Mainland China's reforms will strengthen Hong Kong's role as an Asian financial centre, since they will provide more opportunities for the city's service and financial industries, one of its leaders says.
"China continuous economic reform has not been seen as competition but as opportunities," K C Chan, secretary for financial services and the treasury of Hong Kong, told the press yesterday at the two-day Asian Financial Forum hosted by the Hong Kong Trade Development Council.
Hong Kong, over 30 years, has benefited from reforms on the mainland, every time China opens more markets. China has a huge domestic market, but many economic activities are not market-based. So when the mainland opens more markets, Hong Kong’s strong services and financial industry will expand into China, he said, referring to the new Chinese leaders’ promise to let markets play a more decisive role in the economy.
The "one country with dual systems" policy also makes Hong Kong competitive as it can access the mainland market much easier.
However, Hong Kong is not ignoring any kind of emerging competition, for example competition from Shanghai, which aims to become a global financial centre. Hong Kong also has to update itself, Chan said.
China’s leaders have committed to liberalising the yuan. Currently they allow the currency to be used for international trade settlement. Beijing has not yet allowed the free movement of capital – entering or leaving China.
No one knows when the yuan will become fully convertible. China currently uses Hong Kong for yuan offshore trading. The Hong Kong market is the largest pool of offshore yuan. The value of yuan deposits has exceeded 1 trillion, about one-third of the Hong Kong dollar’s.
"It remains a small part, but it has become an important asset class," Chan said.
This year marks the 10th anniversary of offshore yuan business. Hong Kong banks started offering personal yuan banking services outside the mainland in January 2004.
The Hong Kong dollar will still play an important role as it is fully convertible, he said. The currency’s peg to the US dollar has contributed tremendously to the Hong Kong dollar’s international liquidity. Under the pegged-exchange-rate regime, Hong Kong authorities allow free movement of capital in and out of the city.
"The Hong Kong dollar has an important role to play in the years ahead," he said.
As for Hong Kong’s competitive edge over other financial centres, such as London, New York and Singapore, every market has its own strengths, or specialises in some way, he noted.
Compared with Singapore’s stock market, Hong Kong is many times larger, while Singapore has a larger wealth-management business.
As many mainland Chinese have become wealthier, this provides opportunities for Hong Kong to offer asset-management services, Chan said.
Hong Kong also provides services for foreign investors interested in the Chinese equity market. One of the many advantages of the Hong Kong financial industry is that it is keen on providing financial services in diverse foreign currencies, he added.
Hong Kong ranks third in the Global Financial Centres Index, which rates the competitiveness of global financial centres. The top five are London, New York, Hong Kong, Singapore and Tokyo.