China’s plan to introduce a financial law this year is expected to reinforce the Hong Kong Special Administrative Region’s role as the country’s largest offshore renminbi hub and strengthen the legal foundation of cross-border market connectivity, lawmakers and advisers said.

A work report delivered on Monday by the Standing Committee of the National People’s Congress, the country’s top legislature, said authorities will enact laws on finance and financial stability in 2026 and revise the People’s Bank of China Law and the Banking Regulation Law as part of a push to build a “financially strong nation”.

The proposed law was also flagged in a reform blueprint adopted at the third plenary session of the 20th Central Committee of the Communist Party of China in July 2024. Besides pledging improvements to financial regulation, the document highlighted the need to advance high-level financial opening and renminbi internationalization.

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Ronick Chan Chun-ying, a Hong Kong NPC deputy and lawmaker representing the financial sector, said the SAR, the world’s biggest offshore renminbi center, would be well placed to gain, particularly as policymakers seek to expand the currency’s use in trade settlement and investment amid shifting global monetary dynamics, including signs of a weakening United States dollar.

He cited Hong Kong’s RMB Business Facility, whose quota doubled to 200 billion yuan ($29 billion) within three months of its launch, as evidence of strong demand for offshore yuan among banks, particularly those from economies involved in the Belt and Road Initiative. “The response from the banking sector has been very strong. The 200 billion yuan could be used up quickly,” he said.

The RBF, first announced last year, provides banks with a stable and relatively lower-cost source of renminbi funds, enabling them to offer renminbi financing to their corporate clients and support the wider use of the Chinese currency in the real economy.

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Chan also noted that a firmer legal basis for expanding financial connectivity could be provided as the nation has shown support for Hong Kong’s further integration into national development, and it would also give the industry clearer direction to accelerate cooperation.

Hong Kong and the Chinese mainland are already linked through a range of mutual market access programs, including the Stock Connect, the Bond Connect and the Wealth Management Connect. Chan said additional channels could be explored, such as an insurance connect and a commodities connect focused on products like gold.

At the national level, he said the legislation is expected to fill a gap by providing an “overarching” legal framework for the financial sector, which is currently governed mainly by sector-specific laws covering areas such as banking and securities.

Junius Ho Kwan-yiu, a member of the National Committee of the Chinese People’s Political Consultative Conference and lawyer, said with the financial sector poised to expand, it’s crucial to put in place a basic safety framework in advance to ensure every move remains under control.

China’s gross domestic product has reached about 70 percent of that of the US, but the combined market capitalization of the Shanghai, Shenzhen and Hong Kong exchanges, standing at about $21 trillion as of early March this year, represents only around 30 percent of the US stock market. “This shows that the financial sector has yet to fully match the scale of the economy,” Ho said.

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“Even a modest increase in the share of financial services in the GDP, supported by improved legislation, could generate substantial benefits” and help offset slowing growth in the industrial sector, he said.

Ho cited sharp volatility in global virtual asset markets as an example of mounting external risks, saying that a more comprehensive domestic financial law would also strengthen the country’s ability to manage uncertainties.

Hong Kong’s experience as an international financial center could inform the drafting of the national legislation, said Rock Chen Chung-nin, a Hong Kong deputy to the NPC and legislator.

Over the past few decades, Hong Kong has refined its legal and regulatory framework in response to each round of international financial shocks, he said, adding that practices proven effective could provide useful reference for national lawmakers, particularly in the supervision of financial institutions, the development of market infrastructure and the design of trading rules.

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Chen noted that rapid innovation in areas like cryptocurrencies and the tokenization of real-world assets poses evolving regulatory challenges that Hong Kong and the mainland could explore together.

For instance, lessons from the JPEX case — the alleged HK$1.6-billion virtual asset fraud — could be studied and reflected in future legislation, Chen said.

Contact the writer at irisli@chinadailyhk.com