The overall success of the practice of “one country, two systems” over the past 25 years has been witnessed globally. The innovative framework has not only resolved peacefully the Hong Kong question left over from history but also enabled Hong Kong’s smooth transition to a special administrative region of China from a British-ruled territory.
Over the past 25 years, the mainland has provided strong backing for Hong Kong, with the central authorities rolling out many policies to support the city’s various endeavors, including consolidating its status as an international financial center.
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In 2019, Hong Kong faced unprecedented political turbulence that posed a great risk to national security. Fortunately, the central authorities showed their strong backing again and helped Hong Kong cope with the challenges that emerged by enacting the National Security Law for Hong Kong and initiated the electoral reform in the city based on their comprehensive jurisdiction over Hong Kong under the constitutional order prescribed by the nation’s Constitution and the Hong Kong Basic Law. The two bold and decisive moves have enabled Hong Kong to restore peace and order, and put the “patriots administering Hong Kong” precept into practice.
Over the past 25 years, the mainland has provided strong backing for Hong Kong, with the central authorities rolling out many policies to support the city’s various endeavors, including consolidating its status as an international financial center
The COVID-19 outbreak in early 2020 hit Hong Kong’s economy hard. There was a shortage of anti-pandemic resources and medical staff. To the relief of Hong Kong residents, the city received full support again from the central government, which coordinated the mainland’s efforts to procure masks, rapid testing kits and medicines as well as the construction of mobile hospitals that Hong Kong needed desperately within a short period of time.
With Hong Kong’s political system having been put right, it is believed that the central government’s comprehensive jurisdiction over Hong Kong and the latter’s high degree of autonomy will be organically combined in the future, ensuring the political stability that is necessary for further developing the city’s economy and improving people’s livelihoods, which are understandably among the top priorities of the HKSAR government’s agenda.
Hong Kong is a free port that allows the free flow of capital, and imposes no restriction on trade and investment. At the same time, it also enjoys various preferential policies of the State. It has solid financial reserves and a sound financial regulatory system. In addition, Hong Kong’s implementation of common law, which is the mainstream of legal practice in the international financial market, is conducive to the expansion of its global financial business. Its geographical location also has advantages, and it forms a seamless connection with New York and London in the time zone of the global financial market.
Since 1998, Hong Kong’s GDP has doubled to over HK$2.8 trillion ($357 billion). Total merchandise trade more than tripled to over HK$10 trillion, ranking sixth globally. Total employment rose by 15 percent to about 3.65 million. Today, the number of international companies using Hong Kong as the base of their regional headquarters or regional offices has increased by 57 percent to nearly 4,000.
Deepening interconnectivity with mainland financial market
In recent years, the interconnection system between the financial markets of the two sides has developed rapidly. In just a few years, the Stock Connect, Bond Connect, and Cross-boundary Wealth Management Connect Scheme have been launched successively, providing safe and efficient channels for connecting the mainland’s financial market to the outside world. Hong Kong’s interconnectivity with the mainland’s financial market is unique in the world, and cannot be replaced by any other international financial center.
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In addition, the mainland is a huge source of strength for Hong Kong’s premier financial hub. Over the past 25 years, the number of Hong Kong-listed companies has increased from 658 at the end of 1997 to 2,573 by the end of May 2022, an increase of more than three times, and the total market value has increased from HK$3.2 trillion to HK$38.9 trillion. There are currently 1,370 mainland companies listed in Hong Kong, accounting for about 53 percent of the total listed companies, and their market value accounts for about 78 percent of the total market value of Hong Kong stocks.
At present, the total market value of 261 US-listed Chinese companies has reached about $1.3 trillion. Due to potential political risks, many of these so-called “Chinese-concept” stocks, including relatively mature and large-scale leading new economy stocks, are shifting to the Hong Kong stock market for listing from the US market. At the same time, they are attracting more and more analysts and funds familiar with the technology sector to Hong Kong. The Guangdong-Hong Kong-Macao Greater Bay Area, of which Hong Kong is a part, is a center of innovation and technology. Hong Kong can also play a more-important role in these areas, especially in domestic and international technology cooperation.
Global offshore RMB business hub
At present, China is the world’s second-largest economy and the world’s largest trading country. As an international financial center, Hong Kong is also the world’s largest renminbi business offshore center. Currently, the RMB deposits in Hong Kong exceed 800 billion yuan ($110 billion), and more than 70 percent of global offshore RMB payments are handled here. It can play a more important role in promoting the internationalization of the RMB, promoting the RMB as a global trade transaction currency and as a wealth storage tool.
Inject vitality into Hong Kong financial market
The performance of the financial industry is an important indicator of Hong Kong’s prosperity and stability. Hong Kong should adopt a more-aggressive attitude and devote more effort in promoting the development of the financial industry. There are a few points to consider, such as putting more effort to better integrate the city’s development into the overall national development. It should also further cooperate with relevant cities and regions in the mainland to promote the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the interconnectivity of the Cross-Boundary Wealth Management Connect Scheme and the stock market, bond market and insurance, so as to inject vitality into the Hong Kong financial market.
Secondly, Hong Kong should ride on the new financial modes such as “green finance” and “technological finance” to expand financial businesses and establish new financial product standards. For example, there is no unified standard system for environmental, social and governance (ESG) in the world now. Hong Kong should leverage its expertise and know-how in establishing such an ESG standard, and work together with other Greater Bay Area cities in developing a joint international carbon trading hub.
In addition, Hong Kong should adjust its industrial structure, focus more on the development of the innovation and technology industry, provide a new broad market for the financial services industry, provide more innovation and technology development opportunities for young people, and provide a healthy environment for sustainable development.
Furthermore, under the national 14th Five-Year Plan (2021-25), the central government supports Hong Kong in enhancing banking, securities, insurance, funds, futures and other financial sectors. It helps develop green finance and financial technology and consolidate the connectivity between domestic and foreign capital markets.
Hong Kong has always been a window and a bridge between China and the rest of the world in terms of financial ties. This allows international capital to flow among the mainland, Hong Kong and globally. With the central government’s support, Hong Kong will be able to further deepen its connectivity with the mainland, enhance its status as an international financial hub, and facilitate mainland capital going out to the outside world.
The author is chairman of the Hong Kong Finance Association.
The views do not necessarily reflect those of China Daily.