China’s Market Reform Agenda Highlights Hong Kong’s Critical Role as Financial Superconnector

China is set to introduce a new wave of reforms to further open its markets, with Hong Kong playing a pivotal role in bridging international investors to the mainland, according to top Chinese regulators and exchange executives.

“The China Securities Regulatory Commission [CSRC] will continue to work closely with Hong Kong authorities and regulators to promote programmes that will benefit both Hong Kong and the mainland market, so as to create win-win situations,” said Wu Qing, chairman of the CSRC, via a pre-recorded video at a summit in Hong Kong on Monday. The summit, held at Exchange Square in Central, marked the 10th anniversary of the Stock Connect scheme.

Wu emphasized that China plans to introduce additional measures to align with global standards and practices, maintaining Hong Kong’s central role in attracting international investors to the mainland. Echoing Wu’s sentiment, CSRC vice-chairman Li Ming confirmed the regulator’s ongoing support for Hong Kong to expand the Stock Connect scheme and encourage new share listings.

“All of these schemes are in the process of being implemented, and CSRC has already approved major mainland players such as SF and Midea Group to list in Hong Kong,” Li said.

The Stock Connect scheme, which began on November 17, 2014, initially enabled cross-border trading between the stock markets of Hong Kong and Shanghai. It expanded to include Shenzhen in 2016, and later integrated bonds, exchange-traded funds, wealth-management products, and swap instruments.

“The Stock Connect schemes with Shanghai and Shenzhen have become the major channel for international investors to invest in the mainland market via Hong Kong,” stated Eric Chan Kwok-kit, Hong Kong’s chief secretary for administration and acting chief executive while John Lee Ka-chiu attends an APEC meeting in Peru.

Highlighting the scheme’s success, Chan noted that its average daily turnover has grown 23-fold since inception, rising to 136 billion yuan (US$18.8 billion) in October from just 6 billion yuan in 2014. “International investors’ trading represents 8 per cent of A-share trading in Shanghai and Shenzhen, while 70 per cent of mainland investment in the mainland is trading through the Stock Connect schemes in Hong Kong,” he said.

The southbound route of the connect scheme, enabling mainlanders to trade Hong Kong-listed stocks, saw daily turnover of HK$44 billion (US$5.6 billion) in October—46 times higher than its 2014 figure of HK$900 million. Mainland investors now account for 17 percent of local market turnover, with cumulative fund flow into Hong Kong exceeding HK$3.4 trillion over the past decade.

Chan also pointed to measures announced in January that have expanded capital flows between the two markets. “All of these measures will enhance the connect schemes and strengthen Hong Kong’s role as a superconnector between China and the world,” he said.

“With the backup of the country, Hong Kong will benefit from this unique advantage.”

Financial Secretary Paul Chan Mo-po underscored the importance of the Stock Connect scheme for Hong Kong’s role as an international financial hub. “Stock Connect is an innovative scheme that has allowed Hong Kong to bring in international investors to invest in the mainland over the past 10 years,” he remarked at the summit.

Recalling the initial pathway for international investment into the mainland, Chan explained, “The first H-share listing in Hong Kong in 1993 started the first channel for international investors to invest in mainland companies. The Stock Connect between Hong Kong and Shanghai in 2014 offered an expressway for international investors to buy in the mainland market.”

HKEX chairman Carlson Tong Ka-shing praised the Stock Connect programme as one of the world’s largest cross-border trading schemes, attributing its success to the influx of not just capital, but also talent and expertise into Hong Kong. “The successful implementation of the connect programme over the past 10 years has reached a position where it cannot be replaced, and its model can continuously expand to include different products and participants,” Tong noted.

Adding to the optimism, HKEX CEO Bonnie Chan Yiting highlighted the positive impact of the CSRC’s commitment to supporting overseas listings by Chinese companies. “CSRC’s pledge to allow Chinese companies to list overseas will be a big boost for Hong Kong’s IPO market,” she said, citing Midea’s US$4.6 billion IPO in September as the world’s second-largest this year.

By fLEXI tEAM