Hong Kong Might Lead China’s Monetary Integration Efforts with Main World Economies and Promote Digital Yuan Adoption

Hong Kong may lead China’s monetary integration efforts with different nations and will additionally assist promote the adoption of the digital yuan, in accordance with authorities officers.

However no matter what Hong Kong really does to meet its function, the particular administrative area of the Individuals’s Republic of China should serve the nation’s nationwide strategic objective, in accordance with the Securities and Futures Fee’s (of Hong Kong) Julia Leung.

The Undersecretary for Monetary companies acknowledged that the town may be capable to function a particular hub for supporting the adoption of China’s sovereign digital forex.

As reported by the SCMP, Hong Kong might probably play a key function in serving to China with its monetary integration with the worldwide financial system regardless of Beijing and Washington’s ongoing technology-related and buying and selling warfare.

The Trump administration could have tried to decouple the American and Chinese language economies, nonetheless, this may increasingly have led to Beijing changing into extra dedicated to its monetary integration efforts with different main economies. This will likely have created a “breakthrough” alternative for Hong Kong, in accordance with Julia Leung Fung-yee, the Deputy Head of the town’s Securities and Futures Fee (SFC).

Julia famous throughout a panel dialogue on the Asian Monetary Discussion board (on January 19, 2021):

“We’re on the cusp of [another potential] breakthrough amid the continued US-China expertise and commerce warfare. With its strong infrastructure, Hong Kong is in a singular place of taking part in the function as a connector [to mainland China].” 

The panel had reportedly been how Hong Kong’s asset administration business, which has $3.7 trillion in belongings beneath administration (AUM) and employs a major share of the town’s monetary companies staff, had survived the challenges of the previous yr that have been created by the COVID-19 pandemic. Panel members got here to the settlement that the town’s capital markets have been capable of survive and function fairly nicely due to Hong Kong’s involvement in facilitating channel fund flows out and in of mainland China.

Nonetheless, Hong Kong’s closed capital account meant that any collaboration the town had with Beijing shouldn’t have an effect on the nation’s monetary stability, Leung famous. The problem or objective for Hong Kong was that it should show its capability to make sure China would stay financially steady through the liberalization course of, Leung acknowledged.

She added:

“No matter Hong Kong does [in fulfilling its role or obligations], it should serve the nationwide strategic objective [of mainland China].”

Leung identified that the inventory join schemes have been doing nicely and that they confirmed how the town served as China’s connection to the worldwide financial system. Supported by exchanges in Hong Kong and on the mainland, the mechanism lets Chinese language buyers’ funds to circulation again to their onshore financial institution accounts as quickly as the cash has been withdrawn from the town’s shares, thus avoiding any leakage of yuan-based belongings from the Chinese language monetary system, Leung famous.

She additionally talked about that China could resolve to immediately open up its capital markets with out Hong Kong’s help.

She remarked:

“The join schemes are underpinned by the shut connection that Hong Kong has with Chinese language regulators, and the shut supervisory and enforcement cooperation [between them].”

Leung had been working on the Hong Kong Financial Authority (HKMA) for round 14 years earlier than taking over her function on the SFC again in 2015. Whereas working on the HKMA, Leung had been liable for convincing the Chinese language authorities to permit Hong Kong-based banking establishments to supply sure restricted yuan banking companies again in 2003.

At the moment, the HKMA is finishing up a pilot to be able to check out the digital renminbi, which is a digital forex launched by the Individuals’s Financial institution of China, the nation’s central financial institution.

Joseph Chan, the Undersecretary for Monetary Providers and the Treasury, acknowledged through the panel dialogue on January 18, 2021 that Hong Kong may be capable to lead a breakthrough in China’s capital market opening and numerous reforms or key modifications with the digital yuan.

The digital renminbi, which has been utilized in transactions valued at over 2 billion yuan (appr. S$300 million) in several pilots throughout a number of main Chinese language cities, could also be utilized by Hong Kong’s residents for making purchases inside the Higher Bay Space growth zone.