Hong Kong and Shanghai Capital Markets Essential for International Investment in China, Officials Say

Hong Kong and Shanghai's capital markets have become critical channels for international funds to allocate Chinese assets, according to Hong Kong Financial Secretary Paul Chan, speaking at the Lujiazui Forum held in Shanghai from June 17-18. Chan emphasized that collaboration between the two financial hubs is shifting from quantitative expansion toward qualitative enhancement, with both cities working to establish a comprehensive full-chain investment and financing channel.

Chan outlined several strategic priorities for the partnership. These include facilitating innovative technology companies in dual-direction financing, introducing more diversified capital flows, and unlocking long-term capital potential such as pension and insurance funds for investment in early-stage and hard technology projects. He also highlighted the need to enhance the international functionality of the Chinese yuan and support Chinese companies' "going global" initiatives, while expanding China's foreign direct investment through coordinated resource management and professional financial service platforms.

Securities and Futures Commission Chief Executive Julia Leung announced that the SFC will continue supporting the Hong Kong Stock Exchange in launching yuan foreign exchange futures, yuan-denominated gold futures, and structured fixed income products. The SFC will also collaborate with mainland regulators to accelerate the inclusion of yuan stock trading counters into the Stock Connect program and is actively promoting electronic trading platforms for bonds to enhance market efficiency and liquidity.

Fang Xinghai, former vice chairman of the China Securities Regulatory Commission, proposed two approaches to further strengthen the mutually reinforcing role of Hong Kong and Shanghai's capital markets. First, creating a comprehensive index covering Shanghai, Shenzhen, and Hong Kong that encompasses the entire Chinese market and industry-specific indexes would attract more international capital. Second, Hong Kong, Shanghai, and Shenzhen should jointly promote efforts to attract both international institutional investors and mainland quantitative investment institutions to operate across the region.

Global investors' demand for yuan allocation continues to increase, prompting both cities to jointly enrich investment products and risk management tools. In the commodities sector, they plan to collaborate with Shanghai's futures and spot markets to promote more "China price" products denominated in the yuan. The forum was jointly organized by the People's Bank of China, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the Shanghai government under the theme "Financial Development and Cooperation Under Global Governance Initiative: New Visions, New Challenges, and New Opportunities."