SINGAPORE: Hong Kong holds one of the highest concentrations of banks and financial institutions worldwide. While it houses around 70 of the top 100 global…
SINGAPORE: Hong Kong holds one of the highest concentrations of banks and financial institutions worldwide.
While it houses around 70 of the top 100 global banks, this global financial centre is viewed by some industry observers to be losing its shine.
Despite its position as one of only two special administrative region of China, the world’s second largest economy, Hong Kong fell behind Singapore to fourth place in the Global Financial Centres Index (GFCI) in 2016.
Indeed, Hong Kong’s banking sector has faced strong headwinds in recent years, with Moody’s Investors Service downgrading it in 2016 and for the most part of 2017, citing material imbalances in the city’s economy weighing down banks’ credit profiles.
Key factors such as rising corporate and household debt and inflated property prices were said to pose latent risks to its operating environment.
But Hong Kong managed to get back on track with a strong growth momentum against a backdrop of sustained economic expansion during a critical 6-month period wrapping up the year. This not only saw Moody’s lifting its outlook to positive in December 2017, but also restoring Hong Kong’s GFCI ranking back to third place.
LOOKING TO TECHNOLOGY
Hong Kong Chief Executive Carrie Lam signaled back in October 2017 in her first policy address since taking office, that technology and innovation would be key growth drivers for the city’s “too traditional” economy.
The city plans to increase spending on research and development by nearly two-fold to 1.5 per cent of its GDP, and has acknowledged the urgent need to charge up new engines of growth. HK$700million (US$89 million) has been allocated to transform the global financial centre into a smart city.
On the back of economic recovery, there is plenty of room for Hong Kong to make headway in the innovation and technology race. There are more opportunities for banks to take on a central role to finance the city’s growth, afforded by growing interest in the Belt and Road Initiative and integration of the city into the development of the Greater Bay Area.
Given Hong Kong’s proximity to China, it should be occupying a leadership position on the digital money front, a global driver of inclusive growth identified by experts. Afterall, it was among the region’s pioneers of digital wallets with the launch of the Octopus card in 1997.
