Hong Kong has long held the position of being at the centre of international finance, a position that is expected to grow stronger as it strives to become the leading offshore Renminbi (RMB) hub in accordance with China’s 15th five-year plan.
Financial Secretary Paul Chan Mo-po has unveiled plans in his latest Budget speech which will see Hong Kong as the marketing tool for launching the RMB on the world’s stage. Hong Kong will become the platform for the issuance of RMB bonds on a regular basis by tapping emerging markets to bring in more cross-boundary RMB transactions to the city.
A major incentive to use the RMB was launched by the Hong Kong Monetary Authority (HKMA) earlier this month when it increased the RMB Business Facility (RBF) to RMB 200 billion to provide banks with a stable and relatively low-cost source of RMB funds.This facility enables banks to offer RMB financing to their corporate clients, thereby promoting the wider use of the RMB in the economy. RBF channels onshore RMB liquidity into offshore markets, with Hong Kong serving as a hub for these transactions.
With China’s Belt and Road Initiative (BRI) spreading throughout Asia, the Middle East and Africa there is now less dependency on the US dollar as the international currency for trade and a stronger dependency for the yuan, thus enhancing China’s influence in the global financial system.
As of late February, the yuan is trading around 6.85–6.89 per US dollar, reflecting a strengthening trend for the yuan and a weakening dollar due to shifting trade policies and interest rate environments. The decline in the US dollar has been driven by expectations of Federal Reserve rate cuts and uncertainty surrounding US tariffs.
Offshore RMB hubs are now established across Asia, Europe, North America and Australia and include places like the USA, Canada, Australia, Hungry, France and Germany to name just a few. But Hong Kong is still the leading hub, attracting some 70 per cent of all RMB deposits. Dim sum bonds – yuan-denominated notes issued outside mainland China – have become a mainstream financing tool as tech firms and global companies tap deeper yuan liquidity amid a stronger currency.
Under the 15th five-year plan there are a number of recommendations which the financial secretary has adopted in his budget to fall in line with Hong Kong’s first five-year plan. Hong Kong will promote more convenient foreign exchange quotations and transactions between the RMB and other regional currencies to reduce transactions costs; enrich mutual market access by exploring with the mainland how to expedite the issuance of mainland government bond futures in Hong Kong, plus the inclusion of real estate investment trusts (REIT) in the scheme.
Hong Kong's financial market has performed strongly, and its financial system remain robust. Chan said the city will continue to consolidate its existing strengths, tap into emerging fields, strengthen market systems and risk control and deepen financial cooperation in the Greater Bay Area (GBA). By doing so, Hong Kong will enhance its role as an international financial centre on all fronts and contribute to the national strategic goal of "accelerating China's development as a financial powerhouse".
To better align with the 15th Five-Year Plan's deployment for the RMB internationalization, Hong Kong must further deepen and broaden its RMB financial market, gradually developing a toolbox of RMB risk management tools comparable to those of the US dollar and euro in terms of interest rates, exchange rates, and commodities, thereby enhancing the confidence of domestic and foreign institutions in using these tools with peace of mind and ease of use.
The Security and Futures Commission (SFC) and the HKMA are actively implementing the “Roadmap for the Development of Fixed Income and Currency Markets” announced last year. It includes boosting issuance in the primary market, enhancing liquidity in the secondary market, and expanding offshore RMB business. The electronic bond-trading platform will also be launched in the second half of this year, thereby reinforcing Hong Kong's position as a global fixed income and currency hub.
The budget implements various effective measures outlined in the Chief Executive’s (CE) Policy Address. The CE, John Lee Ka-chiu, said the Budget leverages Hong Kong's unique advantages of being connected to both the mainland and the world under the "one country, two systems" principle in actively pursuing economic growth, advancing development, improving people's livelihood, seizing new development opportunities, and better integrating into and serving the overall national development.
Overall, the Budget was upbeat, highlighting Hong Kong’s role in international finance markets. It paves the way for a bright future for Hong Kong by following guidelines in a five-year planning process.
Currently, the Hong Kong dollar is pegged to the US dollar at 7.75-7.85 range, but as the US dollar weakens, so does the Hong Kong dollar. Maybe, just maybe, in the not-too-distant future it will be time for Hong Kong to change its peg to a more stable currency…such as the RMB.
Mark Pinkstone
** The blog article is the sole responsibility of the author and does not represent the position of our company. **
Before Jimmy Lai was arrested in 2020, it was believed he was worth HK$9.3 billion. Today much of that has dwindled considerably due to bank seizures of his assets and the millions he poured into his anti-Hong Kong campaigns.
