Hong Kong summit steers clear of talk on China risks, reopening

HONG KONG – As Wall Street’s biggest bosses gathered on a panel at Hong Kong’s big financial comeback summit, one topic was conspicuously avoided: China’s growing risks.

Instead, the biggest risks discussed by Goldman Sachs Group chief executive David Solomon and Morgan Stanley’s Mr James Gorman were inflation, volatility in the markets and whether central banks would be able to steer the world towards a soft landing. The panel was moderated by Hong Kong Monetary Authority chief executive Eddie Yue.

Chinese regulators, speaking at an earlier panel, even urged the gathered bankers to look on the bright side, avoid reading international media and instead study President Xi Jinping’s latest work paper.

“Don’t bet against China,” Mr Fang Xinghai, a vice-chairman of the China Securities Regulatory Commission, said in a recorded interview to the gathering of more than 200 top financiers.

China’s opening can only become “bigger and bigger” going forward, he said.

One executive to touch on the subject was UBS Group chairman Colm Kelleher, who said he does not read the American press and is “very pro-China”.

“We actually buy the story, but it’s a bit (of) waiting for zero-Covid to open up in China,” he said.

Chinese markets, and those in Hong Kong, tumbled last month after Mr Xi secured a third term and installed allies in all key positions, raising doubt about the country’s future economic trajectory.

Even so, stocks rallied in the run-up to the summit, in part on rumours that China is forming a committee to exit its strict pursuit of zero-Covid-19. China’s Foreign Ministry said it was unaware of such a committee.

Global banks such as Goldman Sachs and UBS have been building up in China with plans for large-scale investments, as the country opened its doors to full foreign ownership over the past years. But those plans have been stymied by zero-Covid-19, tumbling markets and an opaque regulatory system.

Mr Fang stressed that China would continue its opening, as it still does not have enough high-quality institutional investors. “We want to share China’s growth with the rest of the world,” he said.

So far, global banks have exceeded their plans in the country, he said.

Hong Kong’s leader, Mr John Lee, also took the opportunity in his keynote speech to highlight Hong Kong as an irreplaceable connection between the mainland and the rest of the world. Still, the city has lost ground as a financial hub, in particular to Singapore where money and talent is pouring in.

In an interview with Bloomberg Television outside of the summit, HSBC Holdings chief executive Noel Quinn said he was upbeat on China.

“We are continuing to invest in our wealth business in China and also in Singapore and India,” Mr Quinn said. “China will emerge from Covid. It will rebound.”

On more global topics, Goldman’s Mr Solomon warned of considerable uncertainty ahead and said a better equilibrium will probably be reached in the markets in the coming quarters.

Morgan Stanley’s Mr Gorman said it was improbable that inflation rates will go back to 1 to 2 per cent and that interest rates will remain at 4 to 5 per cent over the next few years.

“There’s still a significant amount of uncertainty as we get into 2023,” Mr Solomon said. As we “start to have a clear understanding of the trajectory of capital markets, I think you’ll see issuers and capital allocators meet again in the middle, although with different valuations and a different cost of capital they have operating with over the course of last decade”, he said. BLOOMBERG