As a superconnector linking the Chinese mainland and the world, Hong Kong’s financial and professional sectors play a leading role in shaping economic transformation amidst historic changes
Over the decades following the founding of the People’s Republic of China on Oct 1, 1949, the country has woven an inspiring story of transformation from an ancient civilization to a global powerhouse.
On top of the long-cherished roles as a superconnector and super value-adder, Hong Kong — enjoying the best of both worlds — has always acted as the harbinger of serious change in the world’s second-largest economy and across the globe.
Business leaders from Hong Kong’s world-class financial and professional services sectors award the city a vote of confidence, lauding the pivotal link it provides between the mainland and the rest of the world which makes it more relevant than ever to the next big story unfolding at a critical, historic juncture.
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“Hong Kong, as a world-leading international financial center, has excelled since its return under the framework of ‘one country, two systems’,” said Hannah Ha, Asia chair of Chicago-founded law firm Mayer Brown, which celebrated its 160th anniversary in Hong Kong in 2023.
Known for its “highly open financial markets, sound financial infrastructure and regulatory systems, an excellent business environment, competitive tax regime, common law system aligned with international standards, outstanding professional services in law, accounting, arbitration, consulting and others”, the thriving metropolis has boasted “unparalleled unique advantages and potential, backed by the strong economic hinterland of the motherland,” Ha noted.
Honored with a financial crown in various dimensions, Hong Kong has been acknowledged as the second-largest global banking hub in Asia and ranks second worldwide in terms of insurance density. It is also the largest hedge fund center and second-largest for private equity in Asia, as well as a major global listing platform and one of the leading biotech fundraising hubs, according to Ivy Cheung Wing-han, regional senior partner of KPMG in Hong Kong, one of the Big Four accountancy and consulting firms.
As the mega city’s meteoric rise has been intertwined with the country’s decades-long journey from poverty to prosperity, such connectivity takes on a greater significance under the ongoing narrative around Hong Kong’s unremitting efforts to regain its charm and glamour.
“Despite facing strong competition and macroeconomic challenges, Hong Kong’s financial sector has shown resilience and adaptability over the years, benefiting from the enhanced integration of Hong Kong’s financial services with Chinese mainland’s economy,” said Li Bing, head of Asia-Pacific at media conglomerate and leading financial data provider Bloomberg.
Riding high on the city’s go-getter attitude, can-do spirit and policy innovation, the mutual market access program, a poster child and living embodiment of the growing connectivity between capital markets of the mainland and Hong Kong, got off the ground in 2014 and has been on the fast track ever since.
Connectivity programs such as Wealth Management Connect, Swap Connect, Bond Connect, Stock Connect and the Mutual Recognition of Funds Scheme “have witnessed strong growth so far in 2024, but considerable untapped potential for future growth remains,” Li said.
All these groundbreaking programs have helped inject vitality into Hong Kong’s financial market, enhancing the SAR’s role as a gateway for foreign investment into the world’s second-largest economy, and as a go-to destination for mainland companies in their pursuits of going global, Li added.
The city has much more to offer, through proactive and innovative steps. As a recent illustration of the promotion of cross-border financial integration and cooperation, Cheung highlighted the “three connections, three facilitations” initiative, jointly launched by the People’s Bank of China and the Hong Kong Monetary Authority, the city’s de facto central bank, earlier this year.
Lawmaker Tan Yueheng, a Hong Kong member of the National Committee of the Chinese People’s Political Consultative Conference, China’s top political advisory body, recalled an even earlier example.
Back in 2004, the country embarked on internationalizing its currency, the renminbi or the Chinese yuan, with Hong Kong picked as the springboard.
At the launch of promoting renminbi as a global currency, the share of the yuan in global payments remained largely stagnant. By August, its share had grown to 4.7 percent, with Hong Kong, being the world’s biggest hub for offshore yuan business, processing about 80 percent of all settlements, according to data from global payment services provider SWIFT and the Financial Services and the Treasury Bureau of HKSAR.
By July this year, renminbi deposits in Hong Kong and the total remittance of renminbi for cross-border trade settlements amounted to 1.06 trillion yuan ($150.4 billion) and 1.28 trillion yuan, respectively, HKMA data showed.
Tan believes this comes as undeniable proof of Hong Kong having a stake in the nation’s past, present and future.
Based on its designation as “eight centers” in the 14th Five-Year Plan (2021-25) for finance, trade, shipping, aviation, law, innovation, IP, and culture, the city’s new roles will flesh out a bigger plan to harness the Guangdong-Hong Kong-Macao Greater Bay Area’s finest minds and impeccable strengths for the emergence of a globally competitive urban cluster.
“Hong Kong’s aim is for synergistic development with mainland cities in the GBA, enhancing competitiveness in the tech and finance sectors,” Cheung said.
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Of particular note are the efforts that Hong Kong should make in nurturing ties with its burgeoning neighbors to bolster its vision as a hub of global significance for technological and innovative financial services, and “provide comprehensive support for industry transformation and technological innovation in traditional finance via closer collaboration across the GBA”, Ha said.
In the current times of momentous change, Tan underscored that much work remains to be done. He proposed a tailor-made board for Hong Kong’s stock market, which would allow the inclusion of innovative high-tech firms into the Stock Connect program without imposing market cap restrictions. He also called for the expansion of Wealth Management Connect 2.0 to the Yangtze River Delta region to essentially sharpen Hong Kong’s edge as a super value-adder for mainland investors.
In a broader sense, as the high-profile Belt and Road Initiative enters its next decade, Tan pointed out the massive initiative has what it takes to be an entry point for Hong Kong to latch onto the trailblazing solution to global development. “Beyond the city’s crucial role as an investment and financing hub for the initiative, its wide-ranging professional services sector could make a big difference for a huge swathe of infrastructure projects along the length of the BRI route,” emphasized Tan, who also chairs the investment bank BOCOM International Holdings Co Ltd.
Ha expressed her confidence in Hong Kong’s promising future. With its better connections to the mainland and global financial markets, coupled with its distinct advantages and huge opportunities, and active integration into the grand national development landscape, “Hong Kong’s position as an international financial center will undoubtedly become more solid and progress to a higher level, contributing to high-quality national development,” she said.
