How Hong Kong can be a key player in the new Silk Road

September 26, 2015 08:03
Hong Kong is the largest asset management center in Asia with more than US$2 trillion under management. It's also the world's biggest offshore renminbi hub with a pool of more than 1 trillion yuan. Photo: Bloomberg

China is experiencing heightened volatility, so are global financial markets.

Against that backdrop, Hong Kong should play up its unique advantages and actively participate in national strategy.

For instance, it can play a key role in China’s ongoing financial reform and modernization.

Hong Kong is already a major player in China’s efforts to internationalize the renminbi and open its capital market.

That role is underpinned by a host of cross-border initiatives such as the Closer Economic Partnership Arrangement, offshore renminbi trading and cross-border stock trading through Shanghai-Hong Kong Stock Connect. 

Moves to mutually recognize cross-border funds were launched this year and efforts are continuing.

Meanwhile, renminbi internationalization is making progress.

The rapidly expanding use of the Chinese currency is driving growth in the offshore renminbi market.

The two-way opening of China’s capital account is closely linked to renminbi globalization.

The stock link is a key component of China’s plans to open its capital account and connect the mainland market to the world.

It allows mainland investors to invest in the Hong Kong market using renminbi and widens investment channels for offshore yuan funds.

Meanwhile, President Xi Jinping is sparing no effort to promote “One Belt, One Road”, an ambitious blueprint to build an economic corridor across Asia to Europe and the Middle East.

The strategy will open access to a dozen economies, benefiting 4.4 billion people.

Hong Kong is in an ideal position to benefit from this initiative as the largest asset management center in Asia with more than US$2 trillion under management.

Also, as the world's largest offshore renminbi hub, it has a pool of more than 1 trillion yuan (US$156.8 billion).

These funds can be used to finance related “One Belt, One Road” projects.

Hong Kong already plays a key role in Asia Pacific trade and investment.

Many Hong Kong companies have roots in Southeast Asia, with some already significantly invested in the region for more than 50 years.

In addition, these firms have a clear understanding and extensive experience in the investment environment, legal systems and wealth management models in the region.

That's not to mention Hong Kong geographic proximity to the mainland, which enables it to connect China’s enormous hinterland to the modern version of the Silk Road.

This article was contributed by Hu Zhanghong, chief executive of CCB International (Holdings), and Qian Zhiyi, executive director at CCB International Capital Ltd., and published in the Hong Kong Economic Journal on Sept. 23

Translation by Julie Zhu

[Chinese version中文版]

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