This undated photo shows the building of the Hong Kong Monetary Authority. (PHOTO / IC)
Editor's note: This series, marking the 25th anniversary of the Hong Kong's return to the motherland, explores the experiences of leaders of organizations operating in Hong Kong over the past quarter-century.
Since the Hong Kong Special Administrative Region was established in 1997, the city has taken strides toward the center stage of the world with the strong support of the nation. The many opportunities provided by the Chinese mainland have brought huge growth to Hong Kong's financial industry over the past 25 years, and promise it a brighter future, Hong Kong Monetary Authority Chief Executive Eddie Yue Wai-man said in an interview with China Daily.
In 1991, Yue started work at the Office of the Exchange Fund, which later merged with the Office of the Commissioner of Banking to form the HKMA. He has steered the authority as its third chief executive since Oct 1, 2019. He said he has witnessed how Hong Kong's financial industry has developed rapidly since Hong Kong returned to the motherland 25 years ago.
According to the data compiled by HKMA, the bond market has seen a twentyfold-some surge to $400 billion in 2021 from less than $20 billion in 1997 while the stock market has increased eightfold to HK$38 trillion ($4.84 trillion) as of May 2022 from HK$4.6 trillion in July 1997
According to the data compiled by HKMA, the bond market has seen a twentyfold-some surge to $400 billion in 2021 from less than $20 billion in 1997 while the stock market has increased eightfold to HK$38 trillion ($4.84 trillion) as of May 2022 from HK$4.6 trillion in July 1997.
Data also shows that the renminbi liquidity pool in Hong Kong had surged to 874 billion yuan ($130 billion) as of April 2022 from 62.7 billion yuan in 2009 when the first pilot project started in Hong Kong to use the renminbi as the settlement currency for cross-border trade. Dim sum Bonds, bonds issued outside the Chinese mainland and denominated in renminbi, had a tenfold rise in annual issuance volume to 109.6 billion yuan last year from their debut in the city in 2007.
"These increases all benefited from the implementation of various cross-border connect schemes and the vibrant offshore renminbi business in Hong Kong," Yue said.
Now, the city is expected to play a more important role as a bridge linking the mainland and overseas economies, he added.
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To realize that goal, strengthening connectivity with the mainland, developing financial technology as well as green finance - the working emphasis of HKMA in recent years - are the main directions in which the city's future financial development will move.
"They will offer Hong Kong's financial industries great opportunities while enhancing the city's status as an international financial hub," Yue noted.
During the past few years, the HKMA has worked together with the Hong Kong Centre of the Bank for International Settlements Innovation Hub, the Bank of Thailand, the Central Bank of the United Arab Emirates, and the Digital Currency Institute of the People's Bank of China on a research program named Multiple Central Bank Digital Currency Bridge, or mBridge, which aims to facilitate real-time cross-border payments across different jurisdictions.
Yue revealed that in the second half of this year, HKMA will launch a pilot trade settlement system, as one of about 15 applications of mBridge, to tap the problems in cross-border payments.
Meanwhile, Yue noted that enhancing the infrastructure of the whole system is key to strengthening the link between the special administrative region and the mainland, and embracing more opportunities that come from the mainland.
The authority plans to improve and upgrade the Central Moneymarkets Unit, a system that provides multi-currency settlement, clearing, and custodian services for debt securities, with the aim of making it an international bond settlement platform to achieve the above mentioned goal.
Several measures will be taken in phases, including the building of a dedicated website for the CMU in the third quarter of this year as well as launching a new CMU platform in 2025.
The improved CMU system is expected to invigorate the offshore renminbi market in Hong Kong by promoting its liquidity, thereby enhancing the city's position as an international offshore renminbi center, said Yue, adding that it might also benefit the acceleration of the internationalization of the renminbi.
In addition, he noted that financial connectivity with the Chinese mainland also brought opportunities in green finance because of the large financing demands of the mainland.
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The city's green finance has seen a huge increase in investment proceeds, with a large portion coming from mainland institutions, Yue pointed out. "Hong Kong can embrace the opportunity given by the mainland," he said.
"Hong Kong has experienced numerous ups and downs during past years, including the Asian financial crisis in 1997, the global financial crisis in 2008, and the social unrest in 2019, but the currency peg with the US dollar as well as the city's whole financial system demonstrated its resilience to us," Yue said.
Despite the various challenges that Hong Kong has faced, the city still has advantages in many areas thanks to the unique system which links it to its motherland as well as to other parts of the world, Yue noted.
"The resilient financial system gives the city a solid basis to realize the goal of enhancing its status as an international financial hub," he said.
