- Funcionarios chinos están trabajando para transformar al distrito de Qianhai en un laboratorio para las esperadas reformas al tipo de cambio y tasa de interés. Se espera que esté completamente operativo hacia el 2020.
- El surgimiento de este Hong Kong 2.0 justo en la puerta de al lado de su versión original, no es necesariamente una amenaza a la existencia del actual centro de las finanzas, señala el reportaje de Credit Suisse.
- Aunque el nuevo centro tendrá la ventaja de ser más barato, tener menos restricciones al flujo de capitales y recoger lo aprendido en estas últimas décadas.
Publicado por Credit Suisse Group, diciembre de 2013.
“Manhattan of the Pearl River Delta”
Just about an hour’s drive northwest of Hong Kong, in a corner of the bustling Chinese city of Shenzen, there’s a roughly 6-square-mile piece of muddy reclaimed land known as Qianhai that has morphed over the last three years into a busy construction site. The thrum of activity comes as Chinese officials are working to turn the district into a laboratory for long-awaited currency and interest rate reforms. Qianhai is slated to be built-out and fully operational in 2020, with the hope that it then becomes a thriving financial services center. Such is the excitement about Qianhai that people are already calling it a “mini-Hong Kong” or “Manhattan of the Pearl River Delta.” But the rise of a Hong Kong 2.0 right next door to the original isn’t necessarily an existential threat, Credit Suisse says. In fact, if all goes according to plan, it’s probably good news for Hong Kong. Special economic zones like Qianhai are nothing new in China – in fact, there are so many that they shouldn’t really be called special anymore. They began popping up in the early 1980s when China threw open its doors to the West, ending decades of economic and political isolation. Most zones offer companies preferential policies such as tax breaks and lower tariffs to boost exports and attract foreign investment. But this one will be different. After Chinese officials renewed their commitment to market-based reforms at the Communist Party gathering that ended November 12, 2013 there is reason to believe Qianhai may actually prove very special indeed.
Widening Currency Flows
Qianhai has a much larger purpose than previous economic zones: Credit Suisse says its success could be a major turning point in China’s increasingly urgent push to liberalize its economy and create a fully convertible currency. Under Beijing’s watchful eye, the existing channels for cross-border currency flows between Hong Kong and the mainland would widen. Banks based in Hong Kong would be allowed to set their own interest rates for renminbi-denominated loans to companies registered in Qianhai – and vice-versa – freeing financial institutions on both sides of the border from the interest rate restrictions on mainland lenders. In fact, 15 Hong Kong banks have already been authorized to lend to companies in the zone. Chinese companies in Qianhai will also be able to directly issue renminbi bonds in Hong Kong, known as dim sum bonds. Qianhai is set to welcome foreign-funded private equity firms, too. And yes, the typical goodies on offer in special economic zones will be available here, too – businesses will receive corporate and income tax breaks as well as other incentives to open offices there. The end result, the authorities hope, will be greater – though still tightly controlled – flows of renminbi into and out of China.
Hong Kong Testing Ground
Of course, building Qianhai on Hong Kong’s doorstep has raised questions about the city’s future as an international financial center. Following the British handover to the Chinese authorities in 1997, Hong Kong kept a large degree of control over its economic, political, financial and legal systems, though Beijing is now responsible for the territory’s defense and foreign policy. That made it a very good setting for foreign companies that wanted to access Chinese markets while maintaining their regional head offices in a capitalist economy with a strong rule of law and a Westernized business culture. Hong Kong’s unique status as both a Chinese territory with special privileges and a modern city with plenty of clout in international markets has also helped Chinese companies expand offshore. For its part, Beijing has used the “one-country, two-systems” arrangement to test major reforms in Hong Kong before rolling them out across the country. In one of the most significant experiments of the past decade, the city was designated an offshore renminbi trading center in 2003. The reform, seen as a significant step towards making the mainland’s currency fully convertible, confirmed Hong Kong’s importance in the eyes of China’s political leaders and international investors alike. But, if Qianhai offers companies seeking access to the Chinese market a base on the mainland with many of Hong Kong’s advantages, plus lower wages, cheaper rents and competitive tax rates, the thinking goes, could it be the first step in Hong Kong losing its own special status?
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Qianhai: An Opportunity, Not a Threat
In short: no. On the contrary, Credit Suisse analyst Christiaan Tuntono thinks the rise of Qianhai could actually benefit Hong Kong. First, having a direct channel for currency flows and cross-border investment options will create more opportunities to put to work the more than 700 billion renminbi (115 billion US dollars) in deposits sitting in Hong Kong’s offshore market. Second, the size of Hong Kong’s renminbi bond market – already the largest in the world, with 294 billion renminbi (48 billion US dollars) issued since 2007 – should grow as Qianhai-based companies are allowed to issue dim sum bonds directly, allowing them to take advantage of Hong Kong’s lower borrowing costs, while also offering new investment alternatives to city investors. Tuntono also believes an asset management industry catering to mainland corporations and individuals could develop in Qianhai, and Hong Kong’s sophisticated financial institutions and investors would likely play a lead role in its development. Finally, a robust Qianhai financial sector would create more jobs for portfolio managers, traders, brokers and analysts from both regions. “We think Qianhai represents another opportunity for Hong Kong, as the process of renminbi internationalization requires its close cooperation,” Tuntono states. “Instead of fearing whether Qianhai shall replace Hong Kong in the future, we think investors should think how Hong Kong shall rise with Qianhai in forming an even greater financial and services hub in East Asia in the years to come.”
Renminbi fully convertible by 2015
Qianhai does have competition. The Shanghai Free Trade Zone, which will also experiment with currency-related reforms, opened in late September, and there are already reports that some companies that had planned to invest in Qianhai are reassessing their options. Still, by mid-September, about 1,700 firms with a combined registered capital of 200 billion renminbi (33 billion US dollars) had signed up to open offices in the zone. Approximately 70 percent of them are involved in the financial services industry. Given Beijing’s penchant for gradualism and tight regulation, it remains to be seen just how fast China’s stated currency and interest rate reforms will occur. Given the experience of many emerging markets of late, there is a legitimate worry that loosening currency controls on the capital account will leave China more vulnerable to sudden, potentially destabilizing inflows and outflows of investment capital than it would like to be. Officials have promised that the renminbi will be fully convertible by 2015, but many observers still think that’s highly unlikely.
What it Means for Hong Kong
Turning back to what it all means for Hong Kong, even if the renminbi were to become a fully convertible currency and Qianhai grew into a thriving financial services hub, most analysts believe that both foreign companies entering the Chinese market and Chinese companies expanding offshore will still want the reassurance of Hong Kong’s strong legal framework, transparent markets and financial know-how. “Financial centers become international hubs only when investors perceive they provide a level playing field,” says Mark Williams of London-based research house Capital Economics. “This requires transparency, an independent legal system, and a willingness to adopt international norms. None of this is in place today in China.” All that said, if China’s financial and legal systems do eventually mature enough to satisfy foreign businesses and investors – and that’s still a very big if ‒ Hong Kong will certainly have to step up its game to stay competitive. “Hong Kong should not be complacent… about its existing advantages over China,” Tuntono writes. “The government, industries and general public in Hong Kong will all have to strive hard for greater advancement than they have achieved in the past so that the city can maintain a leading edge over the mainland.” But what other choice do they have?