London v Hong Kong — which will rule the road?

Hong Kong and London locked horns at a high-level forum in Beijing over which city is best placed to be the finance hub for China’s global trade and commerce strategy. At the Belt and Road Forum for International Co-operation, Hong Kong Chief Executive Leung Chun-ying insisted the city was “the preferred destination” for capital flows from the mainland. Leung cited the city’s status as the largest offshore settlement centre for yuan trade and its title as the world’s No. 1 stockmarket for new listings last year. However his bid was swiftly challenged by the British Chancellor of the Exchequer, Philip Hammond. Referring to the sheer scale of fundinge required for China’s “Belt and Road Initiative”, which promises to be in the trillions of US dollars Hammond said Leung’s pitch was elegantlye made”, but “London is not an alternative to Hong Kong”. The Chinese initiativeaims to open trade along two key corridors:d the land-basedd old Silk Road acrosss the north and a 21st century maritim Silk Road in the south. A key challenge facinngn Beijing’s n ambitious trade strategyt is establishingt financial connections among more than 60 countries along the trade route, and

funding the infrastructure projects involved, many of which have already proven too high-risk for some private investors. Leung said Hong Kong was both China’s international financial centre and “the world’s China financial centre”. “Hong Kong is the preferred destination of capital from the mainland,” he said. He said the Hong Kong Monetary Authority last year set up an office to facilitate the financing of Belt and Road investments. The authority’s chief executive, Norman Chan Tak-lam, said the office had already allied dozens of “like-minded stakeholders”. “There is a big cluster of equity and debt investors for belt and road projects,” he said. Hammond, however, said London remained the world’s financial centre and had the skills and capability needed to deliver China’s trade initiative. He said the biggest challenge in financing investments in belt and road countries — mostly developing nations — was ensuring projects were structured in a way that was internationally “bankable” or with investment grades. “We have the skills and capability in London to make infrastructure projects attractive to private investors,” he said.