Hong Kong’s Paul Chan predicts positive market response to Xi-Trump summit

Hong Kong's finance chief, Paul Chan Mo-po, anticipates a favorable market reaction to the upcoming Xi-Trump summit. He believes that resolving geopolitical uncertainties will boost investor confidence. Chan made this prediction on a radio program the day after Chinese President Xi Jinping visited Washington for talks with US President Donald Trump, despite the summit yielding limited results.

According to Chan, the market will interpret the situation positively because previous concerns over geopolitical factors have led to economic uncertainty and capital flow volatility. A positive outcome of the summit could lead to increased investor security when positioning portfolios. Chan also highlighted Hong Kong's strategic role in global economic growth, noting the city's advantages in facilitating the global expansion of Chinese enterprises.

The recent success of the Hong Kong initial public offering (IPO) market this year further underscores this point. Chan mentioned that Hong Kong's hosting of the Apec Finance Ministers' Meeting from October 20 to 21 would be another opportunity to promote the city's business advantages, such as its 'one country, two systems' model and business environment.

He assured stakeholders that the government's plan to expand renminbi usage, including settling government payments and commodities trading in the currency, would not impact the pegged exchange rate system. Chan explained that Hong Kong's unique advantages under the 'one country, two systems' framework provide international investors with peace of mind regarding the stability of the exchange rate.

The government has already issued some bonds in renminbi to benefit from lower interest rates, and converting proceeds back into Hong Kong dollars still yields a net financial benefit. Settling government expenses for mainland-supplied goods and services in renminbi is a strategic move to mitigate exchange rate risks and lower transaction costs, Chan said.

Hong Kong's role as an international financial center benefits from the growth of renminbi offshore business, with foreign entities holding the currency for diversification and to avoid US dollar risks. As global trade continues to expand, more countries are encouraging transactions settled in local currencies, which can help diversify risk away from the US dollar.