Hong Kong’s Bay Area vision

Asia-Pacific Economic Cooperation (Apec) nations agreed to boost economic coordination amid mounting challenges after a meeting of finance ministers in Hong Kong.“We note that global imbalances have persisted, creating risks to growth and stability,” the finance ministers said in a joint statement following two days of talks. “We recognise that global rebalancing is in our common interest and agree to strengthen communication and cooperation in this regard.”The group also released a policy statement on digital infrastructure financing after highlighting “significant” funding gaps in some economies. Apec pulls together 21 nations from around the Pacific Rim, including China, the United States, Japan and Russia. Together, they represent about 3 billion people and 60 per cent of the global economy.The meeting, chaired by Chinese Finance Minister Lan Foan, took place about a month before Apec leaders gather in the neighbouring mainland city of Shenzhen for an annual summit. Chinese President Xi Jinping will meet US President Donald Trump at the event, their third summit of the year.US Treasury Secretary Scott Bessent skipped the finance ministers’ gathering in Hong Kong.Related news: Negotiators are rushing to line up Chinese investments in the US, potentially including electric vehicles, battery storage and power equipment infrastructure, ahead of next month’s Xi-Trump summit, the South China Morning Post reported on Wednesday, citing multiple sources. Hurdles include US corporate opposition and fractious bilateral relations, which could deter Chinese companies from making long-term investments, the report said. Investments may shift to industries deemed to be less sensitive, such as consumer goods, it said. Discussions about another extension to a trade-war truce were also moving in a “positive direction”, even if an agreement is unlikely until December when Trump and Xi are due to meet at a G20 summit in Miami, the report said. The two leaders agreed to prolong the truce by two months until January at a recent meeting in Washington. Hong Kong finance chief Paul Chan Mo-po said at the Apec event that risks to the global economy were “tilted to the downside”. Geopolitical disruptions had pushed up energy prices, fuelled inflation, weighed on investments and constrained fiscal space, he said. Chan also highlighted “trade policy uncertainty” as another risk that could upend the so-far resilient global economy. “Resilience is uneven and under strain,” Chan said. Thailand is beating out Vietnam as Chinese manufacturers add overseas plants in order to sidestep US tariffs and hedge geopolitical risks. Chinese companies invested US$5.33 billion in Thailand last year, more than double the US$2.46 billion spent in Vietnam, according to China’s Ministry of Commerce. Investment has cooled in Vietnam, traditionally a strong destination for “China plus one” strategies, amid concerns about “manufacturing saturation” and rising US trade scrutiny. By contrast, Thailand has good trading ties with the US, as well as a network of free-trade agreements with other nations. How others reported it Cautious note: While short on detail, [Chinese Finance Minister] Lan’s brief remarks struck a note of caution at a time when the world economy is becoming more protectionist and coming under increasing pressure from the shock waves of the war in the Middle East. In the backdrop are elevated bond yields that are raising financing costs while oil prices add to inflation concerns. (Bloomberg) Solid ground: The world has become a more fragmented place. Trade tensions, competing tech standards and geopolitical rivalry are pushing many economies to ask where they can still do business under predictable rules. Hong Kong’s answer rests on solid ground: an open capital market, a solid common-law system, the leading offshore renminbi hub, and strong backing from the Chinese mainland. (China Daily, opinion) Starting point: [Hong Kong] Legislative Councillor Rock Chen said that while this financial chiefs’ meeting is merely a starting point, the direction it points to is clear: Hong Kong’s international advantage can only truly evolve from being a “superconnector” to an irreplaceable “super value-adder” by continuously iterating at the intersection of serving national strategies and responding to regional needs. (Hong Kong Economic Journal) Investment barriers: The [US-China] Board of Trade has agreed on tariff reductions covering US$30 billion in trade in each direction, but those cuts have yet to take effect. Securing politically sensitive Chinese investments in the US will be harder still. Chinese investment in the US will also face major opposition from American lawmakers. (Trivium China) Friction-free markets: Chinese auto exports including electric vehicles have surged this year, driven by rising oil prices stemming from the US war with Iran and automakers’ push to expand overseas to offset falling domestic sales. Markets such as Japan are becoming increasingly important for Chinese carmakers amid growing trade frictions with other regions. Earlier this month, trade officials of the European Union and China agreed to curb shipments of Chinese hybrid vehicles. (Nikkei Asia) The SCMP Plus takeawayChina’s decision to host Apec finance ministers in Hong Kong highlighted the city’s status as a global financial centre and its role as a gateway for mainland Chinese companies expanding overseas.