Navigating New Growth Corridors in Asia-Pacific: Eddie Yue's Vision for Hong Kong's Role
Authority (HKMA), shared his insights on the evolving economic landscape in the Asia-Pacific region and Hong Kong's role in shaping future growth corridors. His remarks centered on the region's dynamic transformation, driven by geopolitical shifts, economic realignments, and rising trade and investment between China and ASEAN.
The Forces Shaping New Growth Corridors
Yue highlighted several critical factors driving these changes:
Changing Trade Patterns: Asia is shifting from being a low-cost manufacturing hub to a leading force in innovation and consumption, with China at the forefront. Agreements like the Regional Comprehensive Economic Partnership (RCEP) are also facilitating trade in the region. By 2024, ASEAN has become China's largest trading partner, with ASEAN exports and imports to and from China accounting for over 16% of China's trade.
Cross-Border Investment: China's foreign direct investment (FDI) in ASEAN reached USD 25 billion in 2023, with total bilateral investment surpassing USD 400 billion by mid-2024. This includes investments in manufacturing, the digital economy, and green technologies. China's securities investment in ASEAN also rose by over 20% in 2024.
Hong Kong's Key Role
Hong Kong continues to play a pivotal role in fostering regional trade and investment:
Trade Finance: Hong Kong's banks offer around USD 50 billion in trade finance loans, with 40% used for trade outside the city, reflecting Hong Kong's role as a regional trade financier. The rise of RMB in global trade finance, with 6.4% of the market share by November 2024, underscores Hong Kong's role as the world's leading offshore RMB hub.
Cross-Border Investments: Hong Kong's capital markets are a critical intermediary for investments between China and ASEAN, handling around two-thirds of such flows. The Hong Kong Stock Exchange (HKEX) saw a strong rebound in 2024, returning to the top five globally for IPO activity.
Strengthening the Corridors
Looking ahead, Hong Kong must adapt to maintain its position as a regional leader:
Digitalisation: Yue emphasized the importance of digitization, particularly in trade finance, where initiatives like Project Ensemble aim to integrate tokenization and electronic trade documentation.
Sustainability: Hong Kong is focused on enhancing its role in sustainable finance. In 2024, Hong Kong issued over USD 40 billion in green and sustainable bonds, capturing 45% of the Asia-Pacific market. This aligns with the HKMA's Sustainable Finance Action Agenda, supporting Asia's transition to a low-carbon economy.
Engagement: As the “gateway to China,” Hong Kong must continue engaging with ASEAN and other regional markets to enhance its role. Yue cited collaborations with the Bank of Thailand on projects involving tokenization and cross-border payments as examples of fostering deeper connections.
Conclusion
The China-ASEAN corridor is rapidly expanding, with Hong Kong positioned at its center. Yue emphasized that to strengthen its role as an international financial center, Hong Kong must focus on digitalisation, sustainability, and engagement, ensuring it remains a leading force in driving regional economic growth.
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