A pilot free trade zone (FTZ) in Shanghai could lead to greater listings and investor activity on Hong Kong Exchange and Clearing (HKEx), according to its chief executive, Charles Li.
Rebuffing widespread suggestions that the FTZ would weaken Hong Kong’s stature as China’s leading financial hub, Li said the zone was an overall positive move for both China and Hong Kong.
“The Shanghai FTZ will make China more open and internationalised, and Hong Kong is in the best position among all global financial centres to convert the liberalisation of the Mainland market into its own opportunities,” Li wrote in a blog published Monday.
The FTZ, launched on 29 September, is the first of its kind in China, and will act as a testing ground for a range of economic reforms. It will permit Chinese yuan convertibility and unrestricted foreign currency exchange in addition to a tax-free period of 10 years for businesses based within the zone.
Li said the role of the FTZ as a reform testing ground could lead to a growth in such zones spreading across the country, accelerating the push towards liberalisation and in the process reinforcing Hong Kong’s pivotal regional role as a gateway to, and from, China.
“The establishment of the Shanghai FTZ may result in some international institutions, funds and talent flowing out of Hong Kong to the north,” Li conceded, “but a more open and globalised China will absolutely make Hong Kong an even more attractive transfer station to the world and bring more traffic flow to Hong Kong.”
He added as China continues to open up, domestic investors will have greater scope to invest abroad, through international hubs like Hong Kong.