Court records show that during the uprisings from 2013 to 2020, Lai spent more than $160 million paying off the rioters, politicians and promotional campaigns in his fight against Hong Kong. Of this, some $93.26 million was for “donation to Hong Kong’s opposition camp.” Another $26.70 million was paid to Jack Keane (former US Army general with access to the White House), Paul Wolfowitz (former US deputy secretary for defence), and Rupert Hammond-Chambers (US-Taiwan Business Council president). American think tanks received up to $389,000 per year as a “donation”. And millions more were spent on advertising and editorial space in major newspapers throughout the world.
Much of the payments were made by Lai himself and through his navy intelligence associate Mark Simon.
When local banks froze his accounts in February 2021, Lai used his Canadian cash cow LAIS Hotel Properties Ltd and Dico Consultants Ltd. Indeed, it is the Canadian interests that is paying his current “Release Jimmy Lai” campaign.
Among Lai's assets that were targeted included local bank accounts of three companies owned by him as well as the 71.26 per cent stake in Next Digital worth around $350 million. In fact, Lai had earned some $1.9 billion in shareholder funds from Next Digital, one of his companies frozen by the banks between 2001 and when Apple Daily ceased its operations in 2021.
The records show that he paid Catholic Cardinal Zen Ze-kiun $3.5 million as a “donation.” But it was an established fact that Zen, together with Margaret Ng Ngoi-yee, pop singer Denise Ho Wan-see, Hui Po-keung and legislator Cyd Ho Sau-lan ran the “612 Humanitarian Relief Fund” to assist the legal fees of rioters who were arrested in the anti-Extradition Law Amendment Bill (ELAB) movement. At its height, the Fund had raised $140 million to pay the arrested rioters’ legal fees, medical bills and other expenses. All trustees were arrested for colluding with foreign forces.
Indeed, the guilty verdict, handed down by the three judges – Esther Toh, Alex Lee and Susana Maria D’Almada Remedios – documented a tangled web carefully spun by Lai involving a cluster of companies to fund his attempts to overthrow the Hong Kong Government. The 855-page document showed the dedication in which the judges arrived at their conclusions. Every detail was carefully explained, and every dollar was accounted for.
Once Lai’s accounts in Hong Kong were frozen, he turned to the LAIS group of companies in Canada acquired by his twin sister Si Wai and included properties in the Southern Ontario wine and vacation region of Niagara-on-the Lake as well as properties in Caledon and Jordan (also in Ontario). Leading financial source of corporate information, Dun and Bradstreet, lists Mark Simon as chief executive officer for the group, which gave him access to the Lai fortunes in Canada. It listed Simon as residing in Morristown, New Jersey, USA.
Simon had given Wayland Chan Tsz-wah (a paralegal and member of the “Fight for Freedom, Stand with Hong Kong” group) $30,000 for promoting the 2019 riots and through the LAIS hotels, spent $5.1 million on foreign media outlets in global campaigns to promote the 2019 riots. Money was no object for the Lai campaign and millions were spent on print media, as well as a large amount being spent on social media with a dedicated website providing links for people to join from Australia, Canada, Germany, Denmark, France, Ireland, Japan, South Korea, the Netherlands, New Zealand, United Kingdom and the United States. In the US link, it urged viewers to ask senators to implement and enforce sanctions against Hong Kong. And in the UK and other sites, it urged viewers to participate in local rallies against Hong Kong.
At the height of the riots in 2019, a massive advertising campaign blanked the world, including the United States (New York Times and New York Times (global)), Canada (The Globe and Mail), Japan (Nikkei), Australia (The Australian), Taiwan (The Liberty Times), Finland (Sanoma), Denmark (Berlingske), Sweden (Dagens Industri and Dagens Nyheter), France (Le Monde), Germany (Frankfurter Allgemeine Zeitung) the UK ( The Guardian, The Times, Evening Standard, City A.M., The Week and The Economist), South Korea (Kyunghyang Shinmun), Spain (El Mundo) and Italy (Corriere della Sera). More than $1 million was spent on ad space in the UK alone and more than $4 million in other newspapers. All of the advertising costs were paid for from the LAIS Hotel group.
After the arrests of Lai and others, the international campaign against Hong Kong ceased and instead a “free Jimmy Lai” campaign surfaced, spearheaded by one of his six children, Sebastien. Two of his siblings, Ian (now 45) and Timothy (48) were arrested in Hong Kong during police raids of Next Digital in 2020. They were later charged with fraud offences and released on bail.
Sebastien, based in London, had not spoken to his father for four years prior to the launch of the campaign last year. Since then and with money to burn, Sebastien travelled the world with his team of public relations-cum-international legal team – Doughty Street Chambers – seeking help from foreign governments, senior politicians and the press for his father’s release, citing Lai senior’s poor health, even though Lai’s defence counsel told the court he was being well treated.
The judges are to be commended for their detailed findings, after hearing 156 days of evidence and sifting through 161 documents. Despite extreme pressure from foreign forces, the judges produced their findings without fear or favour. They are a credit to Hong Kong’s judicial system and proved the point that money cannot buy everything.
