The height and breadth of China’s advance across the world economic stage over the past five decades has been breath-taking, leaving traders and investors wondering where and how to step in.
The recent Asian Financial Forum (AFF), organised by the Hong Kong SAR Government and Hong Kong Trade Development Council (HKTDC) featured two sessions to help show the way.
At the Breakfast Panel – Unleashing the Dragon's Currency: Navigating Renminbi Internationalisation on the Global Stage, representatives of leading financial firms weighed in on the expanding role of the renminbi globally and Hong Kong’s importance as the leading international hub for the currency.
In welcoming remarks, Laurence Li, Chairman of Hong Kong’s Financial Services Development Council (FSDC), pointed out that the renminbi had become the fifth primary reserve currency fifth most-traded currency, as well as being second-highest currency for settling trade.
However Mainland China was by far the largest trade nation in world and trade in its currency lagged behind the economy’s trade status.
“This can mean just one thing; the trend can only continue, with the renminbi playing a bigger and bigger role.”
Joseph Chan, Under Secretary for Financial Services and the Treasury of the HKSAR, said renminbi use was accelerating and the People’s Bank of China, the mainland’s central bank, had just the day before deepened links with Hong Kong, including allowing overseas investors to participate in bond repurchases and expanding electronic renminbi, or eCNY, pilot scheme in Hong Kong.
Nicolas Mackel, Chief Executive Officer, Luxembourg for Finance said the mainland government had deployed an effective strategy, selecting several financial centres for renminbi expansion, including Luxembourg.
ICBC clearing bank set up in in Luxembourg in 2014 while the Luxembourg Stock Exchange had carried the first dim-sum bond listing outside China.
Karen Ng, Managing Director, China Opening & RMB Internationalisation at Standard Chartered, said renminbi use for currency settlement was growing, with more invoices and more attention from both multinational and local companies. The rise in cross-border business would continue with 41 markets having bilateral currency swaps with the mainland.
Enquiries from ASEAN countries reflecting shifts in supply chains, showing Asia was becoming a strong growth engine. African ran a risk of facing US dollar shortages and the renminbi could fill the gap.
Looking at the mainland’s economy overall, the AFF also hosted a panel discussion, Stewarding China’s New Chapter.
Panel Chair Professor Fan Gang, President of the China Development Institute, gauging the broad view, asked the audience to vote on which business sector had the highest potential for Mainland China.
Innovation and technology won the day, with the digital economy taking 31.4% of votes. Electric vehicles (26.1%) and renewable energy (18.8%) followed in second and third place, respectively. Advanced manufacturing drew 15.8%.
Prof Fan noted that the mainland had surpassed Japan to become the world’s top vehicle exporter last year and electric vehicles played a key role in this success.
Jan Craps, Co-Chair & Chief Executive Officer, Budweiser APAC and APAC CEO, AB Budweiser APAC said Mainland China stood out as the world’s largest beer market, consuming one in every four beers sold worldwide. Consumption was increasing. Of the beers sold in the mainland, just one in six carried a premium brand against four out of 10 in overseas markets, indicating the quality segment had plenty of room to grow.
Prof Fan noted that consumer goods were less impacted by geopolitical turmoil.
Fang Feng-lei, Founder and Chairman of HOPU Investments, said the sheer size of the mainland market was a key attraction. The distressed assets sector had potential offered good potential. Over the next decade many highly investible companies would turn multinational.