Leveraging Asia's Financial Hubs for the AIIB: Hong Kong and Singapore
| Author | Yu‐wai Vic Li |
| Published date | 01 November 2019 |
| Date | 01 November 2019 |
| DOI | http://doi.org/10.1111/1758-5899.12735 |
Leveraging Asia’s Financial Hubs for the AIIB:
Hong Kong and Singapore
Yu-wai Vic Li
Education University of Hong Kong
Abstract
The Asian Infrastructure Investment Bank (AIIB) appeared at its inception to be a Beijing-led multilateral development bank
that is focused on the financing of mega infrastructure projects. The role for meaningful participation by offshore financial
centers such as Hong Kong and Singapore was less defined. This article maps the growing role and influence of these two
city-states within the ongoing development of the AIIB. It analyzes the respective and distinct motivations of Hong Kong and
Singapore as members in the AIIB, and assesses how each city is positioning itself to make unique contributions to the new
multilateral development bank.
Three years after its establishment, the AIIB is being lauded
for its attention to sustainability and openness in the han-
dling of its large-scale infrastructure projects. The new multi-
lateral development bank has tried to work in agile ways –
to live up to its ‘lean, clean and green’motto –and sought
to continually expand its project portfolio and programming
agenda in innovative ways. The AIIB has also experimented
with how to support sustainable infrastructure projects,
where infrastructure development is treated as an asset
class. In so doing, the new bank is venturing into city-based
projects that could eventually benefit billions of urban
dwellers across the developing world.
In its preliminary stage, the new AIIB has relied quite
heavily on financing partnerships with existing multilateral
development banks (MDBs), to deliver rapidly and success-
fully on its first projects. However, it is suggested here that
the continuing success of the new bank, and the achieve-
ment of its mandate over the medium and long-term will
require the AIIB to go beyond relying on co-financing pro-
jects with the peer MDBs, and it will need to structure and
execute more of its projects by working more closely with
its members, including potential key hubs and suppliers of
financing.
This essay examines the understudied roles of two lead-
ing financial hubs in Asia, Hong Kong and Singapore, within
the AIIB. Whereas the AIIB chose to issue its debut global
bond in London and will launch its Euro Medium Term Note
in the Luxembourg Stock Exchange, what roles for Hong
Kong and Singapore? Some analysts emphasize zero-sum
competition between these two international financial hubs
in Asia. However, it will be shown here that each city is
positioning itself in some unique, complementary and rele-
vant ways, to contribute to the AIIB. It is further suggested
that the new bank and its clients could derive significant
benefit by capitalizing on the differing attributes and com-
parative advantages of each city.
Hong Kong, as China’s main offshore financial center, has
exercised considerable market leverage in the country’s
financial opening.
1
Since the early 2000s, Hong Kong has
been the Mainland’s key financial hub for offshore funding
raising for the reform and growth of China’s leading corpo-
rations, and the primary conduit through which China’s
onshore financial markets have made use of the many
onshore-offshore liberalizing initiatives that Beijing and
Hong Kong have co-developed. Hong Kong has also
become the largest renminbi market outside the mainland,
making available new renminbi (RMB) products and services
to global business (Li, 2018a).
Singapore has achieved great success in turning itself into
one of the leading wealth management hubs in the Asian
region, and more recently the pioneer of financial technolo-
gies. The Southeast Asian city-state has emerged as a lead-
ing ‘infrastructure power’, offering technical and financial
expertise unrivaled by peer economies within the ASEAN
region, and it serves as the financial, commercial and legal
services hub for many European, North and South American
corporates that are looking to do business in Asia. Singapore
has also played a growing role in facilitating China’s interna-
tional financial relations, though its role has been secondary
to Hong Kong, within the region, and globally. For example,
Singapore is involved in offshore RMB business, though its
volumes are smaller than Hong Kong, but ahead of London.
These two Asian financial hubs are positioning themselves
to offer unique and needed skills and resources to the AIIB.
In particular, Hong Kong and Singapore are both offering to
help undo the stubborn knot of what the AIIB calls the ‘in-
frastructure-finance paradox’, where huge demands for basic
infrastructure are not matched by the trillions of dollars of
capital that are needed for investment in infrastructure in
the region. Equally importantly, each city is offering to help
the dilemma in its own ways, based on its comparative
advantages. As one senior AIIB official has put it, regardless
©2019 University of Durham and John Wiley & Sons, Ltd. Global Policy (2019) 10:4 doi: 10.1111/1758-5899.12735
Global Policy Volume 10 . Issue 4 . November 2019
660
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