Research and analysis

Hong Kong-London Financial Services Forum 2017

Published 18 December 2017

The seventh private sector-led Hong Kong-London Financial Services Forum (the “Forum”) convened on Monday 18 December in Hong Kong. On the occasion of the Forum, Hong Kong and London announced the City of London (COL) has joined as a partner of the Infrastructure Financing Facilitation Office (IFFO) of the Hong Kong Monetary Authority (HKMA). This will enable IFFO to draw on COL’s strong network of financial institutions in London to facilitate better exchange of ideas and experiences and further strengthen the global dimension of IFFO’s work in promoting infrastructure financing and investment activities. Hong Kong and London also agreed to further explore the digitisation of trade finance, and London Participants welcomed the global trade finance platform based on Distributed Ledger Technology (DLT) the HKMA is developing with the industry. Both sides recognised this initiative could enhance trade efficiency.

The Forum this year covered areas including offshore RMB business, the Belt and Road Initiative (BRI) and infrastructure financing, green finance, and FinTech.

The meeting was attended by senior representatives of the Forum’s member banks including Agricultural Bank of China, Australia and New Zealand Banking Group, Bank of China, Bank of Communications, Barclays, China Construction Bank, Citi, Deutsche Bank, HSBC, Industrial and Commercial Bank of China, and Standard Chartered Bank, as well as industry experts from Hong Kong and London. The HKMA and HM Treasury acted as facilitators.

Latest developments in RMB internationalisation

Forum participants reviewed the development of offshore RMB business in Hong Kong and London, noting the sound economic fundamentals in Mainland China and stabilisation in RMB exchange rate should provide further support to offshore RMB business in the near future. They also welcomed the commitment of the Mainland China authorities to continue to push for RMB internationalisation and capital account liberalisation.

In Hong Kong, participants noted that offshore RMB business in Hong Kong showed signs of stabilisation in the past year, while RMB financial intermediary activities remained vibrant as demonstrated by the high volume of turnover, averaging RMB900 billion per day, in the RMB payment system in Hong Kong. They welcomed the launch of the Bond Connect in July which marked an important milestone in the further development of mutual access of capital markets in the Mainland and Hong Kong. It provides an additional channel for overseas investors to access the interbank bond market in Mainland China with greater flexibility and convenience. Operation has been smooth and there is considerable headroom for activities to grow further. MSCI’s inclusion of A-share in its Emerging Markets index next year should also boost investment activities under the Stock Connect schemes.

Participants from London noted the UK was now responsible for 36% of RMB foreign exchange payments conducted outside of China, and that 50% of UK based financial institutions were using the RMB to exchange payments with Mainland China and Hong Kong. Average daily RMB trading volumes stood at £50 billion by the end of June, and the UK welcomed the announcement this month of a connect partnership between R5FX and Shanghai Clearing House, committing both sides to launch an electronic spot trading platform in the near future. Both sides also welcomed the acceleration of preparations for the London-Shanghai Stock Connect, confirmation that it will utilise a depository receipt structure to facilitate two-way trading, launch of a feasibility study and working group regarding creation of a UK-China Bond Connect, and announcement of a feasibility study into the mutual recognition of funds between the UK and China..

Belt and Road Initiative and Infrastructure financing

Forum participants discussed the opportunities in infrastructure investment and financing arising from the BRI, as well as the implication for the financial services industry. They agreed that Hong Kong and London should step up collaboration and leverage on their respective strength as international financial centres to support the enormous financing and investment activities demand from BRI infrastructure development.

Forum participants noted the achievements by IFFO under the HKMA. IFFO has built a network of over 70 entities covering multilateral financial agencies and development banks, public and private sector investors, asset managers, banks, infrastructure project sponsors, professional service firms, etc. During the year, IFFO has organised and participated in prominent international events, not least the Debt Financing and Investors’ Roundtables in March at which a reference term sheet for infrastructure investment was developed. IFFO is also making active progress in facilitating the use of Hong Kong’s platform for infrastructure financing and investment activities.

Both sides also welcomed the announcement by HM Treasury recently of the appointment of Mr Douglas Flint (former Group Chairman, HSBC) as their Financial and Professional Services Envoy to the BRI, appointment of an Expert BRI Financing Board, and creation of an Infrastructure Financing Exchange to enhance private sector and international stakeholders engagement.

FinTech

Forum participants reviewed the latest development in FinTech and noted the encouraging progress in FinTech collaboration following signing of a UK-Hong Kong FinTech Bridge in September, and the visit to London by a Hong Kong FinTech delegation led by Hong Kong Cyberport and the HKMA.

The UK-Hong Kong FinTech Bridge commits both sides to enhance governmental, regulatory and business engagement on FinTech. This will include preparing annual FinTech action plans outlining their expected industry-focused FinTech events to encourage participation of firms in these events. Forum participants also welcomed an agreement to facilitate introductions to soft landing facilities for UK and Hong Kong FinTechs, and the creation of a single point of contact for FinTech companies by the UK Department for International Trade and InvestHK, to assist FinTech start-ups to establish themselves in the opposite jurisdiction.

Participants noted the series of measures introduced by the HKMA earlier this year to promote the development of FinTech in Hong Kong. Both Hong Kong and London are world-leading FinTech hubs, and participants agreed that, building on existing framework and the newly signed UK-Hong Kong FinTech Bridge, there were many opportunities to expand cooperation, including formalising academic links. In particular, members welcomed the two sides exploring collaboration on a DLT trade finance platform.

Green finance

Forum participants exchanged views on landscape in the development of green finance. Participants noted the HKSAR Government’s initiatives to promote green finance and its plan to issue a green bond next financial year. They agreed that there was room to step up international collaboration especially in the area of harmonisation of standards. Participants noted that BRI in particular presented avenues for London-Hong Kong collaboration on green finance.

The HKMA and HM Treasury also hosted a seminar for over 140 Hong Kong and the UK-based representatives from corporates, financial institutions, asset management firms and fintech firms. The seminar reviewed the latest development in RMB internationalisation and the opportunities for corporates and financial sectors in relation to Mainland China financial liberalisation. The seminar also discussed the trends in fintech development, as well as exploring opportunities for further cooperation between Hong Kong and London in relation to Fintech.