Economic uncertainties make the region ‘more significant’

China’s key national initiatives, including the Guangdong-Hong Kong-Macao Greater Bay Area and the Belt and Road Initiative, are shifting to a more hard-headed stance amid slower economic growth projections and lower market confidence, exacerbated by the ongoing US-China trade stand-off and expectations of further interest-rate hikes, according to a prominent economist.

The US Federal Reserve is on course to raise interest rates gradually to allow a steady economy. Coupled with the “unpredictable” trade tensions between the world’s two largest economies, the emerging market has borne the brunt of the currency turmoil, causing the Chinese yuan to hit an almost two-year low this month.

Given the pool of market uncertainties, E Zhihuan, chief economist at Bank of China (Hong Kong), said she’s confident about the future development and implementation of the Bay Area and the BRI, like “no weal without woe”.

“Market volatility and uncertainty could, however, give us an opportunity to be more pragmatic — doing things one by one, step by step — in terms of tackling different demands from individuals, corporations and others within the region,” E tells China Daily.

Amid the opposite and different directions of the monetary policies of China and the United States, the two nations’ interest-rate spread decreased from 150 basis points last year to around 40 basis points this year, which is viewed as an indicator of renminbi depreciation pressure, she explains.

However, she believes the yuan’s downside risk is still within government control given China’s steadier economic fundamentals compared with other economies in the emerging market.

China will be able to attain its economic growth target of around 6.5 percent for the full year, with steady growth next year despite the downturn pressure, Mao Shengyong, a spokesman of China’s National Bureau of Statistics, said on Oct 19.

The Bay Area — a cluster of nine cities in Guangdong province along with the Hong Kong and Macao special administrative regions — with their respective advantages, turns out to be more significant amid the current world financial situation. Hong Kong, as Asia’s financial hub, is expected to play its unique role in the region’s financial services sector.

To better cater to the region’s financial innovation, E points to three directions for financial institutions — cross-boundary finance, “people’s livelihood” finance and innovative finance.

“Due to the specialty of the Bay Area — ‘one country, two systems’, three customs areas and different currencies — it calls for a good cross-boundary financial environment,” she explains.

“Cross-boundary investment, fundraising and payment services are Hong Kong’s future direction in providing financial services.”

Another opportunity will come from the region’s industrial upgrade, the economist predicts. With the aim of building a world-class technological hub, the Bay Area aims to shift away from the traditional growth model in favor of incubating more “technological stars” which, inevitably, will create a great amount of an affluent middle-class and even billionaires.

“The gathering of the affluent class may boom in the asset management, wealth management and investing management markets,” says E.

With the Bay Area in mind, Bank of China (Hong Kong) has launched financial services in cross-boundary finance, livelihood finance and innovative finance to better serve the “one-hour economic circle” — arriving at every corner of the Bay Area within one hour.