Editorial | More growth ahead as cross-border Connect turns 10
Status of Hong Kong as offshore financial hub for mainland China has been greatly enhanced by ever-widening investment scheme
This month marks the 10th anniversary of the cross-border Stock Connect scheme, a historic moment for Hong Kong as a financial “superconnector” and the opening up of mainland financial markets. International investors quickly took to the stock scheme to access China’s equity markets.
A Connect scheme for the bond market was launched in 2017, and the programme was further expanded in 2022 to include qualified exchange-traded funds.
The stock scheme not only enables Chinese firms to raise funds outside the mainland, but also provides mainland investors with new avenues to channel their money. In all of these, Hong Kong plays a key role and has benefited enormously, thereby underscoring its status as an offshore financial hub for the mainland.
The beauty of the scheme is that it does not challenge China’s capital controls, yet it plays to Hong Kong’s strengths, including its rule of law as a common law jurisdiction – an example of how “two systems” complement each other under “one country, two systems”.
Average daily turnover of the stock scheme has risen by as much as 40 times from a decade ago. The number of stocks under the scheme is up from around 800 to more than 3,300, accounting for about 90 per cent of total market capitalisation of listed firms in the three markets represented by Hong Kong, Shanghai and Shenzhen.
