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Guangdong, Hong Kong and Macao Bay Area to Build a Financial Core Circle

¡¡¡¡A reporter from the "Economic Information Daily" has learned that the Guangdong and Hong Kong and Macao Bay Area will leverage the advantages of Hong Kong's status as an international financial center and depend on the development of Guangzhou, Shenzhen, Macau, and Zhuhai, to create a Guangdong, Hong Kong and Macao Bay Area Financial Core Circle. It will serve the Belt and Road initiative, starting from the Pan-Pearl River Delta region and radiating out to Southeast Asia.

¡¡¡¡Industry insiders said the Guangdong, Hong Kong and Macao Bay Area has three main financial areas of Guangzhou, Shenzhen and Hong Kong as well as the two major securities exchanges -- Hong Kong Stock Exchange and the Shenzhen Stock Exchange ¨C and brings together a large number of banks, insurance and securities companies, venture capital funds and other multinational financial giants from around the world, making the advantages of creating such a financial core circle obvious.

¡¡¡¡He Ningka, director of the Guangdong Provincial Development and Reform Commission, said he will promote orderly competition and coordinated development between Guangdong, Hong Kong and Macao so as to cultivate a new platform for financial cooperation, while expanding the open two-way flow and links between the main elements of the domestic financial markets in Hong Kong and Macao to create a financial hub starting from the Pan-Pearl River and radiating out to Southeast Asia and serving the "Belt and Road." This will be formed with Hong Kong playing a leading role, Guangzhou, Shenzhen, Macao, and Zhuhai as the base, and Nansha, Qianhai and Hengqin servings as nodes of the Great Bay Area Financial Core Circle.

¡¡¡¡Hong Kong, as a dominant global financial center, can play a key role in the construction of the Guangdong-Hong Kong-Macau Greater Bay Area, and is actively exploring ways to continuously enhance the competitiveness of Hong Kong¡¯s listing platform, including a review of the position of the Growth Enterprise Market and exploring the possibility of establishing a new board, said KC Chan, Secretary for Financial Services and the Treasury in the Government of the Hong Kong Special Administrative Region.

¡¡¡¡In 2016, Hong Kong's initial public offerings totaled US$25.1 billion, ranking it first in the world for two consecutive years, said Chan. There were 212 Guangdong companies listed in Hong Kong, accounting for 22% of all mainland companies listed there, raising a total of more than HK$708 billion. By the end of 2016, private equity funds totaled US$118.5 billion, the second-largest in Asia.

¡¡¡¡In addition, Hong Kong has the world's largest offshore pool of RMB funds, handling about 70% of the world's offshore Renminbi payment transactions, making it the world¡¯s offshore RMB business hub.

¡¡¡¡Guangzhou will become the center of global financial resource allocation, said Chen Zhiying, Guangzhou Municipal Committee Standing Committee member and deputy mayor. By accelerating the construction of a national green financial reform and innovation area, the Nansha New Financial Service Area, Guangzhou International Finance City and other financial functional areas will make the pricing system of the China Securities Index Company Limited¡¯s southern headquarters bigger and stronger and strive to make Guangzhou¡¯s financial industry account for more than 10% of GDP this year.

¡¡¡¡According to reports, the Guangdong-Hong Kong-Macau Greater Bay Area will be built to provide a financial services platform, like a maritime Silk Road for the 21st century. Strategic cooperation between the Guangdong-Hong Kong-Macau Greater Bay Area and the financial markets in countries and regions along the ¡°Belt and Road¡± will be strengthened so as to promote the interconnectivity of capital markets, said Cao Dahua, director-general of the Guangdong Free-Trade Zone. This will include the release and promotion of ¡°Certain Innovative Policies for Shenzhen Hong Kong Cross-border Finance¡±, further cooperation and linkages between the insurance, securities, banking and other markets in Hong Kong and Macao, and explore extending service functions of Hong Kong¡¯s financial center to the region. This will serve to push forward the establishment of branches of the Asian Infrastructure Investment Bank and the Guangdong Silk Road Fund around the region and put them into operation, and vigorously develop overseas investment in insurance, export credit insurance, cargo transport insurance, construction insurance and other businesses.

¡¡¡¡It is worth mentioning that the Major Tasks in 2017 for Implementing the Framework Agreement on Cooperation Between Guangdong and Macao recently issued in Guangdong clearly stated the following: facilitate development of cross-border Renminbi business, interoperability of UnionPay multi-currency cards in Guangdong and Macao, and development of cross-border investment businesses, such as RQFII, QDII and QFLP among others; support Macao to develop specialized financial services and expand the financial leasing business and other industries; support cross-border cooperation between Guangdong and Macao financial institutions; support the establishment of Macao bank branches in Guangdong that focus on serving hi-tech financial services zones in Nansha, Qianhai, Hengqin and Guangdong Financial High Tech Service Zone; promote the two-way opening of financial markets, and explore the mechanisms for mutual recognition of products, inter-flow of capital and inter-connection of markets; leverage the intermediary functions of banks in Guangdong and Macao; promote Renminbi settlements in trade with Portuguese-speaking countries; facilitate Macao¡¯s development as the ¡°Renminbi Clearing Centre for Portuguese-speaking Countries,¡±; and help Guangdong enterprises to set up business subdivisions from Portuguese-speaking countries in Macao, and use Macao as a platform for Renminbi settlements.

¡¡¡¡The Guangdong-Hong Kong Framework Agreement proposes the facilitation of the following: co-operation between institutions in the financial sectors of Hong Kong and Guangdong; to study and develop investment abroad among domestic individuals and push for Guangdong enterprises to issue RMB-denominated bonds in Hong Kong among other cooperative efforts; to explore the feasibility of interconnecting the insurance markets and insurance products of Guangdong and Hong Kong; to encourage Guangdong financial institutions to participate in mutual recognition arrangements between Mainland China and Hong Kong funds; and further strengthen the interconnectivity between the capital markets of the two places.

¡¡¡¡By adopting the principle of ¡°resolving the simple issues before the difficult ones, and taking a step-by-step approach¡± and jointly striving under the CEPA framework to further alleviate the conditions on Hong Kong securities institutions entering the Guangdong market, it will support more Hong Kong financial institutions in setting up fully licensed securities companies in Guangdong that are jointly invested by both sides.

¡¡¡¡In fact, there already has been action in regards to the financial integration of the Guangdong-Hong Kong-Macao Greater Bay Area. Recently, the Guangdong Province Administration for Industry and Commerce launched the "Guangdong-Macao Business and Banking Express Registration" and the "Guangdong-Hong Kong Business and Banking Express Registration" services. Through cooperation with the banking administrations of the two areas, Guangdong is able to provide a ¡°one-stop shop¡± for registration and banking financial services, making it easier for investors from Macao and Hong Kong to invest in Guangdong and simplifying the process of registering and opening a business. At present, the Guangdong, Hong Kong and Macao ¡°express banking administration registration¡± service is being trialed in Guangdong Foshan (including Shunde), Huizhou, Dongguan, Zhongshan, Jiangmen and Shantou.

¡¡¡¡World-class bay areas are necessarily areas with high-levels of financial innovation, said Qiu Shan, director of the International Economic Research Institute at the Guangdong Academy of Social Sciences. To build Guangdong, Hong Kong and Macao into a first-class bay area, to explore Guangdong, Hong Kong and Macao¡¯s financial innovation, and to mould Guangdong, Hong Kong and Macao¡¯s financial innovation and development advantages, a national financial industry open trial demonstration window must be established.

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