Hong Kong is not only an international financial centre, it is the most important gateway to Mainland China – and connectivity is the key to enhancing cross-boundary transactions. The Chinese central government is committed to ensuring that Hong Kong maintains its status as a free port and a separate customs territory, and at the same time focus on the development of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA).
Hong Kong has long been a gateway to and from Mainland China, and different data points show that the city originates and intermediates about two-thirds of China’s inward foreign direct investment and outward direct investments. As one of the Mainland’s principal trading partners, Hong Kong not only provides a channel for goods and services to go global, but also catalyses the international usage of renminbi along to the process.
The renminbi (RMB) has retained its position as the fifth most active currency for international payments by value, with a share of 2.15% as of August 2021, according to Swift data. Since the launch of the pilot scheme for cross-border trade settlement in renminbi in 2009, RMB trade settlement handled by banks in Hong Kong has seen exponential growth.
Hong Kong remains the most important offshore RMB economy by weight, accounting for more than 75% of the global total. For the financial services sector, central and Hong Kong authorities are seeking to further promote cross-boundary RMB investment and financing activities, encourage competitive Mainland Chinese enterprises are also issuing green and sustainability related products in Hong Kong, aiming it to become a hub for green finance within the GBA.
“With complementary advantages of respective markets and systems in the GBA, the financial services industry in Hong Kong has much expectation on the coordinated development of the region,” said Laurence Li, chairman of the Financial Services Development Council (FSDC), a high-level cross-sectoral advisory body set up by HKSAR Government in 2013 to promote Hong Kong’s financial services industry.
“At the same time, different stakeholders have been engaging in conversations and preparatory work to enhance the connectivity and standards of financial services and product offerings. With some favourable measures being introduced and implemented in an orderly manner, the industry believes the ever-improving connectivity of financial markets will lead to uncharted market potentials.”
The FSDC has made efforts in facilitating Hong Kong’s financial services industry to capture market opportunities in the GBA. FSDC has recommended and advocated for connecting cross-boundary payment and transfer infrastructure, enhancing the convenience of remote account opening procedures, as well as fostering cross-boundary mortgage financing, mutual funds, insurance and wealth management.
In a recent research paper, the FSDC recommended connecting cross-boundary payment and transfer infrastructure, enhancing convenience of remote account opening procedures, as well as fostering cross-boundary mortgage financing, insurance and wealth management businesses. Through capitalizing on its unparalleled strengths, Hong Kong can play a unique role in driving the concerted development of the financial services industry, and in turn enjoy the growth momentum in the region.
The newly launched Wealth Management Connect scheme will help diversify investment portfolios through exposure to overseas markets via retail funds domiciled and regulated in Hong Kong, while attracting offshore investments to onshore wealth management products in Mainland. It will also allow Hong Kong investors to broaden their mainland exposure.
Wealth Management is a major breakthrough in which retail investment funds domiciled in Hong Kong and authorized by the Securities and Futures Commission (SFC) are eligible for the scheme instead of the traditional product by product approval approach.
The scheme further integrates the Mainland and Hong Kong markets and promotes cross-border trading, following on from the successful launch of the two Stock Connect schemes that linked the stock markets of Hong Kong with Shanghai and Shenzhen in 2014 and 2016, respectively.
According to a recent KPMG client note, Wealth Management Connect represents another “significant development” in the liberalization of Mainland China’s capital account following the launch of QFII/QDII, the Mainland-Hong Kong Mutual Recognition of Funds scheme and the Stock Connect and Bond Connect schemes. The firm expected these developments would accelerate RMB internationalization and strengthen Hong Kong’s position as a global offshore RMB hub.
Meanwhile, the new southbound leg of China’s Bond Connect programed will stimulate demand from Mainland Chinese investors for Hong Kong and US dollar-denominated bonds, boosting liquidity and, thus, facilitate a more efficient price discovery process. The launch of the southbound link could broaden the investor base for both Hong Kong dollar and offshore RMB bonds, whereas the support for the US dollar bond market could be strengthened even further.
Hong Kong should also be a main contributor to the collaboration in green finance, development of Fintech and digital assets in the GBA in the future. Last but not least, the various financial liberalization measures carried out in the region will foster closer exchange among different stakeholders, including regulators and market participants, provide an appropriate market dynamic, and are in line with the longer-term national objectives of financial liberalization and internationalization. Hong Kong, in this context, will continue to play its unique role as China’s only international financial centre.
The cross-boundary nature of Hong Kong’s financial services sector, especially asset management, is constantly being reshaped thanks to the joint efforts of the government and the sector, leading to an increasing number of available product types, a wider reach to more local, international and Mainland investors with different experiences, and more diversified investment strategies and preferences. Just as the Wealth Management Connect is on the horizon, Hong Kong is marching steadily towards its vision of becoming the world’s premier wealth and asset management centre.
Financial Services Development Council (FSDC) was established in 2013 by the Hong Kong Special Administrative Region Government as a high-level, cross-sectoral advisory body to engage the industry in formulating proposals to promote the further development of the financial services industry of Hong Kong and to map out the strategic direction for the development. The FSDC has been incorporated as a company limited by guarantee with effect from September 2018 to allow it to better discharge its functions through research, market promotion and human capital development with more flexibility.
- “World Economic Outlook Database, April 2019”. IMF.org. International Monetary Fund. Archived from the original on 21 December 2019. Retrieved 29 September 2019.
- “World Bank Country and Lending Groups”. datahelpdesk.worldbank.org. World Bank. Archived from the original on 28 October 2019. Retrieved 29 September 2019.
