By Tu Haiming

The second Global Financial Leaders’ Investment Summit, hosted by the Hong Kong Monetary Authority (HKMA) from Nov 6 through Wednesday, once again attracted a global audience. With some 300 financial leaders from around the world congregating at the summit, this edition’s turnout was much higher than last year’s 200.

More than 90 chief e xecutive officers and presidents from international financial groups, including Morgan Stanley, Goldman Sachs, BlackRock and Citigroup, took part in the discussion sessions. Although more sessions were held at this year’s investment summit, tickets were still in short supply, indicating the popularity of the event and strong interest in the Hong Kong financial market.

In his video speech at the summit, Vice-Premier He Lifeng noted that President Xi Jinping has placed special emphasis on Hong Kong’s development, adding that the central government fully supports Hong Kong in maintaining its distinctive status and edges in the long term and consolidating its position as an international financial, shipping and trading center.

At the summit, Chief Executive John Lee Ka-chiu stressed that “Hong Kong is, and will remain, the gateway between the Chinese mainland and global markets, the conduit for the continuing flow of capital between Hong Kong, the mainland and the world at large.” The remarks of He and Lee explain why this Hong Kong event is so popular among global financial heavy weights.

At present, the world economic outlook is far from optimistic. Factors such as US interest rate hikes, a high interest rate environment, increasing geopolitical risks aggravated by the conflicts between Russia and Ukraine, and between Israel and Hamas, have significantly contributed to global economic uncertainty.

Under such circumstances, Hong Kong, being an open and free economy, has a definite advantage in the financial industry. Over the past two years, Hong Kong has raised nearly $85 billion in initial public offerings. As of the end of 2022, its wealth management business amounted to approximately $4 trillion, higher than that of 2019. Hong Kong is also Asia’s hedge fund hub and the region’s second-largest private equity center.

Hong Kong manages to retain its attractiveness to global investors by virtue of three strengths.

First, the city maintains economic vitality. Hong Kong is well-known for being a free port and the freest economy in the world for 28 consecutive years. This has instilled much optimism in the city’s investment environment among the business community. At the summit, HSBC CEO Noel Quinn mentioned there has been an upsurge in capital flow to Hong Kong since the end of the COVID-19 pandemic, and HSBC’s insurance business has increased by 40 percent this year.

The city’s resilience is the second factor for its attractiveness. With the staunch support of the Chinese mainland, the world’s second-largest economy, Hong Kong’s economy has been highly resilient. Not only is Hong Kong’s financial industry underpinned by the needs of the colossal mainland economy, which contributes more than 30 percent to global economic growth, but it has also survived three major financial crises over the past 30 years with the strong support of the central government.

The third contributing factor is the city’s safe environment, which was the result of a sophisticated financial regulatory system built by the HKMA over the past three decades. Its ability to ensure secure and orderly capital flow has been widely recognized by global financial institutions.

Hong Kong took the lead in the areas of technology finance and green finance with its earlier experimentations and has gained some expertise. Excelling in all these areas will require collaboration as well as mutual exchanges and learning between Hong Kong and the mainland.

For the first time, the Central Financial Work Conference held in Beijing at the end of last month raised the notion of “building a nation with a strong financial sector”.

In this context, what most interests foreign investors is how China will expand high-level financial opening-up. It was emphasized during the conference that China should steadily expand institutional opening-up in the financial sector and facilitate cross-border investment and financing, so as to attract more foreign financial institutions and long-term capital to invest and operate in China. It specifically mentioned the need to consolidate and elevate the status of Hong Kong as an international financial center.

The opening-up of the mainland financial sector has been a slow process. The central authorities’ latest decision to steadily expand institutional opening-up in the financial sector heralds a major step forward in the country’s financial opening-up, and Hong Kong’s robust financial sector can play a unique role in the process of financial opening-up and “building a nation with a strong financial sector”.

First, Hong Kong has a wealth of experience to offer in financial supervision. It was also emphasized at the Central Financial Work Conference that the competitiveness and influence of Shanghai as an international financial center will be strengthened. This is where Hong Kong’s experience can apply.

Second, there is much room for Hong Kong to maneuver in promoting renminbi internationalization. Being the world’s largest offshore RMB business hub, Hong Kong is fully committed to promoting the internationalization of the RMB. Hong Kong Exchanges and Clearing launched the HKD-RMB Dual Counter Model earlier this year, which encourages mainland enterprises to issue RMB-denominated stocks in Hong Kong. Although the RMB is among the top five settlement currencies in the world, it accounts for only 3 percent of all settlements, which pales in comparison with the size of China’s economy. This suggests that there is a huge potential for furthering RMB internationalization in the future, and this is where Hong Kong can make a difference.

Third, Hong Kong can work hand in hand with the mainland to advance financial innovation. Also at the Central Financial Work Conference, it was proposed for the first time that the country will “make significant efforts in the areas of technology finance, green finance, inclusive finance, pension finance, and digital finance”.

Hong Kong took the lead in the areas of technology finance and green finance with its earlier experimentations and has gained some expertise. Excelling in all these areas will require collaboration as well as mutual exchanges and learning between Hong Kong and the mainland.

These three points help explain how Hong Kong can play a significant role in the process of “building a nation with a strong financial sector”. It’s believed that global financial leaders are fully aware of the advantages and potential of Hong Kong in this process, and will benefit from participating in it.

Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, said during his visit to Hong Kong in April that Hong Kong generates opportunities and wealth, and where numerous miracles have been created by investors from around the world.

The enthusiasm that global financial heavyweights showed for the Hong Kong investment summit undoubtedly vindicated Xia’s notion.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference, and chairman of the Hong Kong New Era Development Thinktank.

The views do not necessarily reflect those of Bauhinia Magazine.

Source: China Daily