President Xi Jinping’s visit to Britain marks the start of a golden era in the bilateral relationship.
Hong Kong has irreplaceable advantages in promoting trade and economic cooperation between the two countries.
Foreign and domestic firms still regard the city as an ideal gateway to Asia’s markets, because of its geographic location, free trade port, simple tax rules and attractive tax rates.
Amid a sluggish global economy, 18 percent of the companies that have Hong Kong offices said they are confident about the outlook for the city and will expand their business in Hong Kong in the next three years.
The number of international companies with offices in Hong Kong reached a record of 7,904 this year.
Among them, the number of financial institutions and banks climbed 36 percent from 2011, underscoring the city’s position as an international financial center.
Demand for infrastructure improvements in Britain is expected to be a highlight, with large potential, among Sino-British cooperation deals.
Britain is the second-largest investor from the European Union in China and, within the EU, is the country’s second-largest trading partner and destination for outbound investment.
The cooperation between the two sides has expanded from trade to intellectual property, environmental protection, energy, private-public-partnerships, railway technology and nuclear-related areas.
Such cooperation can create a template for China when it joins hands with other western countries.
For instance, Britain led other European countries in joining the Asia Infrastructure Investment Bank and has helped build Sino-EU bridges.
Therefore, Xi’s visit to Britain is also meaningful to the Sino-EU relationship.
Hong Kong, with its special ties to Britain, should seize its opportunity.
The city has a large amount of professional talent familiar with the British legal system and social conditions.
During his visit, Xi and British Prime Minister David Cameron announced a new scheme, London-Hong Kong Connect (LHKC), to study the possibility of linking Hong Kong’s commodity markets with the London Metal Exchange (LME).
Academics said China used to be a price taker in commodity trading.
LHKC can help China have a bigger say in the market by utilizing Hong Kong’s advantages.
Hong Kong Exchanges and Clearing Ltd. (00388.HK) chief executive Charles Li Xiaojia said the preparation work for LHKC has started.
It will be different from Shanghai-Hong Kong Stock Connect in three ways:
(1) The Shanghai link is for the spot market, and the London link is for the futures market;
(2) Shanghai-Hong Kong Stock Connect is designed mainly to attract outbound capital from the mainland, while LHKC will adopt Hong Kong’s time zone and clearing methods;
(3) The Shanghai link is mainly for existing commodity products, but LHKC will bring in more products and capital flow, which should help the city develop its market further.
This article appeared in the Hong Kong Economic Journal on Nov. 2.
Translation by Myssie You
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