Globalising currency will boost SAR
As China continues to take great strides towards globalising its currency, career opportunities in Hong Kong's financial sector are set to grow, with the city being used as a test bed to internationalise the renminbi (RMB).
"In terms of jobs in the region, I think Hong Kong in particular stands to benefit hugely from the regionalisation and globalisation of the RMB," says Donghyun Park, principal economist at the economics and research department of the Asian Development Bank.
Park says the reason for this is that Hong Kong provides the mainland and the RMB with a safe offshore financial centre to experiment with the gradual liberalisation and opening up of capital accounts, without the fear of undermining its own financial stability. As a result, "the potential benefits for Hong Kong - and perhaps to a certain extent Singapore - are quite enormous", Park says.
He believes that in the next five to 10 years, the mainland will be taking more concrete measures that will give the RMB a "firm push" to internationalise. As it stands, Park says the recent steps towards liberalisation, the opening up of capital accounts and financial deregulation are "harbingers" of change. He adds that they are clear signs "of the commitment towards financial sector development, which in turn gives China more confidence to open capital accounts and have greater convertibility" of the RMB.
But whether an RMB currency bloc will take form any time soon continues to be the topic of heated debate. Park, who is set to speak at the Hong Kong Institute of Bankers' annual conference, argues that there are clear signs pointing to the eventual establishment of the RMB currency bloc, based on certain preconditions.
First is the regionalisation and acceptance of the currency within Asia. "There has to be a greater willingness among these regional countries to embrace the RMB before it can be thought of as a global currency," Park says.
From a purely economic perspective, there is already a strong case for the RMB currency bloc, considering that the mainland has become the pre-eminent economy in the region, with most countries in Asia its trading partners. "Increasingly, we are heading towards a future where it is to be one region dominated by one giant, which is China," Park says. "And it is happening exceptionally quickly."
Park even goes so far as to say that when compared to post-war Japan, the mainland is much more an engine of growth for the region than Japan ever was. And there is no doubt that economic performance on the mainland has tangible effects on the rest of the region.
Looking at countries in Asia, there is a clear rise in the relative importance of the mainland as an export market. "In other words, the share of exports to China as a share of total exports is rising across the region," Park says. "In 20 years, that will be regardless of income or development."
The mainland is also visibly shifting from being simply an exporter of parts and components to the US and Europe, to being a consumer. This supports the argument that it is in fact becoming an engine of growth for the region and that it is supporting natural organic growth and the emergence of an RMB currency bloc. "Clearly, in economic terms, I think there's a strong case for the RMB bloc already and the case will grow even stronger in the future," Park says.
However, the regionalisation of the RMB also depends on broader geopolitical factors. "When all is said and done, RMB regionalisation depends critically on the other Asian countries' willingness to embrace the RMB, which in turn makes geopolitical trust very important," Park says.
Looking back on history, Park draws some interesting parallels between the RMB and the Japanese yen. In the latter's case, there was lingering mistrust of Japan following World War II. While China does not have such a history of aggression, Park argues that its sheer size makes it the "elephant in the room, and this makes its neighbours geopolitically uneasy or uncomfortable".
Park says that recent incidents, such as the maritime disputes in the South China Sea, only add "fuel to the fire of mistrust". He argues that if China is serious about promoting the RMB as a global currency, one of the first steps it needs to take is to gain the trust and confidence of its neighbours.
Regardless of how these preconditions take hold, Park says that as long as the mainland uses Hong Kong as a test bed for internationalising the RMB, the city's financial sector will continue to reap the benefits. "The regionalisation and globalisation of the [RMB] has only good news for the financial sector of Hong Kong, and for those seeking jobs," he says.
