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

Hong Kong's Finance Secretary Paul Chan has forecasted a favorable market reaction to the ongoing summit between Chinese President Xi Jinping and US President Donald Trump. Speaking on a radio program on Saturday, Chan noted that easing geopolitical uncertainties would strengthen investor confidence. This statement came a day after Xi's three-day visit to Washington, where the two leaders pledged further discussions despite minimal tangible outcomes.

Chan expressed confidence in the market's positive interpretation of the reduced geopolitical tensions, which previously had caused economic concerns and market volatility. He assured that Hong Kong's economy would persistently grow, with domestic firms expanding abroad, benefiting the region, including Southeast Asia and the Global South. He reiterated Hong Kong's role as a primary driver of global economic expansion.

Chan highlighted Hong Kong's geographical advantages that could facilitate mainland Chinese enterprises in establishing a global presence. He cited the city's successful initial public offering (IPO) market performance this year as evidence. Additionally, Chan pointed to the Apec Finance Ministers' Meeting, scheduled from October 20 to 21, as another platform to showcase Hong Kong's business advantages.

Addressing Hong Kong's commitment to expanding the use of the renminbi, Chan aimed to allay stakeholders' concerns that this move would disrupt the pegged exchange rate system. He emphasized that Hong Kong has an independent currency and maintains a fixed exchange rate band, providing international investors with the assurance that their money transfers remain stable. This certainty is critical for international financial centers like Hong Kong.

Chan explained that the government had issued some of its bonds in renminbi to capitalize on lower interest rates, and converting the bond proceeds back into Hong Kong dollars still generated a net financial gain. He further proposed settling government payments and expenses for mainland-supplied goods and services in renminbi as a practical approach to minimize exchange rate risks and reduce transaction costs.

Chan stressed that renminbi offshore business is a unique competitive advantage for Hong Kong and will continue to expand.

Recognizing that global trade, including imports and exports, accounts for approximately 14 to 15 percent of the world's total, Chan noted that many countries are increasingly promoting transactions in local currencies to lower costs and eliminate exchange rate risks. This trend, particularly in trading with China, including oil purchases, suggests that more foreign entities may hold renminbi.

Consequently, these entities will seek investment opportunities and require a convenient platform to convert their renminbi into other currencies.