The heightened geopolitical tensions, economic recession and ongoing pandemic bring uncertainties to the global financial markets. Some observers hold a pessimistic view of the future of Hong Kong’s role in international finance. However, if we think more pragmatically, we can conclude that Hong Kong is and will continue to be the international financial centre.
In Asia, Hong Kong is irreplaceable in the race for international finance. Hong Kong is the only city in the world where the global advantage and China's advantage converge, being a dual-direction channel for international capital inflows to the Mainland and Mainland capital go global. Its proximity to Mainland China and high autonomy under “One Country, Two Systems” enable Hong Kong to have unrivalled access to opportunities in Mainland which Singapore and Japan do not have. More importantly, Hong Kong’s market is the only international market where foreign capital can invest in opportunities in Mainland China. Investing in Chinese companies listed on the Hong Kong Stock Exchange somehow equals investment in Mainland China. The medium-to-long-term trend of rising economic prospects of China has remained unchanged. For this reason, the demand for financial services in Hong Kong will continue to remain high.
From a global perspective, Hong Kong is highly competitive in offering high-quality financial services. The city benefits from its position between the U.S. and European time zones, with a track record of being a highly internationalised and open market. All the essential success factors have all along been present: an internationally aligned regulatory regime, rule of law, rich talent pool, free flow of information and capital, and so on. When compared to Singapore, Hong Kong’s financial services markets have a lead in size, breadth and depth. In 2020, Hong Kong’s financial services contributed USD 76 billion to the economy and were around 1.5 times that of Singapore (about USD 49 billion). According to the figures as at end of 2021, the market capitalisation of Hong Kong’s stock market was over $42 trillion, with a total of some 2,500 companies listed in Hong Kong, representing 7 times and 2.7 times more than those of Singapore respectively.
In view of the attenuated epidemic, Hong Kong authorities keep sending positive signals of embracing the global financial community. Since the end of September 2022, the Hong Kong government has lifted the compulsory quarantine requirement for inbound persons from overseas and has gradually relaxed the social-distancing measures, which has greatly reduced the inconvenience of cross-boundary travel while keeping risks under control. In early November 2022, Hong Kong will roll out the red carpet for global financial leaders by holding the Investment Summit. It will gather a group of eminent leaders from more than 100 major financial institutions including banks, securities firms, asset managers, etc., aiming to foster exchanges and cooperation among the global financial community. The above is conducive to rebuilding the confidence of the international community in Hong Kong as an international financial centre that is open with an efficient flow of capital and people. The Pearl of The Orient will shine even brighter.
Looking ahead, Hong Kong’s financial sector’s opportunities outnumber challenges. Hong Kong will continue to be a valuable global platform for businesses around the world. With over 1,400 U.S. companies based in Hong Kong and a substantial trade surplus, denouncing, sanctions, and decoupling towards Hong Kong would only jeopardise U.S. interests. All parties should abandon the narrow-minded concept of decoupling and get out of the shadow of the global economic recession through cooperation.
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