Has Beijing secured Hong Kong’s status as an international finance hub?
- Twice-a-decade conference featured strong rhetoric about Hong Kong’s role as a financial centre, stoking optimism for the city’s continuing relevance
- Numerous possibilities exist for its status to be solidified after period of uncertainty, but will require commitments from mainland to carry weight
Beijing’s recent pledge to improve Hong Kong’s status as an international financial centre – a show of commitment to the city made at a time when questions about its purpose grow more acute – has ignited hopes for policy support to make good on strikingly ambitious rhetoric.
That mention was the first to come from the high-profile event since Xi reached the apex of leadership. The previous utterance occurred during the 2012 conference, though Hong Kong’s status was also cited in the Greater Bay Area development blueprint released in 2019.
Following that noteworthy affirmation, the People’s Bank of China pledged on Thursday to steadily expand the institutional opening of the financial market, promote greater overseas use of Chinese currencies and “expand the interconnection of the mainland and Hong Kong financial markets”, according to a statement issued online.
“While some may view this as stating what seemed to be obvious to many, the endeavour to reinforce the status of Hong Kong … cannot be overstated,” said Neville Lai, an independent international affairs strategist.
Lai said he believes its common law practice and its residents’ fluency in both English and Mandarin will help the special administrative region continue to serve as the premier gateway to China for international businesses.
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“The free flow of information and capital remains a steadfast commitment to be upheld, as such to entrench Hong Kong’s role as an international financial and trading centre.”
As China ranks among top importers of raw materials like copper and iron ore, he added, a new platform built after Hong Kong Exchanges and Clearing acquired the London Metal Exchange could be leveraged for access to the enormous Chinese commodity trading market. Lai also suggested the city could integrate further with the Shanghai exchanges, with the yuan “used as a medium for exchange”.
Worries over Hong Kong’s role have been more pronounced in recent years, as the special administrative zone has been caught in the middle of escalating tensions between Beijing and Washington.
The International Monetary Fund released a staff report in May citing Hong Kong’s robust institutional frameworks, capital and liquidity buffers, financial sector regulation and Linked Exchange Rate System as reasons to continue classifying the city as an attractive destination.
In addition, the Bank for International Settlements – an international “bank for central banks” that coordinates monetary policy among member institutions – has set up a representative office in Hong Kong, where it also runs an innovation hub.
Chen Zhiwu, chair professor of finance at the University of Hong Kong, was less optimistic. He said the mention of Hong Kong this week was “vague and general”, suggesting “there’s nothing specific coming up” in the way of changes. The city is unlikely to add infrastructure, expand capital markets or enact new laws in response to Xi’s statement, at least not right away, he said.
Another explanation came from Christopher Beddor, a deputy director at macroeconomic research firm Gavekal. “The [Beijing] communique called for increasing Shanghai’s competitiveness and influence as a global financial centre,” he said. “The mention of Hong Kong’s role may well be partly an attempt to reassure the city that it’s not being neglected.”
Nevertheless, the inclusion has garnered notice. “I’m sure they [Hong Kong leaders] will take [Xi’s statement] to heart because they pay a lot of attention to what Beijing says,” said Andrew Collier, a China economist at Global Source Partners in Hong Kong.
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However, “if the [Communist Party’s] will supersedes local laws, investors could move their capital out,” he warned.
The Hong Kong government, meanwhile, is keeping busy with attempts to revive the city’s financial status.