When Hong Kong launched its latest Connect programme on July 7, most of the attention focused on gold. That misses the bigger story.
Delivery Connect, part of the city’s new gold clearing and settlement system, is not simply another financial initiative but the latest evidence that Beijing has settled on a distinctive model for opening up China’s financial markets.
Rather than embracing wholesale financial liberalisation, China is steadily integrating with global markets through carefully designed cross-border channels, with Hong Kong serving as the indispensable bridge. Delivery Connect shows the Connect model has evolved from a series of isolated reforms into the blueprint for China’s financial opening-up.
It marks a significant departure from the path followed by many emerging economies over the past three decades. Financial liberalisation was once associated with sweeping deregulation, rapid capital account opening and unrestricted capital flows. China has consistently rejected that model.
Instead, it has expanded market access incrementally while maintaining oversight of capital movements and financial risks. Hong Kong has become the testing ground where this distinctly Chinese approach is designed, refined and scaled.
The evolution of the Connect programmes illustrates this strategy.
Stock Connect, launched in 2014, gave international investors unprecedented access to mainland equities while allowing mainland investors to invest in Hong Kong-listed shares.
Bond Connect followed in 2017, opening China’s vast fixed-income market.
Cross-boundary Wealth Management Connect extended integration into retail investment products, while
Swap Connect allows global investors to access mainland China’s interbank financial derivatives market. Each programme initially appeared to serve a specific purpose. Together, however, they reveal a coherent strategy aimed at integrating China’s financial markets with global capital while preserving Beijing’s preference for gradual, carefully supervised reform.
