Published: 21:40, February 20, 2024 | Updated: 09:39, February 21, 2024
Is HK really a ‘ruin of an international financial center’?
By Dominic Lee

In the realm of global finance, few cities hold the same level of prestige as Hong Kong, which has long stood shoulder-to-shoulder with New York and London as a leading international financial center. However, over the past two years, Hong Kong’s stock market has performed poorly, with the initial public offering market also witnessing a lackluster performance. Some have mocked Hong Kong as a “ruin of an international financial center”. Yet this grim depiction is met with staunch opposition from Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority.

Yue champions the city’s financial might, highlighting that Hong Kong’s banking system is the largest among Asia’s financial centers. The local stock market boasts a scale and turnover six to seven times greater than its regional neighbors, and Hong Kong stands as Asia’s predominant asset management hub. Any talk of a “ruin” is laughable, Yue said recently. While the numbers speak for themselves, the city’s financial officials recognize the need to better tell Hong Kong’s story and to further bolster its already considerable strengths.

Hong Kong’s strategic position as the gateway to the Chinese mainland, the world’s second-largest economy, cannot be understated. This unique advantage has made the city the primary conduit for investors and fundraisers from the mainland and around the world, fueling the development of a vast and increasingly diverse capital market over the last couple of decades — an achievement few cities can even dream about.

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Admittedly, there has been a lull in the local capital market over the past couple of years, but it is important to remember that stock markets are cyclical. Many stock markets around the world, and the IPO segment in particular, have performed poorly in recent years because of a spike in interest rates in the United States, which has siphoned money off other markets, including the Hong Kong stock market, contributing to their lackluster performances.

As the mainland’s economy shows signs of recovery and policy measures begin to bear fruit, the outlook for Hong Kong’s economy is improving, as is that for the local stock market. The notion of Hong Kong decaying into the “ruins of an international financial center” is, therefore, more a headline-grabbing statement than a reflection of reality.

The assertion of a decline in the Hong Kong capital market’s significance is not only misleading but also underestimates the city’s resilience and unwavering commitment to innovation and growth in the financial domain

Nonetheless, Hong Kong’s financial officials are not resting on their laurels. Financial Secretary Paul Chan Mo-po recently journeyed to Davos, Switzerland, to attend the annual World Economic Forum and meet with political and business leaders from all over the world. His mission was clear — to promote the strengths of Hong Kong’s financial market.

In his meetings with officials and business leaders of other countries during that trip, Chan underscored Hong Kong’s role as an important node in the Belt and Road Initiative, contributing to regional financial connectivity, trade expansion and cultural exchange in a unique way. Chan noted the eagerness of some countries in the Middle East and Central Asia to diversify their economies and transition to green energy, and said he had invited those countries to tap into Hong Kong’s efficient and stable financial market, which can build mutually beneficial partnerships with those countries by providing financing services to their enterprises and projects. In media interviews, Chan also expressed confidence in the future of Hong Kong’s stock market despite its recent weakness, noting its cyclical nature.

Hong Kong’s financial sector owes its success to several favorable factors: a business-friendly environment, a simple and low tax system, the free flow of capital, a judicial system that aligns with international standards, effective financial regulation, and being one of the freest economies in the world. None of these factors, which underpin Hong Kong’s economic prowess, have changed, nor will they. These are the pillars that must be upheld.

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However, there are areas wherein Hong Kong lags behind other regions, such as the diversification of financial products and the development of financial technology, including electronic payment systems. The HKSAR government is urged to act swiftly to address these gaps and reinforce Hong Kong’s position as a preeminent international financial center.

In conclusion: While Hong Kong’s financial sector has faced its share of challenges, the city’s foundational strengths remain intact. With a clear vision for the future and a proactive stance in promoting its advantages, Hong Kong is set to continue its legacy as a global financial powerhouse. The assertion of a decline in the Hong Kong capital market’s significance is not only misleading but also underestimates the city’s resilience and unwavering commitment to innovation and growth in the financial domain.

The author is the convener at China Retold, a member of the Legislative Council, and a member of the Central Committee of the New People’s Party.

The views do not necessarily reflect those of China Daily.