“We look Chinese to Westerners, but to the Chinese we are not so Chinese,” said Charles Li, chief executive of Hong Kong Exchange and Clearing, in describing its role between China and the West. “We want to bring Chinese investors into Hong Kong and push other investors into China over large bridges and highways with exchanges on each side able to control the flow. We are trying to figure out how Hong Kong can add value to China’s coming out to meet the world.”
He expects the boom in commodities to continue in China and to expand to Africa.
“China needs to be a lot more urban, and so does Africa.” Moving toward a more urban population requires both energy and building materials, such as steel.
Hong Kong recently acquired the the London Metal Exchange platform in 2012, which Li said will require a learning process.
“On the commodity front, Hong Kong doesn’t have a strong commodity tradition, so we are starting from scratch. We have to demonstrate to the Chinese a value proposition.”
If Hong Kong can work out mutual market access with China, it could lead to a boom in retail trading, said Li. China has about 60 million active traders, and that is without margin and without technology-driven high-frequency trading engines. Li said the traders themselves provide high frequency activity, which he referred to as human HFT.
If China’s leaders decide to increase their financial relations with the West, Hong Kong stands ready to assist, and Li knows the task will be demanding.
“Break down that wall so the second largest economy can have its economic system connected to the rest of the world, said Li. “We need to gain enough trust from our counterparties in China. We have to help China Inc. do what they cannot, but soon they will be able to do it for themselves and then we have to move on to something else.”