Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang
Chapter 8: Can Hong Kong Survive as an International Financial Center?
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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