Gold, bond push boosts Hong Kong’s role in nation’s financial future

Why now? Because the world is no longer such a safe and stable place. Central banks and governments worldwide are accumulating gold as more investors seek alternative safe holdings to the US dollar amid often aggressive and erratic policy responses from Washington. To protect itself and others, China needs to be a financial powerhouse, not just the world’s second-largest economy.

Much of global gold buying is now in China and Southeast Asian nations, yet London and New York continue to dominate gold trading, especially in over-the-counter trades and futures. Globally, gold is still priced in US dollars, but the world’s centres of power are shifting east and financial powers need to reflect that new reality. Shanghai is catching up, especially in the trading of physical gold.

As a gold hub, local banks, refiners, traders and jewellers will find new opportunities in Hong Kong. US dollar-denominated gold futures have been relaunched, while yuan-denominated gold futures will come later. The government-owned Hong Kong Precious Metals Central Clearing Company will kick-start a trial run for its trading and clearing platform. “If gold is the world’s safe haven,” Chief Executive John Lee Ka-chiu said, “then Hong Kong will be its safe harbour.”

The United States and its allies are increasingly ready to freeze or confiscate the assets of countries they deem hostile. Hong Kong can provide a safe harbour, one in which the rest of the world can trust. It also operates under the “one country, two systems” principle, granting a high degree of autonomy and a capitalist system separate from the mainland, where there are capital controls. Hong Kong can offer diverse asset classes – including those denominated in yuan – when those gold deposits need to be liquidated. It is Beijing’s foresight and Hong Kong’s fortune to play such an important role in the nation’s financial future.