This will be imperative for navigating the path ahead. And I see Hong Kong’s role in this context as one of increasing vibrancy, growing connectivity, rising cross-border flows and accelerating innovation - all contributing to a far-reaching, fundamental evolutionary process happening that will reshape global financial markets forever, feeding into the tectonic economic shifts that we are witnessing – and in turn creating opportunities for all of us.

I call this process the Big Bang of Finance. This is a once-in-a-generation structural change to global finance that is happening as I write. When we look at a 10 year horizon, I feel pretty confident that we are going to see China’s onshore capital markets continue to expand in breadth and depth, with its equity and bond markets combined surpassing the USD 100 trillion mark over the next decade or so.

Continued growth in China’s economy - expected to be the world’s largest in the next 10 to 15 years – and fundamental changes in the financial sector will drive the Big Bang of Finance. Households will redistribute part of their estimated USD 50 trillion in investible assets from deposits to financial products, and further reforms to open capital markets and drive RMB internationalisation will accelerate capital flows into and out of Mainland China through Hong Kong.

You don’t need to be an economist, a mathematician or an algorithm expert to come up with these figures. If you look at China’s capital markets in the past two years you can see explosive growth, with the combined value of the onshore bond and stock markets growing from USD 18.6 trillion to USD 30.7 trillion between 2018 and 2020.

Whilst the past is of course never a linear prediction of the future, assuming pretty conservative metrics for both China’s economy and capital markets we think China’s onshore markets will grow past USD 100 trillion in the next ten years. That’s like creating a capital market the size of the US’s financial markets in a decade!  

For years Hong Kong has been a conduit between East and West, a vital global hub supported by its deep talent pools, robust infrastructure, internationally-aligned regulatory regimes and practices, free-flow of capital, and transparent, open and globalised markets. And today, I believe Hong Kong’s role is more vital than it has ever been.

Hong Kong is where global investors come to trade Chinese underlying, and where Chinese capital goes to invest in international markets. It remains a trusted, liquid, safe, proven and scaled international financial centre. Hong Kong is China’s premier offshore fund-raising centre, a global asset management and risk management hub, and the world’s largest offshore RMB liquidity pool with total deposits of RMB 868.7 billion at the end of November 2021.

Hong Kong is also a key funding centre for new economy companies, driving the economic transition in the Mainland and global markets.  New economy companies have accounted for a large share of IPO funds raised in Hong Kong in recent years ― 87% in 2021, rising from 64% in 2020 and 49% in 2019.  In particular, after the reform of the listing regime in 2018, Hong Kong has become Asia’s largest and the world’s second largest biotech fundraising hub. A total of 34 biotech and health care companies were listed in Hong Kong in 2021, which made us rank first by the deal number and second by the amount of funds raised globally.

Hong Kong is right in the centre of the Big Bang of Finance and fulfils a unique role as an offshore market for China with close connectivity onshore. Hong Kong’s internationalised market regime provides the perfect testing ground for innovative financial products and the process of RMB internationalisation.

The success and demand for HKEX’s recent innovations, such as the introduction of the MSCI China A50 Connect Index Futures contract, our expansion in Stock Connect underlying, and our new SPAC regime point to the demand we are seeing. We are not seeing decoupling, we are seeing greater integration in markets and greater demand from investors regionally and globally. The Big Bang of Finance is happening, and it is happening now.

Hong Kong must remain nimble and responsive. It must look to make its markets ever more competitive and attractive. And if it succeeds in this, it will be uniquely placed to support China’s continued growth ambitions, to help deliver the returns as well as benefits from assets diversification so eagerly sought by global investors, and to fuel the dreams and aspirations of the regions entrepreneurs, visionaries and job-creators.

The Big Bang of Finance isn’t something that will happen at some point in the future. This is happening now, and Hong Kong is where the action is. It is up to all of us to make the most of this incredible opportunity.

Wishing you a happy, healthy and prosperous year ahead!