Analysts divided on impact of Qianhai-BVI move on Hong Kong

Qianhai, the special economic zone in Shenzhen intended as a test bed for China's yuan liberalisation and financial reforms, has strengthened its financial co-operation with the British Virgin Islands (BVI), a leading offshore tax haven, but analysts are divided as to whether the move will be a threat or a benefit to Hong Kong.

"This should be a tell-tale sign for Hong Kong that Shenzhen and Qianhai may present some competition, at least from the eyes of BVI," said Patrick Yip, deputy tax managing partner at Deloitte Touche Tohmatsu.

"What if Qianhai one day could do some or most of what Hong Kong is currently doing? It would therefore make sense for BVI to develop its relationships with Shenzhen and Qianhai as opposed to relying on Hong Kong for indirect China business."

Qianhai, a 15 square kilometre zone on the west coast of Shenzhen, will benefit from its proximity to Hong Kong, a major international financial centre, and its location in Shenzhen, the third-largest financial hub on the mainland, Li Qiang, the deputy director general of the Qianhai authority, said on the sidelines of the Asian Financial Forum in Hong Kong.

The BVI signed a memorandum of understanding (MOU) with the Qianhai authority and another MOU with the Shenzhen government last Friday.

The MOU with Qianhai sets out each parties' intentions to promote co-operation in the financial industry, the BVI government website said. The MOU with Shenzhen will expand co-operation in tourism, economy, culture, sports and other areas, it said.