Table of Contents

A New Financial Market Structure for East Asia

A New Financial Market Structure for East Asia

Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang

This book contends that the East Asian financial constitution lacks an appropriate infrastructure, resulting in inefficient allocation of high savings and an over-inflated short-term debt market. It goes on to point out that despite high savings, East Asia’s dependency on financial centers outside the region is also relatively high, and that there is no strong region-wide network to connect various financial centers in East Asia.

Chapter 8: Can Hong Kong Survive as an International Financial Center?

Yiping Huang

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation


8. Can Hong Kong survive as an international financial center? Yiping Huang 1. INTRODUCTION Since the 1950s Hong Kong has been an important financial hub servicing the global markets, particularly the rapidly growing East Asian economies.1 That role was further strengthened when China began its open-door policy. According to recent data, Hong Kong is the seventh largest foreign exchange market and tenth largest stock market in the world. It is also one of the world’s major banking centers. Doubts grew strongly in recent years about Hong Kong’s ability to survive as a major international financial center. Difficulties of structural adjustments in the economy had constantly depressed confidence. Sustainability of the currency peg was frequently in question. Some political changes, such as amendments to the Article 23 of the Basic Law which was put on hold indefinitely by the government following the massive protest on 1 July 2003, also gave rise to concerns over the continuation of political and economic freedom. The rapid rise of Shanghai in the financial world also led many to believe that Hong Kong is playing a losing game. In this short chapter, we take a glance at Hong Kong’s financial markets and its future role in international financial markets. In the next section, we provide a brief overview of the financial markets, particularly its banking sector and stock markets. In section 3, we describe the factors – location and institutions – that promoted Hong Kong as an important financial hub. In section 4, we analyse...

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