- “Population, total”. data.worldbank.org. World Bank. Archived from the original on 16 August 2019. Retrieved 5 July 2020.
- “World Economic Outlook Database, October 2019”. IMF.org. International Monetary Fund. Archived from the original on 30 July 2020. Retrieved 17 October 2019.
- “World Economic Outlook Database, April 2020”. IMF.org. International Monetary Fund. Archived from the original on 30 July 2020. Retrieved 9 May 2020.
- “Human Development Index (HDI)”. hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Archived from the original on 14 August 2019. Retrieved 11 December 2019.
- “Inequality-adjusted Human Development Index (IHDI)”. hdr.undp.org. HDRO (Human Development Report Office) United Nations Development Programme. Archived from the original on 11 December 2019. Retrieved 11 December 2019.
- “Labor force, total – Hong Kong SAR, China”. data.worldbank.org. World Bank. Archived from the original on 14 August 2019. Retrieved 11 December 2019.
- “Employment to population ratio, 15+, total (%) (national estimate)”. data.worldbank.org. World Bank. Archived from the original on 24 August 2019. Retrieved 24 August 2019.
- “Ease of Doing Business in Hong Kong SAR, China”. Doingbusiness.org. Archived from the original on 7 February 2017. Retrieved 24 November 2017.
- “Export Partners of Hong Kong”. The World Factbook. 2017. Archived from the original on 6 December 2018. Retrieved 26 November 2018.
- “Import Partners of Hong Kong”. The World Factbook. 2017. Archived from the original on 6 August 2016. Retrieved 26 November 2018.
- “Sovereigns rating list”. Standard & Poor’s. Archived from the original on 28 September 2011. Retrieved 26 May 2011.
- How Fitch, Moody’s and S&P rate each country’s credit rating”. The Guardian. London. Archived from the original on 1 August 2013. Retrieved 31 May 2011.
- “International Reserves and Foreign Currency Liquidity – Hong Kong”. International Monetary Fund. 5 May 2011. Archived from the original on 25 September 2011. Retrieved 31 May 2011.
- Contrived Laissez-Faireism: The Politico-Economic Structure of British Colonialism in Hong Kong. Springer Publishing. p. 26. ISBN 978-3319697932. Archived from the original on 1 August 2020. Retrieved 1 June 2020.
- “The Profitability of the Banking Sector in Hong Kong” (PDF). Hkma.gov.hk. Archived (PDF) from the original on 14 June 2018. Retrieved 27 July 2018.
- Legal Tender Notes Issue Ordinance Archived 3 May 2015 at the Wayback Machine. Legislation.gov.hk (30 June 1997)
- “Monetary Stability” (PDF). Hkma.gov.hk. Archived from the original (PDF) on 5 June 2013. Retrieved 27 July 2018.
- “Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2007” (PDF). Triennial Central Bank Survey 2007. Bank for International Settlements: 7. September 2007. Archived (PDF) from the original on 6 December 2017. Retrieved 5 September 2010.
- Asian Financial Regulators Examine Local Lending Rates”. The New York Times. Archived from the original on 20 September 2017. Retrieved 5 March 2017.
- “The Hong Kong Association of Banks”. Hkab.org.hk. Archived from the original on 17 September 2018. Retrieved 5 November 2012.
- Hong Kong’s Banking Industry Facing Keen Competition”. China Perspectives. 2003 (2). doi:10.4000/chinaperspectives.260. Archived from the original on 14 May 2013. Retrieved 16 November 2012.
- WHub (2018). “Hong Kong Start Up Ecosystem Whitepaper”. Archived from the original on 17 September 2018.
- “Economic Freedom”.
- “London retains financial services crown”. Financial Times. Archived from the original on 10 December 2019. Retrieved 27 September 2013.
- “The Global Financial Centres Index 13” (PDF). Zyen.com. March 2013. Archived (PDF) from the original on 18 November 2017. Retrieved 27 July 2018.
- Hong Kong University Press. ISBN 978-962-209-963-0.
- “Nominal GDP list of countries. Data for the year 2010”. World
- International Monetary Fund. Archived from the original on 5 July 2014. Retrieved 22 December 2011.
- “Gross domestic product (2009)” (PDF). The World Bank: World Development Indicators database. World Bank. 27 September 2010. Archived (PDF) from the original on 12 September 2009. Retrieved 5 October 2010.
- Field listing – GDP (official exchange rate) Archived 4 October 2008 at the Wayback Machine, The World Factbook
- “GDP growth (annual %)”. World Bank. Archived from the original on 10 December 2019. Retrieved 11 June 2019.
- Hong Kong, China – Member information Archived 21 September 2012 at the Wayback Machine. WTO. Retrieved 1 November 2012.
- “World’s Largest Stock Exchanges December 2017”. Retrieved 20 April 2020.
- Hong Kong Monetary Authority (30 December 2009). “A Structural Investigation into the Price and Wage Dynamics in Hong Kong” (PDF). Archived (PDF) from the original on 19 June 2013. Retrieved 5 November 2012.
- “Hong Kong Company Formation”. Archived from the original on 25 August 2013. Retrieved 27 August 2013.
- “UNCTAD World Investment Report”. UNCTAD. Archived from the original on 17 August 2013. Retrieved 27 August 2013.
- “Archived copy”. Archived from the original on 28 August 2013. Retrieved 2013-08-12.
- “Global Information Technology Report 2016”. World Economic Forum. Archived from the original on 17 September 2018. Retrieved 16 September 2018.
- “Index of Economic Freedom“. Heritage Foundation. Archived from the original on 20 June 2010. Retrieved 21 June 2010.