Chinese SMEs should use Hong Kong as a channel for funding, stock exchange’s former CEO says

Charles Li Xiaojia suggests creating a ‘Drip Irrigation Connect’ to link sources of foreign capital

CPPCC member stepped down as head of exchange on December 31 after more than a decade in charge

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Li Xiaojia stepped down as CEO of the Hong Kong stock exchange at the end of last year. Photo: Nora Tam

Published: 6:00pm, 6 Mar 2021Updated: 11:08am, 7 Mar 2021

Hong Kong should be used as a conduit to draw “massive amounts” of international funding into Chinese small and medium-sized enterprises, according to the former chief executive of the city’s stock exchange.

In a report by the state-run China Securities Journal on Friday, Charles Li Xiaojia, who is also a member of the Chinese People’s Political Consultative Conference, suggested the creation of a “Drip Irrigation Connect”, which could be used to link sources of global capital and solve the financing problems of tens of thousands of SMEs.

While China needed to protect against speculative capital inflows damaging its financial markets amid a surplus of global liquidity that was fuelling asset price bubbles, it should still make good use of international funds to support the development of its real economy, he said.

Through China’s qualified foreign limited partners programme, international investment and asset management companies could be granted market access to form joint ventures through limited partnership vehicles in various industries, Li said.

This new generation of asset and investment companies would provide funds and help manage risks and returns for tens of thousands of SMEs, he said.

At the same time, Hong Kong should establish a new trading and settlement platform to help international investors access real-time, transparent and effective valuations and pricing of the underlying assets of “Drip Irrigation Connect”, said Li, who stepped down from the stock exchange on December 31 after more than 10 years as CEO.