Why Complementarity Matters for Stability — Hong Kong SAR as Asian Financial Centers
47 Pages Posted: 1 Aug 2014
Date Written: July 2014
There is much speculation regarding a “race for dominance” among financial centers in Asia, arising from the anticipated financial opening up of China. This frame of reference is, to an extent, a predilection that results from a traditional understanding of financial centers as possessing historical, geographic, and scale economy advantages. This paper, however, suggests that there is an alternative prism through which the evolution of financial centers in Asia needs to be viewed. It underscores the importance of “complementarity” rather than “dominance” to better serve regional and global financial stability. We posit that such complementarity is vital, through network analysis of the roles of Hong Kong SAR and Singapore as the current leading financial centers in the region. This analysis suggests that a competition for dominance can result in de-stabilizing levels of interconnectivity that render the global “network” as a whole more susceptible to rapid propagation of shocks. We then examine the regulatory and policy challenges that may be encountered in furthering such complementary coexistence.
Keywords: Offshore financial centers, Hong Kong SAR, Singapore, Asia, Financial sector, Banks, Regional integration, Interconnectedness, Networks, financial institutions and services, government policy and regulation, bond, financial stability, bond markets, financial institutions, hedge, financial market, international bond, hedge funds, bonds, financial system, financial services, bond issuances, asian bond markets, bond market, international bond markets, financial systems, equity markets, financial regulation, derivative, equity market, bond issuance, stock exchange, hedge fund, bond market development, stock exchanges, derivative market, sovereign bond, derivatives transactions, index futures, ex
JEL Classification: C40, G20, G28
Suggested Citation: Suggested Citation