GBA financial integration seen as priority

The Greater Bay Area is where cross-border fund flows are growing the fastest, and where future development potential is the strongest. This is why the provincial government is focused on supporting deeper integration of the financial industry in Hong Kong and Macau with Guangdong, says a senior provincial official.

He Xiaojun, director of the Guangdong Local Financial Supervision Bureau, says cross-border fund flows within the GBA accelerated this year to reach 14.08 trillion yuan. No comparison with the previous period was given, although He added that Guangdong had 248 listed companies in Hong Kong, and their cross-border settlement activity had helped to boost fund flows.

Speaking at the Greater Bay Area Financial Development Forum in Guangzhou, He said that, as of the end of September, the Shenzhen-Hong Kong Stock Connect scheme had registered transactions in the same period worth 8.4 trillion yuan. Net inflow of cross-border funds was 151.89 billion yuan. 

“The financial allocation capabilities and influence of the Greater Bay Area have been further enhanced,” He said, adding that the growth rate of major financial indicators in the banking, securities and futures, and insurance markets was higher than the national average.

He is right. Official data shows that as of the end of October, the province’s balance of local and foreign currency deposits was 22.6 trillion yuan, an increase of 10.3% year-on-year, at least two percentage points above the national average; the balance of domestic and foreign currency loans, meanwhile, was 16.43 trillion yuan, an increase of 15% year-on-year, at least give points above the national average.

There is still significant upside potential ahead, however. In the first three quarters, Guangdong’s financial industry generated output of 628.6 billion yuan, a year-on-year increase of 8.9%, yet it still accounted for only 8.1% of the province’s GDP. Hong Kong, by comparison, has a financial sector that generated HK$504 billion of revenues last year, or 21% of GDP.

According to the latest Global Financial Centers Index, Hong Kong remains at the No. 3 spot behind New York and London, while Shenzhen rose five places to No. 9 and Guangzhou rose one place to 23rd. Greater integration of these three centers is a high priority, according to He, who said the governments were exploring ways to facilitate further flows of cross-border investment, which would “support the high-quality development of industry.”

He said that in the future, Hong Kong’s advantage as a financial center and Macau’s strength as a platform to connect Portuguese-speaking countries would enable the region to “strengthen cooperation on funding channels”. This would continue to support cross-border two-way RMB loans, local and foreign currency fund pools, and boost cross-border cooperation channels such as QFLP, QDLP, Shenzhen-Hong Kong Stock Connect and RMB overseas investment and loan funds. 

At the same time, the region would pursue innovative means to attract long-term international capital to support the Greater Bay Area’s plans. These would be needed for many areas, including infrastructure construction, promotion of “green” financing, and Guangdong enterprises issuing “green” corporate bonds in Hong Kong and Macau. It would also help to accelerate the establishment of the Greater Bay Area International Commercial Bank (being established in Nansha). 

Moreover, He said a key focus would be to build “institutional compliance”, through “institutional operation and mechanism innovation”. A long-term, stable and sustainable cross-border investment and financing model would be vital for meeting the industrial needs of the Greater Bay Area, He said.

He has previously spoken at length about the need to get more Guangdong companies access to improved financing channels, especially technology companies. The province has 45,000 National-level Technology Enterprises and only 1.8% of these are listed, He told another conference earlier this year.

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