APCAC Soundbites: Asia as a Financial Hub

APCAC Asia as a Financial Hub.png

Moderated by China-Britain Business Council Chief Executive Stephen Phillips, this panel discussed renminbi internationalization, how established financial centers are positioning themselves to benefit from this, and what this means for the strength and influence of China’s economy worldwide.

Ernie Bower, Sumitro Chair for Southeast Asia Studies, Center for Strategic and International Studies

“On the question of whether Asian financial integration goes well… we really should be watching the levels of innovation and integration in Asia. And Singapore is taking a lead in that.”

“If we don’t get the economics right in Asia, it will impact the security relationships… You can’t have a secure, peaceful Asia for the 21st century if we don’t get the economics and finances right.”

“The big question in Washington is how to get China to play by the rules with the rest of the neighborhood.”

Wei Christianson, Co-Chief Executive Officer, Asia Pacific, Morgan Stanley

“We see the liberalization of the RMB to a large extent being driven by the establishment of offshore financial centers. This will definitely create great opportunities for these cities.”

“Hong Kong is a liquidity center – it has a very resilient financial center… We also talk about hard and soft infrastructure, which in Hong Kong is world class… Hong Kong also has a robust financial regulatory environment, which is comfortable for international investors.”

“Hong Kong still has a lot of homework to do and a lot of challenges ahead, but this isn’t a zero-sum game, because the market is huge.”

Liu Shengjun, Executive Deputy Director, CEIBS Lujiazui Institute of International Finance

“The RMB has made very good progress in internationalization over the past few years, in terms of international settlement and being accepted as Special Drawing Rights. However, some of the internationalization is an illusion. Part of the reason is the expectation of RMB appreciation. We have seen a lot of hot money flowing to China, but then that stopped a few months ago.”

“(A big issue) is the stability and sustainability of the Chinese economy. No one can tell when the transformation can be smoothly completed, and this is the biggest factor for the future of RMB internationalization.”

“If we look at the lessons from the Asian Financial Crisis, a lot of economies encountered problems because they opened their capital accounts. If we open our capital account right now, China will probably run into the same problems as occurred during the Asian Financial Crisis.”  

“And there is the theory of the impossible trinity: the stability of the exchange rate, free capital flows, and the independence of monetary policy. China likes to have a stable exchange rate, so this means they will sacrifice free capital flows.”

“Without transparency it is difficult to build long-term confidence. If we look at the renminbi as an international reserve currency, the renminbi still has a very low proportion, because we can’t get the long-term confidence from global investors as a result of the lack of transparency. Two major events last year were the stock market crash and the exchange rate instability, which confused foreign investors.”

Lisa Robins, Head, Global Transaction Banking, Asia Pacific, Deutsche Bank

“Am I optimistic about the future? Absolutely. Think back to the foreign exchange certificates, it’s not the same China as it was 30 years ago. It took over 30 years for Japan to have an open currency.”

“Less than 2% of investors are in Chinese bonds or equities, so there is huge upside possibility. While last year was a bumpy ride, but it was a readjustment.”

“Policymakers should be looking at the capital account to make sure of policy stability there, and how China can have the courage to increase investment and ensure that standards are adhered to.” 

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