Hong Kong will play bigger role as global connector despite challenges, forum hears

Hong Kong Chief Executive John Lee Ka-chiu (front row, center) joins guests from around the world and other senior government officials for a group photo during the 17th Asian Financial Forum 2024 on Jan 24, 2024. (PHOTO / HKSAR GOVERNMENT)

China is not only focusing on supporting the real economy and further opening up the country’s financial services industry but also propping up the global financial status of its Hong Kong Special Administrative Region, thousands of participants at the opening day of Asian Financial Forum 2024 heard.

On Jan 24, in his first appearance in Hong Kong, Li Yunze, head of the National Financial Regulatory Administration (NFRA), said the financial regulatory policy of the central government will focus on certain segments like technology finance, green finance, inclusive finance, and digital finance. 

“Under the new situation, financial supply-side structural reform will be the main focus, enabling financial institutions to improve the adaptability of serving the real economy and stabilizing the national economy,” Li said while delivering special remarks to the forum.

“We will continue to improve the foresight, accuracy, effectiveness, and synergy of supervision, and coordinate with all other parties to implement all aspects of supervision in accordance with the law to supervise all kinds of financial activities. We will also accelerate the construction of a comprehensive and effective modern financial supervision system to promote the high-quality development of finance,” Li said.

The Chinese economy is improving in the long term, its structure continues to be optimized, and its high-quality development trend will not change, Li said, adding that the economy will move forward steadily despite challenges and continue to provide strong impetus for world economic development.

Themed “Multilateral Cooperation for a Shared Tomorrow”, the 17th AFF, held from Jan 24-25, brought together over 3,000 policymakers, business executives, academics and veteran investors from more than 40 countries and regions. It was held for the first time fully in-person since the COVID-19 outbreak — evidence that supports the city leader’s narrative that Hong Kong is back on the world stage of business.

The People’s Bank of China (PBOC), the central bank, and the Hong Kong Monetary Authority (HKMA) on Jan 24 launched six measures that involve financial market connectivity, cross-border capital facilitation, and deepening of financial cooperation.

The measures enhancing financial market connectivity include allowing bonds under the Bond Connect program as eligible collateral for the renminbi liquidity arrangement of the HKMA, further opening-up so that foreign investors can participate in domestic bond repurchase business, and expanding and facilitating individual investment channels in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).

Minister of the National Financial Regulatory Administration Li Yunze speaks special remarks during the opening session at the Asian Financial Forum in Hong Kong on Jan 24, 2024. (ANDY CHONG / CHINA DAILY)

Regarding cross-border capital facilitation, the PBOC and the HKMA recommend implementing policies to facilitate payments for home purchases by Hong Kong and Macao residents in the GBA, expanding the scope of pilot projects for cross-border credit reporting cooperation between Shenzhen in Guangdong province and Hong Kong, and deepening the cross-border pilot program of the digital renminbi to provide more convenience for Hong Kong and mainland residents and enterprises.

In his opening address, Hong Kong Chief Executive John Lee Ka-chiu said the “one country, two systems” principle and the far-reaching opportunities it brings “have enabled Hong Kong’s financial sector to thrive despite the considerable challenges we face”

“Under the ‘one country, two systems’ principle, Hong Kong can create opportunities for companies and economies in Asia and around the world. We can, and will, contribute to realizing a bright and shared future for the global community,” he said.

Lee and other Hong Kong officials at the annual Asian Financial Forum called for closer global ties to be forged against protectionism and roadblocks to trade and investment, saying the city’s financial strength will play a major role by bridging the markets between East and West.

“In a world of escalating de-globalization and decoupling, international cooperation has never been more essential,” Lee said.

Alongside his call to halt international market fragmentation that can result in rising costs, reduced market liquidity, and a diminished and destabilized financial system, Lee said that Hong Kong’s connecting role is here to stay and will help to buck the decoupling trend, given its broad financial prowess.

Hong Kong’s leading role can be seen in other financial sectors such as the asset and wealth-management business, Lee said. 

As of the end of 2022, the city managed close to $4 trillion in assets, with two-thirds of that funding sourced from non-Hong Kong investors, data from the city’s Financial Services and the Treasury Bureau showed.

The Asian financial hub last year broadened the scope of eligible stocks under the Stock Connect program, including the addition of stocks of foreign companies with primary listings in Hong Kong, and more than 1,000 stocks listed on the Shanghai and Shenzhen exchanges.

“That, of course, greatly expands investment choices via the Stock Connect. It also attracts international corporations to list in Hong Kong, boosting our fundraising competitiveness,” Lee said.

The financial gathering bears testimony to Hong Kong’s efforts to boost global connections.

Chief Executive John Lee Ka-chiu delivers a speech during the opening session at the Asian Financial Forum in Hong Kong on Jan 24, 2024. (ANDY CHONG / CHINA DAILY)

Financial Secretary Paul Chan Mo-po reiterated Hong Kong’s firm commitment to multilateralism amid global headwinds, such as “de-risking” and “friend-shoring” moves of some nations. 

We are a staunch supporter of the rules-based multilateral trading system, with the World Trade Organization as governing institution,” Chan said.

Ever since Hong Kong embarked on its post-pandemic reopening last year, local officials have led delegations to various parts of the world, including the Middle East and Southeast Asia, to develop business collaboration, and more such trips are in the pipeline.

Hong Kong’s Financial Services Development Council and Saudi Arabia’s Financial Sector Development Program signed a memorandum of understanding on Jan 24 to strengthen collaboration between the financial markets of the two sides.

Hong Kong Monetary Authority Chief Executive Eddie Yue Wai-man said that international collaboration will be required more than ever because the world is confronting new challenges, including artificial intelligence and digitization. Yue chaired a session titled “Policy Dialogue — Towards International Economic and Financial Cooperation” at the AFF.

At a panel discussion on asset and wealth management, Julia Leung Fung-yee, CEO of the Securities and Futures Commission, Hong Kong’s financial market regulator, said there is a need to carefully manage foreign capital flowing through Hong Kong into the Chinese mainland to mitigate substantial risks across various markets. She cited differences in levels of market openness — the mainland’s not being fully open and Hong Kong’s being completely open.

She highlighted the significance of supervisory cooperation among regulators, government bodies, and the private sector. This approach forms the foundation of Hong Kong’s strategy in navigating the complexities of cross-boundary financial regulation.

The Wealth Management Connect, launched in 2021, saw its latest expansion last year to encompass a wider range of traded products and updated eligibility criteria, allowing more investors and brokerages to participate in the program.

Hailing the enhancement of the connect, which has provided greater flexibility, convenience, and investment options for investors, Amy Lo, head and chief executive of UBS Hong Kong, called for raising the individual investment cap to a minimum of $1 million, from the current 3 million yuan ($419,760).

“Hong Kong’s competitive edge is seen in its low-tax regime and leadership in asset management and hedge funds in Asia,” Lo said. “Over the next 40 years, an estimated $22 trillion in assets is expected to be transferred from one generation to the next in Asia, underscoring the region’s need for wealth management services.”

However, the sector is going to face headwinds in the future as geopolitical uncertainty and an economic slowdown will lead to increased risk aversion among investors, cautioned Nicolas Moreau, global chief executive officer of HSBC Asset Management.

“Investors are increasingly considering fixed income as a low-risk option for returns, indicating a shift in investment strategy toward more secure assets,” he said.

In other discussions, Fan Gang, president of the China Development Institute chaired a panel titled “Stewarding China’s New Chapter”.

Contact the writers at oswald@chinadailyhk.com