Some biased Western media and politicians have taken issue with Hong Kong’s improved electoral system and the National Security Law promulgated for Hong Kong, claiming that they have undermined Hong Kong’s status as an international financial center because they encroached on Hong Kong’s democracy. They are oblivious to facts.
The upcoming Legislative Council election heralds a new era of good governance for Hong Kong. The 153 candidates who have passed the vetting process come from different sectors and professions with varying political stances and different backgrounds. Among them are experienced and senior political participants, as well as brilliant, young and new faces. This diverse mix of candidates demonstrates broad representation, balanced participation and robust competition, and thus attests to the new electoral system’s political inclusiveness, which is contrary to the critics’ claim that the revamped electoral system has expelled all dissidents.
As it turns out, some aspirants who have been critical of the HKSAR government or are from the traditional “pan-democratic” camp have made it to the official candidate list and have a chance to win in the race. This indicates that the patriotism requirement for candidates has a very low threshold: One only needs to love the country and the HKSAR to be qualified for the “patriots administering Hong Kong” camp, no matter what his/her political beliefs and persuasions are. Such political inclusiveness will go a long way in consolidating Hong Kong’s status as an international financial center.
Contrary to the pessimistic predictions of the critics, the National Security Law for Hong Kong and the subsequent revamp of its electoral system have not produced any negative impact on the city’s status as an international financial center, evidenced by some hard figures. For example, according to the UNCTAD World Investment Report 2021, Hong Kong was the third-largest destination for inbound direct investment in the world in 2020. The International Monetary Fund’s report also reconfirms Hong Kong’s position as an international financial center with a robust financial system. Thanks to its role as a gateway to the Chinese mainland, a number of international financial institutions have recently increased their staff and strengthened their presence in Hong Kong.
Hong Kong’s financial markets have developed steadily since the implementation of the National Security Law more than a year ago. The local economy also continues to improve, with the growth rate reaching 7.6 percent in the second quarter, the second consecutive quarter of rebound, and a growth rate of 7.8 percent in the first half. The Hong Kong dollar exchange rate has maintained its strength over the past year, with around $50 billion of capital inflow into the Hong Kong dollar system. The size of deposits in the Hong Kong banking system grew by 5.4 percent year-on-year in 2020 and remained stable in the first half of this year. Assets under management in the wealth management business rose by 25 percent last year and are expected to continue to grow this year. In the first half of this year, Stock Connect transactions reached a record half-yearly high, up 78 percent from the first half of 2020, reflecting Hong Kong’s solid position as a gateway connecting the mainland and the international markets.
Hong Kong has built up a vast international network, global asset allocation resources, regulatory experience, global talent as well as legal and tax expertise. In the future, if Hong Kong is to continue to excel as an international financial center, we must seize the opportunities in several areas.
Firstly, according to a survey, among the four major global wealth management centers — Hong Kong, Singapore, Switzerland and the United Kingdom — Hong Kong ranks first in terms of ease of trading, range of investment options and investor protection, making it an important offshore wealth management center. China’s wealth management is still thriving. The rapid development of the private sector economy in the mainland has facilitated the meteoric accumulation of wealth. In 2015, high-net-worth individuals in the Asia-Pacific region surpassed North America for the first time. China and Japan are leading the way, representing 90 percent of the wealth growth of high-net-worth individuals and 60 percent of the population growth. The focus now is not just on wealth creation but on the preservation and distribution of wealth over generations.
The Cross-boundary Wealth Management Connect Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area is one of the core initiatives providing mutual access to markets between the capital markets of Hong Kong, Macao and the mainland. As of Nov 30, the total amount of transactions of the Northbound and Southbound Scheme were 127 million yuan ($19.9 million) and 87 million yuan respectively. Furthermore, the banking sector plays an essential financial intermediary role in the economy and society. Indeed, the latest financial technology used by the banking sector in Hong Kong also ensures that it offers the most cutting-edge convenient banking services to its customers and it therefore attracts a diverse clientele globally.
Secondly, the Regional Comprehensive Economic Partnership was finally signed in November 2020, after eight years of negotiations. It is a breakthrough during the rise of protectionism and unilateralism. It demonstrates the importance of deepening regional economic integration, international division of labor and cooperation. It helps bolster consumer markets and investment within the region. Hong Kong’s early accession to the RCEP would strengthen its international ties and increase business opportunities.
Thirdly, in terms of global climate change, China plans to have carbon dioxide emissions peak before 2030 and achieve carbon neutrality before 2060, with an estimated investment amount of 130 trillion yuan. Hong Kong, with its proximity to the mainland and its access to investors worldwide, can engage in the promotion and development of green finance, implementation of evaluation and rating systems, information disclosure, investment and financing as well as other interactive ecosystems. This would allow Hong Kong to become a regional green financial center and a regional carbon credit trading hub.
Finally, China has become the world’s second-largest economy, the largest industrial country, the largest trading nation in goods, as well as the country having the largest foreign exchange reserve. With such a large, fast-growing economy as its hinterland, Hong Kong has an unparalleled advantage over other international financial centers.
The author is a member of the National Committee of the Chinese People’s Political Consultative Conference; and chairman of the Hong Kong Finance Association.
The views do not necessarily reflect those of China Daily.