Hong Kong could spearhead China’s financial integration with world, digital yuan use: government officials

Hong Kong could play a leading role in easing China’s financial integration with the rest of the world amid Beijing and Washington’s technology and trade war, according to the city’s securities regulator.

“We are on the cusp of [another] breakthrough amid the ongoing US-China technology and trade war. With its robust infrastructure, Hong Kong is in a unique position of playing the role as a connector [to China],” she told a panel discussion at the Asian Financial Forum on Tuesday.

The panel was looking at how the city’s asset management sector, which has US$3.7 trillion in assets under management and employs a sixth of Hong Kong’s financial services workforce, had weathered the past year under the coronavirus pandemic. All members agreed that the city’s financial markets had remained resilient thanks to its role in helping channel fund flows in and out of China.

But given its closed capital account, high on Beijing’s national priority was that any new connection or collaboration that Hong Kong sought to forge with China must not compromise the country’s financial stability, Leung said. The challenge for Hong Kong was that it must demonstrate its ability to ensure China would continue to have financial stability in the process of its liberalisation, she added: “Whatever Hong Kong does [in fulfilling its role], it must serve the national strategic goal [of China].”

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China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

“The connect schemes are underpinned by the close connection that Hong Kong has with Chinese regulators, and the close supervisory and enforcement cooperation [between them],” she said, adding that China could also opt to directly open up its financial markets without Hong Kong’s help.

Leung worked at the Hong Kong Monetary Authority (HKMA) for 14 years before joining the SFC in 2015. During her tenure at the HKMA, she was instrumental in getting Beijing to allow Hong Kong banks to offer limited yuan banking services in 2003.

Now the HKMA is conducting a pilot to test the digital yuan, a digital currency launched by the People’s Bank of China, in the city.

Joseph Chan, the undersecretary for financial services and the treasury, told a panel on Monday that Hong Kong could lead another breakthrough in China’s financial market opening and reforms with the digital yuan.

“Hong Kong already handles over 75 per cent of global offshore yuan transactions, so the city is well-equipped as the financial centre in the Greater Bay Area to promote China’s central bank digital currency,” he said. The country is expected to be among the first few to launch their own digital sovereign currencies.