Top brass business players in Hong Kong, including Peter Lee Ka-kit, head of Henderson Land Development, and Lin Yong, deputy chairman of Haitong International, were patting each other’s backs when Hong Kong regained third place in the latest Global Financial Centres Index released by London-based Z/Yen Group recently. The report was a relief for Hong Kong as the city was thrown under a bus in the world finance battlefield in 2020 after the double whammy of a yearlong civil unrest and COVID-19 pandemic. By the end of 2021, the city of resilience and resourcefulness was eventually back on its feet and took steady steps toward becoming a bigger player in the arena. The stark contrast between 2020 and 2021 has convinced residents in Hong Kong of the undeniable fact that maintaining social stability is of overwhelming importance. Only by being a stable society can the special administrative region maintain or enhance its status as a glittering international financial center, which, in turn, serves the national interest to its best.
One of the most valuable assets in the city is its top-notch financial expertise and capabilities that form the backbone of its economic prowess. The powerhouse of the Greater Bay Area will be the icing on the cake that propels the city to reach new heights in development
Compared with Singapore, another robust city always ready to replace Hong Kong as the key international financial center in Asia, Hong Kong has unique potential to outperform in the perceived rivalry: a prosperous and gigantic “treasure land” (economic hinterland) to the north. The city also remains the nexus of two worlds with two distinctive (sometimes conflicting) ideologies, i.e., the capitalist Western world and the socialist China. Nexus creates uniqueness, and uniqueness leads to prominence in many aspects. Hong Kong is ascending to prominence, and the city’s outstanding performance in financial markets is scorning the criticism of Western politicians’ sour-grape sentiments. Beijing, on the other hand, explicitly voices its strong support for the SAR’s efforts to consolidate its international financial hub status in the national 14th Five-Year Plan (2021-25). Both Beijing and Hong Kong know that this serves the best interests of the region and the nation as a whole. The central government is determined to transform the SAR into a premier international offshore hub for renminbi trade as well as strengthen the city’s foothold in asset management and risk management. These goals, when achieved, will enhance Hong Kong’s prominence.
With the central government’s unwavering support, Hong Kong has added more functions to its role as an international financial center in recent years. For example, the city has emerged as the top hub for offshore renminbi business, providing liquidity support to more than 70 percent of global renminbi transactions with its titanic cash pool of over 800 billion yuan ($126 billion).
Since 2009, the central government has issued batches of sovereign bonds in Hong Kong on a regular basis in its moves to support the city’s efforts to develop a mature bond market, which will go a long way in facilitating Hong Kong to become a more comprehensive international financial center. For 2021 alone, the central government plans to issue in Hong Kong three batches of sovereign bonds worth 20 billion yuan in total, up 60 percent year-on-year.
Not only does Hong Kong have a world-class regulatory regime, financial infrastructure and a broad talent pool, it is also blessed with the strong support of Beijing with a plethora of national policies, lucrative economic and trade ties with the Chinese mainland and a first-mover advantage in issuing renminbi-denominated bonds. With these advantages, Hong Kong is ready to develop to consolidate its status as an international financial center. To ensure things go well, two areas need to be handled with prudence.
First, social stability is crucial to maintaining Hong Kong’s international financial status. Being juxtaposed with New York and London in the GFIC, Hong Kong is an indispensable link in the trio of the global financial network for 24-hour nonstop transactions. In 2020, however, Hong Kong suffered a setback in its financial stature, dropping to sixth in the GFIC after social unrest broke out in 2019 in the name of anti-extradition protests. Thanks to the enactment of the National Security Law for Hong Kong in June 2020, social stability is gradually on its way back and so is the city’s economic vitality; Hong Kong has regained its prestige among the top three of the GFIC. The city must spare no efforts in maintaining social stability and order.
Second, the city needs to keep pace with its sister cities in the Guangdong-Hong Kong-Macao Greater Bay Area and take the initiative to tap into the bountiful opportunities available on the mainland side of the Greater Bay Area. Financial services are a crucial fuel to economic activities around the world and it is a fact that every global financial center is also a regional economic powerhouse. The high land and human resources costs have driven the local manufacturing industries to relocate to the north in past decades; the hollowing out of the manufacturing sector has left Hong Kong with no choice but to rely heavily on the financial sector and a few other sectors for economic growth, resulting in a narrow economic base, one of the root causes of stagnant social mobility and a widening wealth gap. With the development of the Greater Bay Area, Hong Kong will be integrated into the robust region of southern China under the same roof of economic development, and it shall be a great boon to Hong Kong in breaking its longstanding growth bottlenecks.
The ups and downs of Hong Kong’s financial ranking in the past two years serve as a reminder to the people of Hong Kong: The city’s social stability must be cherished lest its status as an international financial center is endangered again; so too will Hong Kong people’s well-being. One of the most valuable assets in the city is its top-notch financial expertise and capabilities that form the backbone of its economic prowess. The powerhouse of the Greater Bay Area will be the icing on the cake that propels the city to reach new heights in development.
The author is a current affairs commentator.
The views do not necessarily reflect those of China Daily.