“Under the unique ‘one country, two systems’ principle, Hong Kong enjoys both the China advantage and the global advantage,” the city’s leader, Chief Executive John Lee, told the Apec ministers in a welcome speech.Lee talked up Hong Kong’s strengths, including zero tariffs, low taxes, a common-law system and a stable business environment. He also promoted the city’s major universities, strong talent pool and coming Northern Metropolis which will help to connect Hong Kong with the mainland. Future plans include growing the city’s offshore yuan business and its role in wealth management.The city is already attracting mainland businesses looking to grow internationally.Last year, 350 mainland companies had regional headquarters in the city, up from 252 as recently as 2021, according to the Census and Statistics Department.That growth contrasts with US companies. The number of US businesses with regional offices in Hong Kong plunged to 200 from 254 in the same period, the census data shows. That has pushed the US to third from first in the rankings. Japan is second with 220.The drop-off in US offices probably reflects geopolitical tensions among other factors, such as the fallout from the imposition of Hong Kong’s national security laws in 2020 and the draconian quarantine policies implemented during the Covid-19 pandemic.Mainland companies are expanding in Hong Kong as part of a wider “Going Global” push (see the SCMP Plus Going Global 100). This broader drive is being fuelled by businesses seeking an escape from profit-destroying price wars at home that are the result of overcapacity and weak consumption.Chinese regulators have also encouraged mainland companies to sell shares in Hong Kong, helping the city lead worldwide fundraising from initial public offerings (IPOs) last year.IPO volumes have risen further in 2026. The full-year tally could hit HK$500 billion (US$64 billion), surpassing the HK$449.5 billion record set in 2010, according to KPMG. There were HK$388 billion of deals in the first nine months of the year, it said. Almost all the 116 listings were from the mainland. The city has more than 600 active IPO applicants in the pipeline.Still, there are risks to the fundraising drive, notably including investor fatigue. Retail stock buyers have become much more cautious, meaning that listing oversubscriptions are way down from even a few months ago. The city’s Hang Seng Index has also lost about 10 per cent this year, one of the worst performances among major benchmarks worldwide, amid concerns about weak mainland consumer spending and higher US interest rates.Geopolitics is another factor: electronics components maker Suzhou Dongshan Precision Manufacturing has scaled back its IPO partly because investors fear that potential US trade restrictions could dampen its optical modules business. The company has also been hit by some of the air coming out of the artificial intelligence (AI) bubble.Furthermore, Hong Kong’s Securities and Futures Commission has tightened scrutiny of the IPO market in a bid to crack down on listings fraud. Last week, the regulator froze assets worth HK$4.6 billion in an operation against syndicates suspected of rigging three listings.Hong Kong’s boosters will tout the clampdown as evidence that the rule of law holds sway in the city and its financial market.Beyond bankers and financing, Hong Kong is also winning over mainland companies with its prowess in marketing and e-commerce, professional services, supply-chain management and research.This depth means that 83 per cent of mainland companies named Hong Kong as their preferred source of “going global” support in a Hong Kong Trade and Development Council survey released in June. That was the highest share worldwide, and up from 62 per cent in 2023.More mainland companies will probably head to the city, as 95 per cent of the roughly 2,000 enterprises in the survey said they plan to “go global” on a greater scale in the next two years. The businesses in the poll spanned key national growth centres such as the Greater Bay Area and Yangtze River Delta.Hong Kong’s dual role as a financial centre and “Going Global” gateway seemingly has further to go.