Despite the challenges brought about by the Covid-19 pandemic and external uncertainties, Hong Kong remains a major financial hub globally, with new opportunities to further raise its global status.
Hong Kong secured a 3rd place in the latest Global Financial Centers Index, maintaining 1st place in areas including business environment, human capital, infrastructure and general reputation, according to the Index compiled by the UK’s Z/Yen think tank based in London and the China Development Institute based in Shenzhen.
Since Hong Kong’s return to the motherland in 1997, its financial market has evolved both in size and openness, with remarkable progress made in its banking system, capital market and foreign exchange market.
A series of data from the Hong Kong Monetary Authority (HKMA) shows how rapidly Hong Kong’s financial market has grown over the past 25 years: the combined assets of the banking system totaled $27 trillion (3628 billion euros) in April 2022, three times more than in July 1997, and its stock market was valued at 38,000 billion Hong Kong dollars in May 2022, against only 4600 billion in July 1997.
“Hong Kong’s status as a global financial hub has been strengthened and stabilized over the past 25 years, while its role as a bridge between the Chinese mainland and the rest of the world has become more and more marked,” said Eddie Yue, the general manager of the HKMA. Hong Kong’s foreign exchange reserves have grown from around US$80 billion (€76 billion) in July 1997 to over US$460 billion in May 2022, a significant amount relative to its money supply.
In addition, support from the Chinese mainland provides Hong Kong’s financial market with additional help to cushion external shocks. Stock and bond market connection programs have boosted market liquidity and encouraged brokerage firms and other financial institutions to stay in Hong Kong, Eddie Yue said. “Hong Kong has the distinct advantage of receiving support from the Chinese mainland while remaining well connected to the rest of the world,” he said.
Support from the Chinese mainland also provides Hong Kong with new opportunities to enhance its status as a global financial hub. The HKMA is stepping up its efforts to boost the liquidity of the yuan, while promoting financial products – notably stocks and bonds – denominated in this currency.
“As the largest offshore yuan business hub, Hong Kong could play a crucial role in boosting the use of the Chinese currency globally. […] Over the next few years, there will be considerable growth potential for the international use of the yuan,” explains the HKMA’s managing director.
Green finance is another area where Hong Kong has taken the lead. According to Eddie Yue, funds raised through green bonds or green credits in Hong Kong totaled 57 billion US dollars (54 billion euros) last year, four times more than the last year.
“Despite challenges in equity and bond markets in the first 4 months of this year, we saw faster issuance of green bonds and credits than last year. […] The future looks bright for green finance in Hong Kong,” he notes.