Chinese Economics Thread
- Thread starter Norfolk
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I remember the first day of 2020, I was reading an article on RT about how by the end of the decade the US dollar would be finished as a reserve currency...
I was thinking how it would play out....
We are barely 2 years into the decade and Russia is fixing to get kicked out of SWIFT and RT got taken offline...
So now I know this is how it plays out, the beginning of the end....
I wonder if that’s true? Is this chollima report accurate? Previously they mentioned something about SMEE lithography machine but we were not able to verify
I saw a Russian professor based in Vladivostok wrote a same thing
The reason why Alibaba and Tencent has listings outside of China is simply because a lot of its initial capital was from western sources and they need to be able to cash out.
Exchanges are meant as a means of matching capital to opportunities, at this point there's a lot of opportunities in China also potentially a lot of capital, without a free floating currency and capital controls China aims to keep its capital internal.
The Hong Kong Stock Exchange has to be large internationally because its domestic capital is paltry, its peg to the US dollar removes currency risk which makes it attractive also as part of China which effectively underwrites the SAR but without its restrictions it's not deemed a big risk by international capital despite it relatively small size.
Hong Kong only benefits from the income generated serving its capital market not from the raw size of the market itself i.e. all the international banks, law firms, insurance companies set up shop there generating jobs and tax income directly plus all the restaurants, coffee shops, gyms etc serving them indirectly. A mammoth day of trading does not materially change that. Hong Kong's days of 'sharks fin soup on rice' are long gone, which is the root cause of a lot of the social unrest in the 21st century.
The myth that Hong Kong is some how special just leads to all sorts of issues at best it can be described as convenient, but convenience comes and goes if anyone cares for a historical precedent just look to the rise and fall of Venice replete with the black death episode!
@Tyler bro with the west sanctioning Russia financial sector, having Capital control seems like a good idea and other country are mulling to create one.
The RMB is not freely convertible and that's by design.
During the 1998 financial crisis in Hong Kong could the HKMA have defeated Soros and his cronies without Beijing pledging not to devalue the RMB and ensuring liquidity for it to soak up a market in free fall?
If you want to debate HK's GDP, RMB Clearing in HK makes a tidy sum for its economy, back in the day, London fought tooth and nail to get the rights to do RMB clearing in Europe!
Switching to stock markets, having a listing somewhere allows companies to raise capital if you are a Chinese company needing to raise capital then domestically RMB convertibility is a non-issue, if they need to raise non-RMB capital, for say offshore expansion, that can be done in any stock exchange after the organisation meets that exchange's criteria.
Besides how much capital is raised as equity and how much as debt through bond issues by Chinese companies? Before we go down that rabbit hole China's bond market is bigger than HK's!
Do Chinese companies prefer Hong Kong, probably but its not because its 'special'. Looking in the opposite direction wrt investment how many of China's foreign acquisitions have been of HK listed companies?
Hong Kong's financial markets provides a function once upon a time it was crucial but it's no longer that special or unique wrt China, what it does do is provide Hong Kong with a means to pay its way. Its not to say its not important but now a days its merely one amongst many.