The monopolistic system in Hong Kong’s core market infrastructure has resulted in high transaction costs and post-trade inefficiencies. However, this very system could make the city’s exchange attractive to investors if it expanded post-trade capabilities and promoted direct exchange connectivity.
Encroachments by the yuan on the US dollar’s international turf will be evolutionary, not revolutionary – because of Chinese policymakers’ caution. Besides, given that demand for dollars has reduced the competitiveness of US exports and cost the country jobs, a more internationalised yuan could help American workers.
Hong Kong could play a critical role in unlocking both China and Saudi Arabia’s strategic objectives. Chief Executive John Lee must position Hong Kong to deliver unique value in the emerging petro-yuan market in a way that complements Riyadh’s development as a trading centre for renminbi securities.
A system in which the global financial commons can be weaponised by the dominant power may favour the US now, but not when it slips from its perch. American industry and people are also paying a price for their country to maintain its exorbitant privilege.
The Chinese mainland and innovations like the Tracker Fund, which celebrates its 20th anniversary, aided Hong Kong’s rise as Asia’s global financial centre. A natural evolution would be for HKEX to become the region’s one-stop shop.