China retains the necessary levers to manage the shift to a more sustainable model of economic growth despite current challenging conditions, according to Douglas Flint, HSBC Group Chairman. In a speech at the Cass Business School in London, Mr Flint discussed HSBC’s role as a foreign bank operating in China and the opportunities to support Chinese growth in the future.
Foreign banks have an important role to play in supporting China’s expansion and the internationalisation of the renminbi (RMB), according to Douglas Flint, HSBC Group Chairman.
“If we succeed together, the benefits will accrue not just to China – but to investors and businesses all over the globe, and the global economy more generally,” he said.
In a speech to an audience at the Cass Business School in London, Mr Flint said foreign banks are facilitating outward investment by helping Chinese corporates to connect with international markets and expand overseas.
He said foreign banks are supporting the internationalisation of the RMB by, for example, encouraging foreign and Chinese companies to use the currency for trade settlement. He explained that foreign banks are also working with the Chinese authorities to advise on how best to grow the country’s capital markets – the development of which will support China’s long-term economic growth.
Mr Flint highlighted the opportunities for foreign banks in China in sectors such as infrastructure and in regions such as the Pearl River Delta, which is home to almost 60 million people and has a GDP of nearly USD900 billion. Foreign banks are also keen to help regulatory and public policy communities by sharing best practice, training and advice, he said.
He referred to the recent Chinese stock market sell-off as well as the depreciation of the RMB that followed the reform of China’s currency-fixing mechanism, saying such fluctuations were normal in a market-orientated economy. He also acknowledged that China continued to face significant challenges as it “attempts to shift from a period of exceptional growth to a more sustainable model in a way that no other country has tried to do before”.
Rather than undermining the case for reform, Mr Flint said, China’s recent challenges underlined the need to continue along the path of reform “with both caution and conviction”.
He said: “Even in the current challenging conditions, China retains the necessary levers to manage the shift to a more sustainable model of economic growth.”
For example, China has room to cut rates to boost domestic demand, reduce the reserve ratio requirements to increase bank lending capacity and can also deliver strong fiscal support for growth, he said.
Summing up, Mr Flint said: “Foreign banks working with their counterparts in China share a great opportunity to satisfy an evident and growing client demand for the broader range of financial services and product innovation that will further drive China’s economic growth in a sustainable way.”
He added: “Inevitably there will be obstacles along the way. But the long-term drivers of growth remain sustainable and the opportunities are great.”