HK can play bigger role in Belt & Road

By Yang Sheng Source:Global Times Published: 2017/6/27 23:48:40

International status gives commercial, legal advantages

As a "super-connector" for the Chinese mainland, Hong Kong can provide significant support in financial and legal services to boost China's cooperation with other countries under the Belt and Road initiative, experts said.

As the city kicks off celebrations for the 20th anniversary of its return to China, President Xi Jinping will visit the Hong Kong Special Administrative Region (HKSAR) from Thursday to Saturday.

Although some mainland cities have become increasingly developed and internationalized and their economies have quantitatively surpassed Hong Kong in certain fields, "Hong Kong still has solid advantages at the international level and is playing an important role to serve the country's grand strategy," Tian Feilong, a legal expert and associate professor at Beihang University, told the Global Times on Tuesday.

"Hong Kong's most observed and solid advantage is its status as an international financial center. No mainland city can completely replace it right now, so Hong Kong's support for internationalization of the yuan and other services for investment and raising capital is essential," Tian said.

Hong Kong is the biggest offshore yuan center in the world, and it can boost the yuan's exchange and financing among Belt and Road countries, and it can also use its capability in financial risk management to cushion against risks for infrastructure investment in the Belt and Road, Bank of China (Hong Kong)'s economic and policy research director Xie Guoliang told the China News Service.

On March 23, the Asian Infrastructure Investment Bank (AIIB) announced that Hong Kong will become a new member upon deposit of its first capital contribution.

SAR Financial Secretary Chan Mo-po said "Hong Kong's professional services and financial services sectors can contribute to the success of the AIIB. Hong Kong's participation in the AIIB can also create new opportunities for the relevant sectors, and can further reinforce our position as a premier international financial center," according to the HKSAR government website.

According to a fact sheet issued by the Legislative Council, Hong Kong will subscribe to 7,651 capital shares in the AIIB (about 0.765 percent of total AIIB capital shares), of which 20 percent are paid-in shares and 80 percent are callable shares. The total capital subscription is $765.1 million. Of this amount, $153 million is the paid-in portion requiring actual payment and the remaining as contingent liability of Hong Kong.

However, "there is a challenge for Chinese firms to raise capital in Hong Kong and invest in Belt and Road countries, because Hong Kong has established a sophisticated and strict financial mechanism that aims to reduce risks while seeking profits, and some Belt and Road countries' political and security situations are not stable," said Liang Haiming, chief economist with Guangzhou-based China iValley Research Institute.

More internationalized

Apart from financing, Hong Kong is more internationalized than Chinese mainland cities in many areas, such as in legal systems and education, Tian said.

China's massive investments in Belt and Road countries may bring issues in contract law or over commercial disputes, and Hong Kong's legal system is more recognized and accepted in the international community than the mainland's, so it can offer legal services, like arbitration and dispute mediation, for China and all other Belt and Road participants, Tian added.

Together with the Belt and Road initiative, construction of the Guangdong-Hong Kong-Macao Greater Bay Area is a significant development opportunity for Hong Kong, as well as the whole Pearl River Delta, because this grand regional integration strategy will connect these cities by high-speed rail, and their port infrastructure will see them become an important part of the 21st Century Maritime Silk Road, Tian noted.

At the Fifth Session of the 12th National People's Congress of China in March, Premier Li Keqiang said the central government will draw up plans for the development of a city cluster in the Guangdong-Hong Kong-Macao Greater Bay Area to capitalize on the distinctive strengths of Hong Kong and Macao, elevating their roles in the development and opening-up of China's economy.

"Hong Kong has many distinctive strengths to build the Greater Bay Area, like higher education, tech innovation, and also port management. Although many ports in the mainland have bigger capacities, Hong Kong is still much more developed in management experience and internationalization," Tian said.

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