Hong Kong security law: China doubles down on support for city as finance hub as concerns mount over its future

China is expanding financial schemes in Hong Kong to cement its status as a commercial gateway to the rest of the country

Beijing’s imposition of a new national security law on the city has raised the risk of US financial sanctions and prompted questions over its future

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The People’s Bank of China has pledged support to help Hong Kong maintain its status as a finance hub. Photo: Bloomberg

Published: 3:51pm, 3 Jul 2020Updated: 10:59pm, 3 Jul 2020

Beijing is expanding existing financial schemes and voicing continued support for Hong Kong’s role as a gateway for international investors into China, amid concerns about the impact of a new national security law on the city.

China’s central bank on Friday celebrated the third anniversary of Bond Connect, a scheme that allows foreign investors to buy bonds in the onshore interbank market through financial institutions in Hong Kong.

The People’s Bank of China (PBOC) vowed to improve the programme, which has helped boost foreign ownership of Chinese bonds. About 9 per cent of China’s government bonds were held by overseas investors at the end of June.

Last week, China also launched a “wealth management connect” programme, which may allow foreign wealth managers to offer products through Hong Kong to clients in the Greater Bay Area, which includes China’s tech hub of Shenzhen and eight other cities in the Pearl River Delta.

The key economic issues are whether the city will retain its role as a gateway in and out of China, and its status as a global financial hub

Tommy Wu

While details of the programme are still being drafted, it could help cement the city’s role as a gateway to China.

These efforts have been accompanied by strong verbal support from senior Chinese leaders in recent weeks. Vice-Premier Liu He, a top economic aide to President Xi Jinping, said last month that China will continue to support Hong Kong as an international financial centre. The People’s Bank of China made similar statements last month as Western nations expressed concern over the security law, which has been criticised as heavy handed and an assault on the city’s freedoms.

A total of 27 countries, including Australia, New Zealand, Britain, Germany and Japan, have issued a joint statement urging China to reconsider its national security law, while the US Congress has passed legislation that would allow Washington to sanction banks for doing business with Chinese officials involved in implementing the legislation.