China told top Wall Street executives on Tuesday that it will move ahead with capital market reforms and in the opening up of its financial sector for foreigner investors, while supporting Hong Kong in bolstering its credentials as a global financial hub.
The pledge from Chinese policymakers at the Global Financial Leaders’ Investment Summit comes amid growing geopolitical tensions. These tensions follow Donald Trump’s election as the next U.S. president, and a destabilising slowdown in the world’s second-largest economy.
“We will create an inclusive favourable business environment for outside investors and business leaders coming to China,” said Zhu Hexin, deputy governor of China’s central bank and administrator of the State Administration of Foreign Exchange.
“So we open our arms to foreign investors. They’re welcome to the mainland to share in the success of China’s economic development.”
Backing For Hong Kong
China Securities Regulatory Commission (CSRC) Chairman Wu Qing added that China would remove investment barriers and implement supporting measures while deepening capital market reforms.
Beijing will also support more high-quality enterprises from China to list and issue bonds in Hong Kong, China’s Vice Premier He Lifeng said. Lifeng offers backing to the city at a time when its future as a financial centre is facing scrutiny.
The summit, hosted by the Hong Kong Monetary Authority (HKMA), is being attended by the CEOs of top Wall Street firms. This includes Citigroup, Goldman Sachs and Morgan Stanley.
Hong Kong’s standing as a global financial hub has been clouded in recent years after Beijing imposed a sweeping national security law in 2020. Western governments say it has hit the territory’s autonomy, but Chinese authorities say it was necessary to restore order after mass pro-democracy protests in 2019.
Hong Kong Businesses
On Tuesday, Hong Kong’s High Court jailed 45 pro-democracy activists for up to 10 years following a landmark national security trial that has damaged the city’s once feisty democracy movement and drawn criticism from the U.S. and other countries.
Chinese vice premier He said the country’s recent stimulus measures were gradually taking effect and benefitting Hong Kong’s markets. He said Beijing would help support Chinese financial institutions to expand their businesses in Hong Kong.
“We will improve the mechanism for the regular issuance of treasury bonds, steadily increase issuance in Hong Kong, and support Hong Kong in consolidating its position as a global financial business hub,” He said, without providing specifics.
‘Battling Deflation’
There have been $9.1 billion worth of listings in Hong Kong in 2024, according to Dealogic data, compared with $5.88 billion in 2023. Despite the pickup, issuance volumes remain well off the 2020 peak of $51.6 billion.
The deals slowdown has prompted Western and Chinese financial firms to slash hundreds of investment banking jobs in the past two years. Some international law firms have also scaled back or exited their businesses in the greater China region.
Citigroup chief executive Jane Fraser and Goldman Sachs chairman and CEO David Solomon told the forum Trump’s return to the White House next year should spur more corporate buyout activity on the prospect of reduced regulation.
“When we think about deregulation tapering there (U.S), we saw an almost immediate unlock happening with the election result,” Fraser said.
“… We saw a huge growth in our pipelines, almost overnight in M&A, IPOs, our sponsor clients are definitely back and I would call it “the big unlock” that we’ve been waiting for a long time.”
China’s Slowdown
In Asia, however, the deals outlook remains sluggish as China is grappling with an economic slowdown, fuelled by a property sector debt crisis and the lingering effects of the pandemic lockdowns.
Beijing unveiled earlier this month a 10 trillion yuan ($1.38 trillion) debt package to ease local government financing strains and stabilise the country’s flagging growth.
Morgan Stanley CEO Ted Pick said it would take time for the stimulus measures to show effect, but early signs of recovery can be seen.
“Battling deflation takes time. And so the monetary impulse is starting to take hold, lower interest rates, more attractive mortgage rates, inducements to new ownership. The fiscal piece will take time.”
Goldman’s Solomon, however, said global investors who have “put a lot of capital” into China continue to be concerned about getting capital out of the country.
“And so in that context, I think messages around the ability to both attract capital and have capital come in and come out — very, very important for global investors.”
(with inputs from Reuters)
