Clear vision for a new decade with change and opportunity

2020 welcomes in a new decade and we bid farewell to twists and turns of 2019.

What does 2020 and the next decade hold? Can Hong Kong maintain and strengthen its international relevance? As we stand at the crossroads of two decades, I am looking forward, hoping to see the future with clarity, with a 2020 vision.

The past decade was full of both progress and contradictions; of global economic and technological innovations; and of deepening political and social divisions.

Globalization spread at an unprecedented rate. China’s economic development miracle has won the admiration of the world, yet on the other hand, the development of the nation’s governance model has seen it diverge further from the West.

While rapid technological development during the decade has greatly enhanced material enjoyment and the overall quality of life for many, its significant impact on modern politics, employment and the global financial order have, however, now only begun to take shape.

It is against the backdrop of an inconsistent China’s policy towards the United States that we look at Hong Kong’s past accomplishments and for a glimpse of its future potential. Hong Kong has been a key beneficiary of globalization and China’s progress over the past decade, thanks, in part, to its unique status under “one country, two systems”.

The last 10 years have brought immense opportunities for Hong Kong’s economy and specifically its financial markets. Hong Kong is a city built on its adaptability, on its innate capability to reinvent itself, and in recent years, it has strengthened its role as a bridge builder, and pioneer of global connectivity with China. This has not only sustained Hong Kong’s prosperity, but has also been of considerable strategic value to China.

Our efforts at Hong Kong Exchanges and Clearing (HKEX) have been to build the foundations for this super connectivity, specifically in equities, bond and commodities markets. These foundations have been supplemented by major reforms to Hong Kong’s listing regime, welcoming new economy companies to our shores and, in turn, creating Asia’s leading capital markets, embracing the corporate giants of today and the future.

Hong Kong is now home to Asia’s most liquid and most progressive capital markets, and is also home to one of the world’s premier financial communities.

You don’t need a 2020 vision to foresee that the new decade will be characterized by major global challenges. In particular, there will be a focus on where globalization is headed, as well as the disruptive potential of technological advancements. How these developments take shape will depend very much on whether China and the US can work together to address such far-reaching issues as climate change, wealth disparity and social mobility.

Going forward, China’s further rise and the continued dominance of the US could set the two nations on a collision course. Meanwhile, the disruptive power of technology could reshape the world’s economy and global society, spurring a fierce battle between these major powers for technological dominance.

The polarizing effect of this rivalry means that our world needs more and better connections, and not fewer. As such, Hong Kong’s role as the connector between East and West will only become more vital.

Today, China’s rapid development has brought it much closer to the rest of the world; yet at the same time, for example, there are widening gaps between China’s market structures and regulatory models and those of the West. The sheer size of China’s financial markets and its self-contained nature make expectations of short-term structural change unlikely.

This validates, reinforces and strengthens Hong Kong’s position — its role is fundamental for allowing for more seamless interaction between China and the rest of the world.

We at HKEX have our role to play in supporting Hong Kong’s future success. HKEX’s focus in the next 10 years will be to further build up, strengthen and diversify our capabilities in market connectivity, to fully embrace technology, and to reinforce Hong Kong’s relevance to both East and West as the decade unfolds. Our unique financial markets framework, backed by the rule of law and a talented financial services community, will be paramount to our future.

On equities market connectivity, we will build on our successful Stock Connect platform with new enhancements, as well as capacity and technology upgrades. We will move beyond spot market connectivity to derivatives, we will move beyond secondary market connect to the primary market, and we will build up our suite of products, allowing more efficient, reliable and safe capital flows between the international and Chinese markets.

On bond market connectivity, we took the first step three years ago via the Bond Connect with the launch of the northbound program. But only with the full two-way linkage of the Bond Connect will we see the true realization of the mainland’s capital market internationalization.

Going forward, we will speed up the process to enable two-way access, with the first step being to expand our Connect scheme to bonds that are traded on exchanges. Also, we will strengthen our post-trade capabilities, including the expansion of our collateral management services through repo trading and clearing, to help boost liquidity in the bond markets of both Hong Kong and the mainland; use technology to help reshape the international bond market; and speed up the internationalization of our fixed-income capabilities through tie-ups, joint ventures, and possible acquisitions.

On commodities market connectivity, over the last 10 years, our focus has been to lay the foundations for our global commodities strategy with the acquisition of the London Metal Exchange and the establishment of the Qianhai Mercantile Exchange. The coming decade will see efforts to accelerate the connection between the Chinese and international commodities markets. We will work to replicate the Stock Connect model for commodities trading and clearing, connect the prices of the Chinese and international commodities markets through product cross-listings and developing price benchmarks, and accelerate the internationalization of onshore physical deliveries in China.

We also hope to use technology to help reshape the trading and financing ecosystem of China’s commodities markets.

Technology is very much front and center of our strategic development, and we are investing much in this area to enhance our competitiveness and to champion new ways of working.

We will increasingly focus on the power of technology going forward as a new driving force to connect China more quickly and effectively with the world.

We don’t need a crystal ball or 2020 vision to know that the next decade will be characterized by change and opportunity. And I know that I don’t need the ability to see into the future to know that for Hong Kong, the best is yet to come.

Embracing new technologies, retaining competitiveness and forward thinking, we must have the courage to bravely explore these new opportunities, to experiment, and to move one step at a time toward greater success. Our relevance and our prosperity will be pinned to it.

The author is chief executive of Hong Kong Exchanges and Clearing.

The views do not necessarily reflect those of China Daily.