Hong Kong should draft proposal to join AIIB

April 13, 2016 18:33
Jin Liqun said recently that the AIIB will try to include Hong Kong as a member. Photo: Xinhua

Jin Liqun, governor of the Asian Infrastructure Investment Bank (AIIB), recently said at the Bo’ao forum in Hainan that the AIIB will try to include Hong Kong as a member.

Most believe it’s just a matter of time before Hong Kong joins the AIIB, so the city should proactively take part in related work.

The efforts will benefit the country’s and the city’s development.

It is said that the AIIB has started to establish branches overseas.

Given Hong Kong's position as an Asian and global financial center, the city is likely to be its first destination outside mainland China.

As Jin said, Hong Kong is able to play an important role in fundraising work, for example, helping AIIB issue bonds or arrange foreign exchange transactions.

A big part of AIIB's capital pool will likely be raised by issuing bonds on international financial markets.

So, while helping to meet AIIB’s needs, Hong Kong’s financial industry can develop more innovative financial services and have a larger say in international markets.

Asia is no doubt the fastest-growing region in the world, but many countries are still suffering from lack of infrastructure.

The AIIB said in a study that the demand for infrastructure investment in Asia will be about US$730 billion every year until 2020.

With trade volumes increasing between China and other Asian countries, the use of the renminbi will expand, and the demand for the currency will be higher.

If Hong Kong can be an AIIB member, it can be its international currency exchange center or base, specializing in renminbi.

By doing so, Hong Kong will be more influential in pricing of the renminbi, which would help reduce exchange rate risks for AIIB members.

As for bond issuance, the local bond market can provide good liquidity for investors wishing to exit their positions.

The city can also offer high-quality consulting and legal services, making arbitration of disputes easier.

Joining the AIIB will also provide good opportunities for the younger generation in Hong Kong.

This article appeared in the Hong Kong Economic Journal on April 13.

Translation by Myssie You

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Permanent Honorary Chairman of Hong Kong Federation of Fujian Associations