The central government's "stable word" to rescue the market at the same time enlightens the new focus of Hong Kong's financial management

The Financial Stability and Development Committee of the State Council recently (March 16) held a special meeting chaired by Vice Premier of the State Council and Director of the Finance Committee Liu He.

The meeting responded to issues of concern about the economic development and financial markets of the mainland and Hong Kong, and acted as a "spinner for the sea" amid economic fluctuations, prompting a sharp rebound in the stock market.

It is worth noting that it also instructs the Mainland and Hong Kong regulators to strengthen communication and cooperation to maintain the long-term priority of Hong Kong's financial market stability.

Liu He, Vice Premier of the State Council and Director of the Finance Committee, presided over a special meeting of the Financial Stability and Development Committee of the State Council, giving a boost to the stock markets of the two places.

(Reuters)

Dry port financial management institutions should cooperate

The stock market has recently set off a "bloody storm".

The Hang Seng Index once fell below 19,000 points, hitting a six-year low.

The Hang Seng Technology Index also fell below several support levels, falling below 3,500 points, hitting a record low.

Ding Chen, director of the Hong Kong Financial Services Development Council and president of CSOP, said in a recent webinar that many investors have expressed their concerns about the volatility of the Hong Kong stock market to her.

In response, she pointed out that the volatility of Hong Kong stocks is not a "market problem". The global market has fluctuated violently due to wars, sanctions, antitrust, and the Federal Reserve's interest rate hike. Funds are "giving up high-growth areas and returning to the United States."

Ding Chen emphasized that Hong Kong is still a competitive international financial center.

"The central government is addressing issues in the capital market, such as transparency. The meeting clarified that each department should coordinate with the financial management department in advance before launching policies with significant impact, which we have never seen before." Ding Chen commented, The signal released by the State Council Finance Committee meeting can remove market uncertainties.

Enhancing transparency and maintaining financial market stability are not just the requirements of the State Council's Financial Commission on mainland financial regulators.

The meeting also emphasized that the regulators of the mainland and Hong Kong should strengthen communication and cooperation in maintaining the stability of Hong Kong's financial market.

Why should the cooperation between the two financial regulators be emphasized?

First, as an open small economy, Hong Kong's financial system is deeply affected by the external economy and fluctuates violently.

Compared with the Hong Kong financial market, the mainland is an immature financial market with limited volatility.

However, with the return of Chinese concept stocks and the opening of investment channels such as Shanghai-Shenzhen-Hong Kong Stock Connect, Bond Connect, and Cross-border Wealth Management Connect, the degree of "interconnection" between the financial markets of mainland and Hong Kong is increasing.

For example, national regulatory trends and favorable policies will quickly affect changes in the Hong Kong stock market, and fluctuations in the Hong Kong stock market will also be transmitted to the mainland's financial and economic systems.

With the increasing correlation between the financial markets of the two places, maintaining the stability of Hong Kong's financial market is also maintaining the stability of the country's financial and economic system.

To a certain extent, since the financial regulators of the two places have been on the "same boat", it is naturally necessary to strengthen communication and cooperation on market stability issues.

The Hong Kong Monetary Authority shoulders the responsibility of maintaining the stability of Hong Kong's financial system and has once rescued the market during the financial crisis.

(file picture)

Financial stability: the 'new challenge' for a free economy

However, as far as the goal of "maintaining Hong Kong's financial stability" is concerned, it may not be easy to implement.

There are four major financial regulators in Hong Kong, including the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Insurance Authority (IA) and the Mandatory Provident Fund Schemes Authority (MPFA) ), responsible for overseeing the banking, securities and futures, insurance and retirement planning businesses respectively.

The HKMA and the SFC are most closely involved in maintaining financial market stability.

As the central bank of Hong Kong, the HKMA not only supervises the banking industry, but also manages the currency and maintains the stability of the financial system.

The SFC's function is to maintain the integrity and stability of Hong Kong's securities and futures market, and has certain enforcement powers. Specific tasks include: formulating and implementing regulations; licensing and supervising financial intermediaries; monitoring the operation of operating agencies, optimizing infrastructure; approving products and sales documents ; Supervise acquisitions and mergers; monitor the regulatory performance of listing on the Hong Kong Stock Exchange; cooperate with domestic and overseas regulatory agencies; assist investors to understand the market.

As a free economy in Hong Kong, regulators generally do not directly intervene in market operations unless the financial system suffers a huge blow.

For example, every time the HKMA takes action to "bail out the market", it is in the context of the global financial crisis or a run on banks in Hong Kong, in order to avoid the collapse of Hong Kong's financial system, it will "intervene" through market means.

It can be said that in terms of financial stability, Hong Kong's financial regulators all focus on maintaining infrastructure and the rule of law, and rarely directly affect market performance through policies.

Therefore, how to "maintain financial stability" in a market with free flow of capital without compromising Hong Kong's role as an international financial center is an issue that local financial regulators need to start paying attention to and ponder.

Ren Zhigang, the first president of the HKMA, once suggested that an "expert group" could be set up under the current leading group for the development of the Guangdong-Hong Kong-Macao Greater Bay Area to solve the problem of poor communication between land and port officials.

(Data picture: Photo by Ou Jiale)

Cooperation between the two places: establishing high-level communication channels

In terms of communication and cooperation with the Mainland, the HKMA and the SFC do still have room for improvement.

The cooperation between the HKMA and the Mainland is mainly in cross-border finance and financial technology. However, in the high-level organizational structure disclosed by the HKMA, there is no position dedicated to Mainland affairs or communication with relevant Mainland institutions. The regulatory authorities appear passive and cumbersome when communicating.

Ren Zhigang, the first president of the HKMA, once recounted in public his experience of communicating with the central government when he was in public office, "Going to the People's Bank of China, the Hong Kong and Macau Office, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission for advice, "walking through ministries and commissions" for a year or two , can begin to execute", the process is very painful.

Ren Zhigang once suggested that an "expert group" could be set up under the current leading group for the construction of the Guangdong-Hong Kong-Macao Greater Bay Area. Taking finance as an example, experienced and authoritative financial figures could be invited to take command, including Zhou Xiaochuan, former governor of the People's Bank of China, Chen Yuan, chairman of the China Finance Forty Forum, and others; on this basis, the People's Bank of China, the Hong Kong and Macau Affairs Office and other relevant government departments are invited to send ministries to the group, "it will be much easier to do things."

Compared with the HKMA, the SFC has closer cooperation with the Mainland regulators.

In terms of organizational structure, the Office of the Chief Executive Officer of the CSRC has a Mainland Affairs Office, which is mainly responsible for tracking and researching the issuance and regulatory reform of the Mainland capital market, maintaining close liaison with the China Securities Regulatory Commission and relevant Mainland institutions, and promoting financial cooperation between the two places. Work.

However, in terms of the scope of cooperation, refer to the various cooperation arrangements signed by the SFC and mainland regulators (the table below), which mainly focus on exchanging information and assisting each other in investigations.

In general, the CSRC is relatively passive in its cooperation with mainland regulators, and the content of the cooperation is not very relevant to maintaining financial market stability.

Furthermore, cooperating with mainland financial regulators to maintain Hong Kong's financial stability is not just a matter of the HKMA and the Securities and Futures Commission.

In theory, the communication mechanism should include the four major financial regulators in Hong Kong, major stakeholders in Hong Kong's financial industry (such as exchanges, note-issuing banks), and relevant officials and departments of the Hong Kong government.

Regarding this issue, there is still a lot of room for discussion and improvement, whether it is Hong Kong's financial regulators or relevant stakeholders.