Market connects, RMB-based products, BRI funding to brighten SAR prospects

The People's Bank of China, the central bank, will continue to support the Hong Kong Special Administration Region's development as an international financial center, its governor said on Dec.7.

Measures in that direction are mainly for optimizing the financial market connect mechanism between the Chinese mainland and the SAR, as well as developing RMB-denominated financial products and tools, said PBOC Governor Yi Gang in a seminar.

The SAR can play a role in connecting the mainland and international financial markets, and authorities will further improve the connect programs, which channel funds between the mainland and the SAR to better satisfy investor needs, Yi said.

Multiple efforts will help strengthen Hong Kong's status as an international financial center, he said.

The seminar, entitled "Hong Kong's Position and Prospect as an International Financial Center", was jointly held by the PBOC and the Hong Kong Monetary Authority in Beijing on Thursday.

According to data from the PBOC, more than half of all the listed firms in Hong Kong are from the mainland, contributing more than 80 percent of the local market capitalization. Under the Securities Connect program, about 70 percent of the A shares held by international investors are traded in Hong Kong.

By far, Hong Kong contributes to nearly 50 percent of cross-border RMB payments, 60 percent of offshore RMB deposits and 80 percent of offshore RMB-denominated bond issuance, the central bank indicated.

Hong Kong is expected to provide stronger support in financing for projects related to the Belt and Road Initiative. As an important gateway for mainland enterprises' "going out" development, Hong Kong can support mainland enterprises as well as attract global investors to join the BRI construction projects through improved financial services, Yi told the seminar.

Eddie Yue, chief executive of the Hong Kong Monetary Authority, stressed continual improvements to regulatory regimes to mitigate risks and contribute to policy delivery and standard-setting at international regulatory forums, in order to strengthen the stability of Hong Kong's financial system.

Mu Changchun, director-general of the PBOC's Digital Currency Institute, told the seminar it is important to further enhance cooperation with Hong Kong under fintech and central bank digital currency initiatives.

The ongoing trial of the cross-border use of central bank digital currency, which is called the "mBridge", will further improve flexibility and expand docking services, which allow integration of different types of financial infrastructure as well as widen the scope of digital currency use cases, Mu said.

Hong Kong can help expand the cooperation network by inviting more partners to co-build and co-share the mBridge platform, he said.

The PBOC governor mentioned that RMB-denominated financial products would be expanded and risk management tools improved in Hong Kong as a means to promote the internationalization of the RMB.

Other efforts to strengthen Hong Kong's position as an international financial center include cooperation on the central bank digital currency, regulatory technology and green finance between the PBOC and the HKMA, Yi said.

On the recent fluctuations in the US dollar bond market, Yi said the short-term risk exposure of some individual real estate companies such as the Evergrande Group will not influence the financing functions of the market in the medium-to-long term.

As a mature international financial center, Hong Kong has established a complete and efficient financial system, which also has clear laws, rules and procedures to deal with relevant issues, Yi said.

The PBOC will continually build a level playing field and urge all enterprises and shareholders concerned to deal with debt issues in accordance with laws and market rules, fully respecting the rights and interests of creditors and shareholders who follow the legal order of debt redemption, Yi said.