Enterprises in the Chinese mainland have taken advantage of Hong Kong's "one country, two systems" and made use of its financial and international advantages to go global under the Belt & Road (B&R).
Over the past four decades since China's policy of reform and opening-up to the outside world, Hong Kong has long served as a super-connector to help introduce the foreign capital to the Chinese mainland and also promote going global of the enterprises in the mainland.
Particularly, Hong Kong has played an increasingly important role in promoting the two-way exchanges after the Belt & Road Initiative was proposed in 2013.
--- Unique advantages in B&R finance
It is the focus of the Belt and Road Initiative to promote infrastructure construction in the countries along the routes. Demands for financing and fund management will bring a lot of business opportunities to the financial industry in Hong Kong which has unique advantages in promoting infrastructure investment and financing, such as fund raising, project matching, risk management and professional support, according to Carrie Lam, Chief Executive of Hong Kong Special Administrative Region (HKSAR).
Bank of China (BOC) has been operating in Hong Kong for more than 100 years and is actively promoting the regional bank transformation and implementing the group restructuring strategy.
BOC Hong Kong acquired the parent bank's branches in Southeast Asia and opened a branch in Brunei. Currently, its outlets have been located in seven ASEAN countries including Malaysia and Thailand. It aims to extend BOC's advantages of advanced management, service and financial products in Hong Kong to Southeast Asia in a bid to enhance the regional and global service capabilities of BOC.
In recent years, BOC Hong Kong has completed a batch of key projects in various industries such as telecommunications and infrastructure in the B&R regions and provided financial support to those projects along the B&R routes, said Gao Yingxin, president of the BOC Hong Kong.
In addition to BOC Hong Kong, many Chinese-funded enterprises have used Hong Kong's financial advantages to establish a number of special investment funds to help promote the project construction under the B&R.
For example, CR Capital has joined hands with CR Power, CR Cement, CR Land and CR NG Fung to launch special private equity funds and fully leverage the third-party capital to spread risks in the process of "going out" and realize the overall innovation and development of financial business.
CITIC Group and its financial subsidiaries such as CITIC Bank, CITIC Securities have provided financial support of about 15 billion U.S. dollars for the B&R projects in the form of setting up the B&R infrastructure funds and launching the direct investment funds.
--- Ideal platform for "going global"
Since the listing of Tsingtao Brewery Co., Ltd in Hong Kong in 1993, the Hong Kong capital market has been an ideal platform for mainland enterprises to go global.
At present, among the more than 2,200 companies listed in Hong Kong, the market value of mainland enterprises has accounted for more than 60 percent of that of the Hong Kong securities market.
In recent years, more and more Chinese-funded enterprises have established corporate treasury centers in Hong Kong, which has not only met their financial management needs, but also helped them to handle overseas treasury operations centrally, improve operational efficiency, and better manage risk.
In 2016, Huatai Securities acquired all the shares of a U.S.-based financial technology company through its Hong Kong financial holding platform, with the total transactions reaching approximately 780 million U.S. dollars. It is the first acquisition transaction that Huatai Securities has concluded overseas through relying on the Hong Kong capital market.
Huang Yiyu, a senior lawyer of Davis Polk & Wardwell Hong Kong, participated in the overseas acquisition deal of Huatai Securities in the whole process, noting that most of the law firms in Hong Kong are British-owned or American-owned, with a long history and great international influence. The legal due diligence and legal opinions of these law firms are highly recognized in the international capital markets and by foreign investment banks and regulators.
Huang added that Hong Kong's financial system is developed and connected to the world. The transaction settlement system is very convenient. There is no foreign exchange control or quota, and the litigation risk is very small.
In the process of going global, the Chinese enterprises will face a variety of risks involving legal, political, tax, financial and intellectual property rights, and Hong Kong is the risk management center of these enterprises.
Hong Kong has the advantages of low cost and high efficiency in financing such as debt issuance, listing, loans and venture capital. It can not only provide diversified financial platforms for enterprises of the economies along the Belt and Road routes, and even government fundraising and financing, but also offer a variety of asset allocation tools to the investors, said Hu Zhanghong, rotating chairman of China Mergers & Acquisitions Association (CMAA).