Some new measures have been announced to promote the financial interconnection between Hong Kong and the mainland. The Hong Kong Monetary Authority (HKMA) and the People's Bank of China (PBoC) announced a few days ago that they would launch the southbound trading of Bond Connect next Friday (September 24).
The mainland has been increasing the openness of the financial industry domestically and to the outside world, and the financial interconnection between Hong Kong and the mainland has continued to deepen. Since the crash in the mainland's stock markets in 2015, the central government has been paying great attention to financial security. The conflict between China and the US has made the international situation increasingly complicated. This, together with the outbreak of the anti-amendment storm in Hong Kong, has made the mainland even more prudent when promoting the openness of the financial market and interconnection with Hong Kong.
Since the beginning of this year, the mainland has been cracking down on Internet platform companies and other businesses. The storm of regulation has attracted widespread attention domestically and abroad. From the central government's point of view, the crackdown is aimed at bringing about a fair playing field, tackling monopolies, combating unhealthy trends in the industry, and promoting "shared prosperity". However, some people are accustomed to looking at mainland policies from ideological perspectives such as "state enterprises in, private enterprises out", arguing that the central government is tightening its control of private enterprises and foreign capital and suspecting that there might be uncertainties over the mainland's policies of increasing openness. In Hong Kong, some people are concerned about the long-term impacts of the establishment of a stock exchange in Beijing and the deepening reform plan of the Qianhai Cooperation Zone on Hong Kong in the long run.
Money always goes to where there are profits. This does not change because of political speculation. Bloomberg has reported that since the end of last year, funds from investors around the world have continued to flow into mainland stocks and bonds. Last month, overseas investors bought RMB26.9 billion worth of mainland stocks, the highest in three months. Compared with its stock and foreign exchange markets, Hong Kong's bond market have always been a weak link in the development of Hong Kong's financial market. The southbound flow of money from the north will bring domestic investors and capital to the Hong Kong bond markets. In the long run, this will also help expand the scale and development of the Hong Kong bond markets.
China is a socialist country, and the central government looks at the development of the financial market from a top-down perspective. Many of its ideas are different from those of Hong Kong people. The central government emphasises the role of the financial market in supporting industrial development. The establishment of a stock exchange in Beijing reflects that the central government does not intend to put all eggs in one or two baskets to avoid the monopolies of one or two financial markets. The move is also aimed at dividing the tasks of financing, as the central government hopes that the stock exchange in Beijing can become the main venue for supporting innovative SMEs, a different positioning strategy from the Shanghai, Shenzhen and Hong Kong markets. Pan Gongsheng, the deputy governor of the PBoC, recently stated that the functions of Qianhai, as a "pilot zone for the increase in the openness of the financial industry to the outside world", should be linked up with Hong Kong's role as an international financial centre. On the one hand, it is about using Hong Kong's status as an international financial centre to promote the internationalisation of the RMB. On the other hand, it is about using Qianhai as a testing ground for the connection with international standards. Hong Kong's financial development can complement the mainland's. The key is whether Hong Kong can strive to become stronger and make good use of every opportunity. Given the murkiness of international politics, China attaches great importance to financial security. When Hong Kong deepens financial cooperation with the mainland, it is also necessary for Hong Kong to raise awareness in this regard and work harder on financial security.