Hong Kong’s headache over how to stay on top in Asia
Hong Kong is still a mecca for financial services talent in Asia, but needs to position itself away from the “big exploding ball” that is China and work with, not against, the mainland if it’s going to survive and thrive.
How, exactly, Hong Kong manages to keep its edge in the face of a developing financial services industry in mainland China is still a source of debate. Bankers and industry participants speaking at the Asia Financial Forum suggested that its status as a “first tier” financial centre was not entirely secure because of moves from the mainland.
Attempting to compete, however, is a fruitless exercise. “If Hong Kong competes with China, they will not work with you. What’s the point of fostering a competitor?,” said Charles Li, CEO of Hong Kong Exchanges and Clearing, suggesting it needs to work with the mainland as a long-term partner.
“China is like a big ball that’s exploding. Hong Kong should be on the edge. We should only do the things that they can’t do without us,” he said. “However, as soon as they can do it, we should be able to be big enough to return it to them.”
Hong Kong is still reliant on China for many things that ensure it’s one of the world’s top financial centre – instead of raising capital, it’s needs China in terms of fixed income, currency, derivatives and commodities, said Li. Unless Hong Kong is able to offer all of these, the city is not a real financial center, he said, adding that this is one of the reasons why Hong Kong Exchanges acquired the London Metal Exchange in 2012.
Laura Cha, chairman of the Financial Services Development Council, Hong Kong, said that although the city has been comparative resilient since the onset of the global financial crisis. “Our position as a first-tier international financial center is not entirely secure.”
So, what should Hong Kong do to stay competitive? Lawrence Lau, chairman of CIC International, said Hong Kong believes it should capitalise on its traditional strength in equity capital markets.
“I am always supportive to the idea that Hong Kong should list stocks from around East Asia. This means that someone sitting here could buy the entire MSCI Index without going anywhere else. You could buy Samsung, you could buy TSMC [Taiwan Semiconductor Manufacturing Company).”
It should also develop a bond market, he said, relying on the huge pool of savings on the mainland China. “A lot of East Asian countries run surpluses vis-à-vis China. So, in time, these countries could have surplus renminbi, and that could be from the basis of sovereign countries issuing bonds in Hong Kong in renminbi.”
More importantly, however, Hong Kong remains more attractive to financial services professionals because it doesn’t have the blanket of smog that makes life so difficult for people in Beijing. Even here, it has to be vigilant.
“If you look at the challenges taking place in Beijing at present, it’s difficult to get people with small kids to go there, as they don’t want to subject them to the quality of air,” said John Rice, vice chairman of General Electric Company. “We can’t let Hong Kong follow in the same path.”