5 reasons Hong Kong’s financial hub status is secure

Hong Kong’s fundamentals actually put it in a position of unique strength
It’s the gateway to mainland China and the top clearing centre for the renminbi, while the city’s cosmopolitan charm is appealing to talent

Damien Green

Published: 4:33pm, 8 Dec 2023

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“The report of my death was an exaggeration.” As it was for Mark Twain, so it is for Hong Kong’s status as an international financial centre.

The often-misquoted line from Twain that appeared in the New York Journal in the spring of 1897 was his way of ridiculing what was obviously not true. According to the Journal, Twain was “undecided whether to be more amused or annoyed when a Journal representative informed him today of the report in New York that he was dying in poverty in London”.

Similarly, one wonders whether Christopher Hui Ching-yu, Hong Kong’s financial services secretary, should be annoyed or amused by claims that the city’s days as a leading financial centre are numbered. Like Twain, perhaps Hui could be forgiven for any urge to gently ridicule these claims.

Hong Kong’s future as a financial centre is underpinned by five fundamentals that put the city in a position of unique strength.

First, Hong Kong remains the capital gateway to mainland China. Chinese sovereignty over Hong Kong now or in the future has never been in question and if anything, the stabilising of the pathway to integration in recent years has further cemented Hong Kong’s role in this regard.

The steady progress towards an integrated cultural and economic zone across the Greater Bay Area even further presents Hong Kong as a natural staging post for foreign investment in and out of the mainland.

It’s worth remembering that the Greater Bay Area represents more than 10 per cent of China’s gross domestic product, has a population of about 85 million people exhibiting meaningful average income growth and is rapidly climbing the value-added curve.

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Second, Hong Kong is uniquely positioned as the world’s largest clearing centre for the renminbi. In August, the Chinese currency ranked fifth, accounting for 3.47 per cent of global payments, following the dollar (48.03 per cent), euro (23.22 per cent), pound (7.14 per cent) and yen (3.68 per cent). And there have been forecasts that the renminbi will be the third largest trading currency by 2030.

Hong Kong processes 73.16 per cent of renminbi payments, way ahead of the United Kingdom (5.51 per cent) and Singapore (3.81 per cent). This not only points to Hong Kong’s future role, but the city’s clear advantage over the Southeast Asian island state as a leading financial hub.

Third, Hong Kong has a mature financial services sector underpinned by an advanced financial regulatory framework and entrenched common law system. This continues to give business confidence in the city as a domicile and a hub for China investment.

Hong Kong also remains a natural platform for China-based corporations seeking outward investment and expansion.

Fourth, Hong Kong can and should leverage its deep capital markets and its position as a trade hub to become a central player in global green finance. China has been making determined efforts to address climate change challenges, through the development of green finance platforms and carbon exchanges. Given this, Hong Kong’s opportunity to become a super hub for global green finance is its to lose.

Last but not least, Hong Kong is one of Asia’s true cosmopolitan wonders, offering immensely rewarding cultural and lifestyle experiences, both urban and natural, to all who live and work in the city. Hong Kong’s variety of textures and contrasts – whether it is the pre- and post-industrial urban landscapes, the passion for food and fanfare, the colour and energy of Chinese culture, or the rich traditions of the South Asian minorities who have settled in the city for generations – makes it quite an extraordinary place indeed.

Beyond the busy streets, Hong Kong’s natural beauty is waiting to be discovered in its mountain ranges and marine habitats. In the post-pandemic world, lifestyle and health have become even more important pull factors for talented professionals, and thus, for the organisations that wish to attract and retain them. Hong Kong’s cultural scene and natural scenery, together with its advanced healthcare system, are surely plus factors in the city’s viability as a global financial hub.

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Of course these five fundamentals are no guarantee that Hong Kong is and will remain a leading financial centre. There is competition and sadly there are some with political motivations to diminish Hong Kong’s opportunities.

Further action is no doubt required of the government. This includes successfully guiding the city through the current period of global economic and geopolitical volatility. Coordination across all stakeholders, from the government to the investment sector to the wider community, is vital.

It’s also vital that foreign investors in Hong Kong do not simply seek to extract value but also actively support social and economic progress in the city. We are perhaps not seeing enough of this active support, particularly from the North American firms that have been fence-sitting their way through the current geopolitical tensions.

It was good to see the secretary for financial services and the treasury actively pushing back on some of the negative talk about Hong Kong’s status as an international financial centre. Building confidence in the city as a financial hub is an extremely important matter and the duty of all stakeholders who are invested in and benefiting from the city. Perhaps business could do more in this respect.

Damien Green is a Hong Kong based financial services executive