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Hong Kong, London Can Achieve Mutual Growth: Chan

by Mary Swire, Lowtax.net, Hong Kong
11 June, 2014

During his speech to the London Stock Exchange Group Greater China Forum on June 9, Hong Kong's Secretary for Financial Services and the Treasury, Professor K C Chan, pointed out the great possibilities that exist for future co-operation between the two international financial centers.

While "there is talk of increasing competition for capital, talent, and business opportunities between international financial centers," Chan did not "see the relationship between Hong Kong and London, or any financial centers for that matter, as a simple zero-sum game." He stressed that, despite their similarities (including English law and language), Hong Kong and London are also very different places. "Located in the geographic center of East Asia, Hong Kong has long been a commercial and financial hub for Greater China and much of Asia, just as London is for the United Kingdom and Europe," and their scope for co-operation is unlimited because their development has become complementary, he said.

Chan looked at the growth of the offshore Renminbi (RMB) market in Hong Kong and London as a good example. While Hong Kong has developed into the largest offshore RMB center, "serving not only customers in Hong Kong, but also the rest of the world," London has launched its own RMB market by settling its RMB trades via the clearing facilities operated by the Hong Kong Monetary Authority (HKMA), and the RMB Qualified Foreign Institutional Investor scheme was also expanded to include London last October, the first time it was offered outside Hong Kong.

Mutual co-operation on the development of international RMB business will be further carried forward, he said, by the private sector-led Hong Kong-London Forum, which was launched under the auspices of the HKMA and the UK Treasury. He confirmed that the Forum has met three times since it was launched in 2011, and the participants "have agreed on a number of initiatives to promote the use of RMB by corporate bodies around the world."

However, above all, Chan foresaw that the Shanghai-Hong Kong Stock Connect scheme, which was announced in April and is expected to commence later this year, will also offer the greater opportunity for co-operation between Hong Kong and London.

Under the pilot scheme, for the first time, eligible Mainland investors will be allowed to trade stocks listed on the Stock Exchange of Hong Kong (SEHK) directly through the Shanghai Stock Exchange (SSE). At the same time, it will also allow Hong Kong and overseas investors to trade, for the first time, stocks listed on the SSE directly through the SEHK.

"The arrangement will strengthen the strategic co-operation and interaction between capital markets in Hong Kong and the Mainland," Chan concluded. "It will also catalyze the two-way RMB fund flows between onshore and offshore markets, and further increase RMB liquidity in Hong Kong. Companies wishing to attract investors from the Mainland or raise their profile among them may also consider a listing in Hong Kong. London-based investors with RMB funds will be able to take part in this new scheme to access the onshore stock market using Hong Kong's platform."

In his concluding remarks, he noted that financial reform is around the top of the Mainland's national reform agenda, which has called for "an orderly, risk-managed, and two-way opening of the capital account, as well as further liberalization of the foreign exchange and interest rate regimes, (and) improved access for foreign investors and the establishment of free trade zones."

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