half of this year.

Qian Keming, vice commerce minister, said the mainland’s economic development would offer increasing opportunities to Hong Kong and more cooperation would benefit both sides.

“In particular, the One Belt One Road [strategy] will offer business opportunities to Hong Kong because the city has its unique advantages as an international financial centre,” Qian said in a press conference in Beijing yesterday.

READ MORE: Hong Kong’s credit rating risks cut as financial secretary blasts Moody’s assessment as ‘mistake’

Qian was in respond to Moody’s decision to downgrade Hong Kong’s credit-rating outlook because of the city’s reliance on trade amid the mainland’s slowing economy, close links in financial market and evidence of interference from the mainland in Hong Kong’s political formulation and implementation.

“We see cooperation between the two sides, but this is not interference,” Qian said, citing the Closer Economic Partnership Arrangement as an example.

Hong Kong’s financial secretary John Tsang Chun-wah said on Saturday that Moody’s was mistaken in interpreting close links with the mainland as a risk. The structural rebalancing in the mainland’s economy was beneficial to Hong Kong from investment to consumption, he said.

Speaking at the same conference, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said the plan to connect the Hong Kong and Shenzhen stock exchanges is likely to launch in the second half of this year.

Fang said trading would be ready to start after four months of technical preparation work following an official announcement.

“If there is no special condition [in the stock market], it’s likely that the Shenzhen-Hong Kong stock connect will be launched in the second half of this year,” Fang said, adding that normal market volatility would not delay the plan.

A spokeswoman of the Hong Kong Exchanges and Clearing (HKEx) said: “We are technically prepared for Shenzhen Connect. We are awaiting regulatory approval and have no information about the timetable.”

The HKEx expects a preparatory period of three months would be required following the announcement of regulatory approval, she said.

The Shenzhen-Hong Kong stock connect, which allows investors to conduct cross-border trading between the two markets, was much anticipated in the second half of last year. However, tumbling stock prices on mainland markets beginning in June prompted authorities to put the plan on hold.

Premier Li Keqiang, in the government work report delivered at the opening of the National People’s Congress on March 5, said the Shenzhen-Hong Kong sock connect will be introduced at an “appropriate time”.

Fang also said that the regulator was conducting a feasibility study on a similar programme connecting the Shanghai and London markets, but that no time frame had been set for the launch.

He said there would not be a conflicts with the current Shanghai-Hong Kong stock connect as the city was in different time zone with London.

“Because of the time difference, the model of the Shanghai-Hong Kong stock connect cannot not be copied directly to London, so you don’t need to worry about competition with Hong Kong,” Fang said.

Fang said the central government is unwavering in its support of Hong Kong as an international financial centre and offshore hub for yuan trading.

“The relations between the mainland and Hong Kong is different from that with other global financial markets. It’s not comparable as a deeper corporation between the two financial markets will also benefit the development of mainland market,” he said.

Fang also said that the authorities would review the Shanghai-Hong Kong stock connect and consider expanding the investment scope. The scheme was launched in November 2014.