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Hong Kong’s role as a conduit for international investment into mainland China has reached new heights, with cross-border trading volumes hitting record levels in 2024. 

“Hong Kong is that rare place where global capital meets mainland investment flows,” said Wilfred Yiu, Deputy Chief Executive of Hong Kong Exchanges and Clearing (HKEx), speaking at the Sibos conference in Beijing. “Within just 90 minutes, you have the best combination of Wall Street and Silicon Valley,” in reference to Hong Kong’s strategic position within China’s Greater Bay Area technology and financial hub.

Beijing’s latest round of economic stimulus measures, including new swap facilities and reduced lending rates, have helped channel financial support into the Chinese economy. These initiatives form part of China’s broader economic transformation from an infrastructure and real estate-driven model towards one focused on consumption and technology.

Hong Kong’s evolution as a financial centre is perhaps most evident in its role as the world’s primary offshore renminbi hub. The Chinese currency has become the fourth most commonly used payment currency globally, though still significantly behind the US dollar. Hong Kong has established itself as the leading centre for offshore renminbi bond issuance and product development.

The Special Administrative Region (SAR) has pioneered innovative trading mechanisms, including a dual counter market that allows stocks to be traded in both Hong Kong dollars and renminbi—the only offering of its kind in the world. This flexibility has become increasingly attractive given the current interest rate environment, with Chinese rates at approximately 1.75% compared to US dollar rates above 4%.

Yet despite these achievements, there remains room for growth. Foreign participation in mainland Chinese markets remains surprisingly low, with global capital accounting for just 5% of the onshore equity market.”We are still at a very nascent and early stage,” said Yiu.

The SAR’s financial infrastructure has expanded well beyond equities trading. The recent launch of Swap Connect, enabling global investors to trade onshore interest rate swaps, marks what Yiu describes as “another major breakthrough”. New initiatives around REITs and block trades are also in development, further diversifying Hong Kong’s financial product offerings.

Hong Kong’s role in the Greater Bay Area development zone has become increasingly central to its future prospects. The region encompasses three major exchanges—in Shenzhen, Guangzhou, and Hong Kong—alongside sophisticated banking and investment infrastructure, creating what Mr Yiu calls “an unbelievable” concentration of financial and technological capability.

Hong Kong has invested heavily in technological infrastructure to maintain its competitive edge. Recent market volatility saw daily trading volumes exceed HK$ 600 billion, handled “seamlessly” according to Yiu, thanks to robust financial systems.

However, challenges remain. Geopolitical tensions continue to cast a shadow over Hong Kong’s role as an international financial centre. “We are not out of the box,” admitted Yiu, emphasising the need for business models and systems that can weather an increasingly complex environment.

Yiu struck an optimistic note about Hong Kong’s future. While acknowledging that market changes bring “anxiety and nervousness”, he emphasised the SAR’s proven ability to adapt and thrive amid challenging circumstances.

This year’s Sibos conference marks a return to in-person gatherings in the Chinese capital for many international financiers. And as China’s expansion into global markets continues, so does Hong Kong’s role as a conductor between the two. 

Its success in facilitating cross-border investment flows while maintaining robust market infrastructure makes Hong Kong’s well-established position as a leading financial hub in Asia more secure.