China Sees Hong Kong Role in Yuan Internationalization
Beijing has unveiled an ambitious five-year plan to boost Hong Kong’s position as a commercial center by becoming the main conduit for China’s dissemination of the yuan as a global exchange currency.
Chinese Vice Premier Li Keqiang revealed the new plan for Hong Kong at an economic forum there on Aug. 17 to announce China’s 12th five-year growth plan through 2015. Li is a leading candidate to succeed Wen Jiabao as China’s premier, and was in charge of formulating the five-year plan.
The plan would enhance Hong Kong’s role as an offshore yuan market through direct yuan-denominated investments by Hong Kong firms in the mainland. To boost Hong Kong’s role in China, the mainland’s medical and legal services sector, along with others, would be opened to the Hong Kong firms by 2015.
This favorable treatment is granted in hopes that Hong Kong will contribute to efforts to reform China’s industrial structure and help spur domestic demand, said Li.
Li is the first member of the Politburo Standing Committee of the Communist Party of China to visit Hong Kong to explain a five-year plan. Further indicating Hong Kong’s importance to China’s economic plans, for the first time separate chapters were assigned to Hong Kong and Macao in China’s own five-year plan approved by the National People’s Congress in March.
China’s mainland accounts for about half of all trade from Hong Kong and 60 percent of visitors to the special administrative region.
Even as Hong Kong’s reliance on the mainland is increasing, the rise of Shanghai and Singapore are fueling concerns that Hong Kong’s status as a regional financial hub is being eroded.
A lack of growth strategies by the Hong Kong government prompted Beijing to formulate the plan, says Chen Wenhong, director-general of the China Business Center of Hong Kong Polytechnic University.
Hong Kong’s assimilation into China is the best way to prevent it from being marginalized further in Asia, said Kiyoshi Inagaki, an analyst living in Hong Kong.