Hong Kong, UAE solidify financial links with deeper regulatory ties, digital assets focus

Deeper regulatory ties and a shared push for new growth sectors are expected to give fresh impetus to cross-border investment flows between China and the Middle East, according to industry players and a United Arab Emirates (UAE) regulator.Hong Kong would benefit from the increased China-Middle East cooperation as the city develops into “a key hub for Middle Eastern capital to deploy in Asia and an important gateway for Chinese capital to go global to the Middle East,” said Linda Cai, inbound and outbound leader and head of China corporate finance at PwC China.One emerging area of cooperation is digital assets, where the two sides have advanced their joint digital currency initiatives. Last month, China introduced a new framework for its digital yuan, upgrading it from a cash equivalent to “digital deposit money” to help enable deeper links with the cross-border central bank digital currency pilot, Project mBridge.Transaction volume under Project mBridge, which makes settlements more direct and efficient between mainland China, Hong Kong, Thailand, the UAE and Saudi Arabia, surged over 2,500-fold from the early 2022 pilot levels to more than US$55 billion by November 2025, according to the US think tank Atlantic Council. Digital yuan, or e-CNY, accounted for over 95 per cent of the tally.The January announcement to promote digital yuan’s cross-border payment role would “greatly facilitate bilateral economic and trade activities and personal exchanges”, according to Cai.Combined with the mBridge project, China and the Middle Eastern countries would have formed a “multilevel financial cooperation framework of ‘currency-fund-digital assets’, laying a foundation for the mutual recognition of more cross-border products, such as exchange-traded funds and green bonds, in the future”, she said.