In the recent London Stock Exchange Group Greater China Forum that took place on June 9th, Professor K C Chan, Hong Kong’s Secretary for Financial Services and the Treasury, pointed out great possibilities that have arisen for future collaboration of Hong Kong and London. Chan indicated that although there is “talk of increasing competition for capital, talent and business opportunities between international financial centres” the relationship between Hong Kong and London, is not as a simple “zero-sum game”.
He pointed out that there is limitless capacity for collaboration between the two financial centres due to their increasing development, stressing out that despite their similarities (English law and language), London and Hong Kong are very different: “Located in the geographic centre of East Asia, Hong Kong has long been a commercial and financial hub for Greater China and much of Asia, just as London is for the United Kingdom and Europe”.
Looking at the growth of the offshore Renminbi (RMB) market in Hong Kong and London he pointed out that this is a good example of how the two can benefit each other; While Hong Kong is the largest offshore RMB centre serving customers in Hong Kong and worldwide, London has developed and launched its own RMB market using its RMB trades via the clearing facilities operated by the Hong Kong Monetary Authority (HKMA), and the RMB Qualified Foreign Institutional Investor Scheme which only expanded to include London last October, a fist time offer for outside of Hong Kong inclusivity.
Chan indicated that mutual co-operation on the development of international RMB business will be carried forward by the private sector-led Hong Kong – London Forum, which was launched under the auspices of the HKMA and the UK Treasury. He pointed out that in the previous three Forum meetings since its launch in 2011, the participants have “agreed on a number of initiatives to promote the use of RMB by corporate bodies around the world”.
Above all, Chan foresaw that the Shanghai-Hong Kong Stock Connect scheme, announced in April and is expected to commence later this year, will offer the greater opportunity for co-operation between Hong Kong and London.
The pilot scheme will allow, for the first time, eligible Mainland investors to trade stocks that are listed on the Stock Exchange of Hong Kong (SEHK) directly through the Shanghai Stock Exchange (SSE). At the same time, it will also enable Hong Kong and overseas investors to trade, for the first time, stocks listed on the SSE directly through the SEHK. He stated: “It will also catalyze the two-way RMB fund flows between onshore and offshore markets, and further increase RMB liquidity in Hong Kong. Companies wishing to attract investors from the Mainland or raise their profile among them may also consider a listing in Hong Kong. London-based investors with RMB funds will be able to take part in this new scheme to access the onshore stock market using Hong Kong's platform”.
Concluding, Chan pointed out that financial reform is on at the top of the Mainland’s national reform agenda which was required an orderly, risk-managed and two-way opening of the capital account as well as further liberalization of the foreign exchange and interest rate regimes, and improved access for foreign investors and the establishment of free trade zones.
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