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Abstract

This research project explores the rise of Hong Kong as the intermediate financial centre serving the Chinese financial system. Hong Kong’s pivot role as a principal gateway for China’s financial sector to access the global financial market has been thoroughly understood. Nonetheless, conventional theory often downplays the significance of offshore financial attributes when considering its role as a financial centre in facilitating Chinese financial internationalisation. Furthermore, the predominant focus of research on financial centres often neglects the nuanced political-economic dynamics inherent to Hong Kong and China. Against this backdrop, the overarching objective of this research project is to understand the features and driving forces that shape Hong Kong as the intermediate financial centre under China’s rising financial sector. This thesis applies the two-fold structure at the micro and macro-level analysis to achieve that. The first objective is to investigate the offshore features of Hong Kong on firm-level financial activities. Following that, the second part is to rethink the relationship between Hong Kong and China in its formation as the intermediate financial centre from the perspective of the Chinese political economy.

The thesis begins with a systematic review of the development of Hong Kong's and China’s financial sectors. It then constructs the new database and utilises a mixed-methodological approach to investigate Chinese state-owned banks’ offshore financial activities through Hong Kong. The first empirical chapter is to investigate Chinese state-owned banks’ global corporate structure through Hong Kong. Drawing on this evidence, the second paper breaks new empirical ground in the mechanism of offshore financial activities in Hong Kong by exploring Chinese state-owned banks’ international bond issuance structure. They shed light on how Hong Kong facilitates Chinese state-owned banks’ internationalisation on the firm level (Micro level). Employing in-depth interviews and triangulation techniques, the third paper zooms out on the formation of Hong Kong as the intermedia financial centre in the framework of the Chinese political economy (Macro-level). It presents how the interaction between Hong Kong and China shapes the financial landscape for both entities.

This thesis distils the following findings: The empirical analysis has revealed that Chinese state-owned banks set up a ‘sandwich’ arrangement of holding whereby a mainland company controls a Hong Kong subsidiary and further holds OFC subsidiaries, which in turn, holds a publicly listed joint-stock company in Hong Kong and subsidiaries in the Chinese mainland market. In addition, Chinese state-owned banks tend to establish strings of ‘floating’ subsidiaries in Hong Kong and Offshore Financial Centres (OFCs) with no known equity ties to the parent. In addition, with the liberalisation and deepened reform of China’s international bond market, Chinese state-owned banks have increasingly relied on their multiple layers’ offshore corporate structure with arbitrage purposes in different jurisdictions to issue bonds. Surprisingly, these arbitrages mainly benefit from SOE’s exclusive market access granted to State-Owned Enterprises (SOEs) under China's international finance schemes, coupled with the implicit guarantee provided by the Chinese government to SOEs. That further results in Chinese state-owned banks' monopolised position in advanced financial services on the Chinese international financial market. Subsequently, this thesis argues Hong Kong has been incrementally merging into the Chinese political framework since its reintegration with China in 1997, facilitated by its engagement in 'political bargains' pertaining to mainland China’s financial liberalisation. These political interactions not only shaped Chinese international financial schemes but also contributed to the formation of Hong Kong as the intermediate financial centre in the new era.

Overall, this thesis adds up to a multifaceted yet integrated perspective on the drivers, dynamics and consequences of Hong Kong’s role as the intermediate financial centre serving Chinese financial system. It clarifies the intersection features of IFC and OFC embedded in Hong Kong, which is essential for understanding how the Chinese financial sector integrates into the global financial market. This thesis also affirms that state and politics remain central to our understanding of the financial centre.

Publication Type:	Thesis (Doctoral)
Subjects:	J Political Science > JQ Political institutions Asia J Political Science > JX International law J Political Science > JZ International relations
Departments:	School of Policy & Global Affairs > International Politics School of Policy & Global Affairs > School of Policy & Global Affairs Doctoral Theses Doctoral Theses

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