Hong Kong is a super connector that bridges the mainland and the rest of the world.
No doubt, it’s the best platform for mainland enterprises to expand overseas or for international companies to tap into the Chinese market.
Chinese banks, securities brokers, fund houses and asset managers, among others, have been setting up branches in Hong Kong in recent years.
At the end of 2005, mainland-headquartered banks were holding about 15 percent of assets in Hong Kong’s financial system.
Ten years later, that number has doubled.
The rapid development of mainland financial institutions in Hong Kong has allowed them to offer a wide range of services to Chinese companies seeking to expand into overseas markets.
Growth was largely driven by the one-way appreciation of the renminbi, lower interest rates and narrowing yield gap between onshore and offshore markets.
With China entering a new normal, these companies should make adjustments.
Firstly, they should stick to their goal of pushing their parent companies’ internationalization by establishing operations in Hong Kong
Secondly, they should adapt to the needs of their mainland customers in terms of their global asset allocation by tapping into Hong Kong as a global asset management center.
Thirdly, they should take advantage of “One Belt, One Road” by promoting Hong Kong as global financing and commodities exchange center.
Fourthly, they should help turn Hong Kong into a renminbi pricing center in conjunction with efforts to speed up the renminbi’s internationalization.
And finally, they should learn from mature capital markets to improve governance.
It goes without saying that cooperation with foreign financial institutions is key to winning partners and identifying potential acquisition targets for their parents.
And they should play an active role in ensuring Hong Kong’s long-term stability through education and job generation.
This article, published in the Hong Kong Economic Journal on April 6, was contributed by Zhang Li, president of Shanghai Pudong Development Bank (Hong Kong branch).
Translation by Myssie You
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