International financial hub now on firmer footing
▶ 25 years of integration with Chinese mainland makes city nearly crisis- proof
When Hong Kong returned to the motherland in 1997, some Western market watchers argued that the Hong Kong dollar would disappear within several years – a laughable reminder of fearmongering that transpired following that historic event.
A quarter of a century later, not only has the Hong Kong dollar survived crises after crises, but the city's role as a global financial hub has only been further strengthened. With strong backing from the Chinese mainland through every difficult period, the Chinese SAR's financial sector is keeping up with a race for greater global clout that may pit Hong Kong against New York and London in the future.
Nearly crisis- proof
When recalling the early days since the 1997 handover, observers would give credit to the HKSAR government's sobriety and effective responses under the auspices of the central government for the local financial market's weathering of the turbulent 1997- 1998 Asian currency tsunami.
Such a memorable performance is considered to have paved the way for the city to weather other major crises, economists said.
During the Asian financial crisis, the HKSAR government succeeded in intervening in the foreign exchange market, with the central government's underpinning, thereby maintaining the basic stability of Hong Kong's financial market, E Zhihuan, chief economist of Bank of China ( Hong Kong) Limited ( BOCHK) , told the Global Times in an exclusive interview on Tuesday.
Over the past 25 years, the linked exchange rate system ( LERS) has played an important part role in maintaining a stable local currency, fostering the local financial market and attracting foreign investment, E said. The LERS sets a floating band of HK$ 7.75- 7.85 against the US dollar.
Back in 1996, total loans extended by the Hong Kong banking sector
stood at HK$ 4.1 trillion ($ 522.51 billion). The reading hit HK$ 10.8 trillion in 2021, nearly triple the prior- handover level, E said.
Additionally, the city's stock market surged from HK$ 2.82 trillion in capitalization prior to the handover to HK$ 58 trillion now. The expansion of Hong Kong's banking sector and its capital market over the past 25 years speaks volumes about the local currency- denominated financial market strength, E noted.
Mutual integration
Behind the city's financial prowess that has withstood the test of more than two decades of vicissitudes lies its stronger ties with the mainland, increasingly relied upon as the backing of Hong Kong's financial prominence, market watchers said.
As Hong Kong continues acting as a gateway connecting the mainland and the international market, with a push for more headway in linkups between the mainland and Hong Kong financial markets, and ongoing improvement in the local business environment, the city will see its attractiveness for international capital keep rising, according to E at BOCHK.
Specifically, the impressive growth of the mainland economy prompts international capital to seek a foothold in Hong Kong to access growth opportunities resulting from the city's linkup with the mainland, the economist said.
Hong Kong is set to retain its competitiveness in terms of business environment and market efficiency under the “one country, two systems” principle, laying the groundwork for the continued uplift in its role as an international financial hub, Thomas Yeung, vice dean of the Grand China Institute of Capital Management, told the Glob
al Times.