Sovereign Islamic bond issued in HK generates wide response

Faleel says the adoption of Islamic banking and finance can help China attract investment from wealthy Gulf nations, which have already been targeted by the West.

Moreover, he says Islamic banking can help the Chinese currency, "as in my view the growth of Islamic finance will facilitate the speedy rise of the yuan as a dominant international currency".

China also enjoys increasing trade and commerce with major Islamic countries in Southeast Asia like Malaysia, Brunei and Indonesia.

The volume of trade between China and Indonesia exceeded $66 billion in 2013. And China has been Malaysia's largest trading partner for five consecutive years, with bilateral trade reaching more than $106 billion in 2013.

"Having Islamic banking and finance facilities in China would surely assist trade and commerce between China and Southeast Asia," said Nik Shahrizal Sulaiman, Malaysia-based executive director at PricewaterhouseCoopers.

"Many corporate entities in Malaysia, Brunei and Indonesia have a specific preference for Islamic finance, driven by the needs of stakeholders and regulatory rules. In Malaysia, for instance, for listed entities it is a requirement to have at least two-thirds of (their) financial transactions conducted through the Islamic system," Sulaiman said.

Hong Kong has been attempting to capitalize on the growing Islamic finance market since 2007, when the Airport Authority Hong Kong announced it was interested in selling $1 billion of debt that complies with sharia law.

The proposed sale never happened. Nevertheless, in September 2009 the HKMA signed a memorandum of understanding with Bank Negara Malaysia to promote Islamic finance in the city.

In 2013, Hong Kong made legislative changes, providing a taxation framework for sukuk issuance comparable to that for the issuance of conventional bonds.

Jeffrey Kirk, managing partner at Appleby, a leading offshore firm delivering law and fiduciary services, said in order for Islamic finance products to be on a level playing field with conventional finance products, "it is often necessary for legislation and regulation to be amended to facilitate the launch of such Islamic finance products".