It is often said that China gives money to Hong Kong to support its economy, but in fact, both Hong Kong’s banks and stock market are busy supporting China’s economy. And ordinary Hong Kongers play a part in that too.
According to the Hong Kong Monetary Authority’s report for last year Hong Kong’s banking system transfers 51% of its deposits of non-bank financial institutions to China.
Half of this, or HK$1.48 trillion, goes to state-owned enterprises. If you think these loans to China have nothing to do with the average Hong Konger, you’d be wrong.
Seventy-three percent of the funds the banks use come from customer deposits. In other words, for every HK$100 you deposit in the bank, HK$20 goes to help a Chinese state-owned enterprise.
What about the stock market? In the past 20 years, Chinese-funded enterprises have raised more than HK$2.91 trillion via the Hong Kong stock market
In 2013, more than half of the money raised on the Hong Kong stock market was raised by Chinese-funded companies.
Last year, Dalian Wanda Group raised HK$28.83 billion, the most raised by any company.
Even state-owned CITIC Group would rather have it’s subsidiary company in Hong Kong
purchase its China-based parent company, than relocate its funds to the Chinese stock market.
There are two reasons CITIC group took such a painstaking approach to going public in Hong Kong.
One, the Chinese stock market doesn’t yet have a comprehensive system, and it’s not completely open to foreign markets. Foreign investors are often hesitant to invest in Chinese companies
without the quality assurance that exists on the Hong Kong stock market.
Two, the Chinese government holds so much debt, that it doesn’t have enough money to support the vast number of Chinese enterprises.
So in reality, is China saving Hong Kong, or is Hong Kong in control of China’s funds?
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