In the midst of increasing tensions with the West, Southeast Asia has emerged as China’s top trading partner, a region the Hong Kong Exchange and Clearings underlined as a new opportunity.
«While US-China trade has declined, this year is the very first time that Southeast Asia became China’s biggest trading partner,» according to an «SCMP» report citing Ba Shusong, HKEX's chief China economist. «So cooperation within the region is really strengthening.»
U.S. and its traditional partners have been increasingly critical of China with regards to its alleged mishandling of the coronavirus outbreak including a recent report citing German intelligence that claimed President Xi Jinping had pressured W.H.O. director-general Tedros Adhanom to delay warning and disclosure about human-to-human transmission. China and the W.H.O. denied the claims.
The aftermath of the pandemic has led the U.S., E.U. and Japan to have announced or discussed plans to reduce production and investments in China and onlookers fear that this could escalate to broader hawkishness against China and the yuan.
New Opportunities
«The shift in manufacturing supply chains, the adjustments, will mean a new setup of opportunities and demand for financial services,» said Ba, who is also a member of the Financial Services Development Council's (FSDC) «Mainland Opportunities Committee». «We need to grasp these new trends to find Hong Kong’s positioning to provide room for professional services.»
In light of increasing yuan headwinds elsewhere, Southeast Asia could act as a new springboard to internationalize China’s currency and Ba highlighted improvements that could boost the outlook including financial innovations in cross-border investments and enhanced free trade account systems.
«From the perspective of Southeast Asian countries, they may want to make investments for capital preservation and growth purposes using the yuan held as a reserve currency by their central banks,» added FSDC board member Ding Chen. «Hong Kong should provide a richer and more liquid range of yuan investment products for the region.»
