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The View | As China reopens to the world, Hong Kong must lean into super-connector role
- Hong Kong already serves as both a financing centre and base for regional headquarters for foreign firms, while its role as a link between mainland China and Asean is expanding
- As the city eases pandemic restrictions and reopens to the world alongside the mainland, it can take these roles to the next level
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Hong Kong’s role in connecting mainland China with the rest of the world has evolved over time. The city has expanded from a key entrepot for trade and investment in the 1990s to become an important hub for financial intermediation and mainland capital account opening, earning it the title of super-connector.
Although the pandemic has reduced the travel linkages essential to an international financial centre, the city still connects with the mainland and other economies through channels such as financial services.
As Hong Kong relaxes the restrictions imposed during the pandemic and reopens to the world alongside the mainland, it is a good time to think about how to elevate its super-connector role.
First, it must fortify its role as the capital exchange of choice. Hong Kong facilitated 65 per cent of mainland China’s foreign direct investment in 2018 and 57 per cent of outbound direct investment in 2021. While a significant share was associated with Chinese offshore enterprises “round-tripping” capital back to the mainland through the financial centre, interest in investing in Chinese and overseas markets remains solid.
Additionally, a growing number of mainland companies have set up their regional headquarters in Hong Kong. The share of mainland regional headquarters more than doubled to 17 per cent of total regional headquarters in Hong Kong last year from just 8 per cent in 2010.
Hong Kong could expand its role as a premier location for Chinese and foreign businesses. It could further leverage its institutional edges, such as a robust regulatory and legal framework, first-rate professional services, and strong treasury and risk management capabilities, in channelling investments.
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