Hong Kong Financial Secretary Paul Chan speaks on Friday at an event organised by the International Finance Forum. Photo: Handout

Hong Kong can play an important role in helping abate the trend toward China-US decoupling that poses growing risks to the global economy, officials and analysts said at a recent conference in the city for business executives.

“Shifting trade and supply chains that tie to geopolitical blocs are gaining increasing attention,” Hong Kong Financial Secretary Paul Chan said at the event on Friday. “Financial flows, foreign direct investment and supply chains may become more fragmented as a result.”

By offering itself as a dialogue nexus, Hong Kong could stop China’s economic fragmentation with the West from leading to a bigger conflict, according to conference panellist Antony Leung, an independent non-executive director of China Construction Bank.

Leung, who is also chairman of the Hong Kong-based Nan Fung property development group, foresees a world fractured by a Western alliance and another bloc led by China.

“Hong Kong sits right in the middle – we have … an emerging economy, and we [trade] with the rest of the world, so clearly we feel the winds, but hopefully Hong Kong can play the role of bridging the two systems. Maybe have a dialogue through Hong Kong,” Leung suggested, adding that offshore traders and investors still care about the China market.

“Hopefully Hong Kong can [help explain] to the world what [China’s] emergence is like. And secondly, that we are no threat to the rest of the world.”

Chan added that wider fragmentation with the West could hinder cross-border capital flows and jeopardise international financing options and “risk sharing”. Individual countries may also lose “diversity in funding sources”, he said, leading to higher financing costs and more “fragmented liquidity”.

The financial secretary said Hong Kong would help support multilateralism by serving as Asia’s premier “green financing hub”. Last year, it issued more than US$80 billion worth of green and sustainable debt – the most in Asia.

The former British colony and long-standing world financial hub also has plans to work separately with cities in neighbouring Guangdong province to build up green-tech companies. Those firms do environmental engineering and energy reduction with an eye toward international expansion, Chan said.

US-China decoupling began in 2018 with a tariff dispute affecting hundreds of billions of dollars worth of two-way shipments. US officials followed with curbs against transfers of technology to China, a catalyst for supply-chain decoupling in tech and other fields.

Friday’s event was organised by the International Finance Forum dialogue platform and hosted by the Hong Kong Monetary Authority. About 200 people attended.

Some speakers suggested that multilateralism could eventually replace decoupling.

“You can think of a world that’s speaking to each other in many, many different ways, but in which you have one world and many systems, and that may be a way of thinking of how globalisation should develop,” said Harold James, a conference speaker and a professor of history and international affairs at Princeton University.