A man walks in front of the IFC tower in Central, Hong Kong, on May 15. Hong Kong is uniquely suited to accommodate the transformation to a new era of finance. Photo: AP
Opinion
King Leung
King Leung
Hong Kong fintech can be the world’s gateway into the Asian Century
Hong Kong is a microcosm for the future of fintech innovation and the global financial centre for the Asian Century
The Greater Bay Area will consolidate the city’s position as Asia’s financial hub and provide an even stronger case for companies that intend to scale up
In a shifting investment landscape with few certainties, there is one thing international investors can agree on. The direction of the next 10 years, and perhaps this century, will be driven by economic growth in Asia – a stretch of the world that encompasses many forms of government, economic systems and demographic diversity.
Whether we decide to call it the “Asian Decade” or the “Asian Century”, its implications for Hong Kong are profound. It is a future that provides a strong case for optimism after a pandemic that has left many Hongkongers looking for hope.
The fact the city is the gateway for the world to access Asia, and for mainland China to access global markets, means Hong Kong is uniquely suited to accommodate this transformation to a new era of finance. Investors such as Bridgewater founder Ray Dalio have described as an epochal shift of changing financial order.
“Throughout history, the largest trading countries evolved into having the global financial centre and the global reserve currency,” Dalio said in an interview in January, pointing to China as the home of the new global financial centre.
Major investors, banks and financial institutions have clearly got the memo. They are announcing plans to pivot to Asia as fintechs flock to Hong Kong and IPOs boom. For example, Airwallex, a cross-boundary fintech that processes about US$10 billion of transactions annually, has moved to Hong Kong from Australia to become the “global financial cloud” and meet the rising demand in digital payments.
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HSBC doubles down on Asia in massive staffing overhaul
HSBC doubles down on Asia in massive staffing overhaul
HSBC, which announced its Asia pivot this year, is relocating senior leaders to Hong Kong as part of a multibillion-dollar regional investment strategy. The bank has pointed to three demographic megatrends accelerating this shift that require a comparatively sized fintech mega hub.
Since Hong Kong is the financial lead at the centre of the Greater Bay Area, it makes sense for it to take on this expanded role in a growing Asian economy.
These trends include the growth of Asia’s middle class, which is expected to make up 88 per cent of all new entrants into the global middle class; Asia’s early dominance in 5G technology and the rise of mobile data consumption, and; the increase in life expectancy among Asia’s over-65 population, which the United Nations expects to double by 2050.
Each trend will create opportunities for new forms of insurance and wealth management services. Hong Kong is second only to New York in its number of high-net-worth residents.
This is why the Greater Bay Area will consolidate Hong Kong’s position as Asia’s financial hub and provide an even stronger case to companies that intend to make the most of this opportunity to scale up, with Hong Kong as their home.
Recent government initiatives have prompted foreign investors to pile into Chinese capital markets, thanks to the Stock Connect and Bond Connect programmes that allow investment in Chinese domestic securities through Hong Kong.
These increasing flows and volumes of money through Hong Kong make the city the ideal location for fintech growth across Asia. TakeBond Connect, the overseas access scheme launched by the Monetary Authority in 2017.
Hong Kong is well ahead of other major international financial centres in first-time bond issuance, capturing 75 per cent of the Asian market compared to 9 per cent in Singapore and 5 per cent in the UK. First-time issuance is known to drive market growth because issuers tend to use the same location for subsequent issuances.
Also consider Stock Connect, the “connector, translator and bridge between China and the world” that since 2014 has made the Hong Kong stock exchange one of the most liquid financial markets in Asia. This liquidity is one of the clearest signs that Hong Kong is the new changemaker within Asian finance.
The Hong Kong stock exchange is well ahead of its closest regional competitor in Singapore, a lead that is only set to grow as capital flows and volumes increase across the region.
Such liquidity offers huge potential to shape the future of fintech. Hong Kong is home to one of the first Bank for International Settlements Innovation Hub Centres, which fosters cooperation among central banks as financial services mature and diversify through fintech transformation.
The hub’s flagship project is the first field experiment for cross-border payments using digital currency. Its recent expansion into the Multiple Central Bank Digital Currency Bridge Project is a wholesale banking initiative that ranks first among more than 60 central banks around world. It is the biggest fintech collaboration between multiple central banks.
Hong Kong’s implementation of this project with the People’s Bank of China, Thailand and the United Arab Emirates takes the city’s lead well beyond a first-mover advantage. It is now a situation whereby Hong Kong is developing the field on which other major economies will soon come to play a role.
This historic opportunity cannot be overstated. Hong Kong is the microcosm for the future of fintech innovation and the global financial centre for the Asian Century.
