In early 2025, global capital markets witnessed a dramatic "choice." Southeast Asian tech giant Grab ultimately chose to list its primary listing in its home base of Singapore, rather than nearby Hong Kong. Almost simultaneously, news circulated that Saudi Aramco was actively considering spinning off its massive trading business and establishing an international energy trading center in Hong Kong or Singapore. These developments serve as a mirror, reflecting the subtle yet real competitive pressures Hong Kong faces as an Asian financial center—it not only needs to accommodate the return of Chinese concept stocks but also needs to proactively compete for a new generation of "anchor" assets from around the world, particularly from emerging markets.
On the surface, the data remains impressive. According to market data released by the Hong Kong Stock Exchange, in the first five months of 2025, the average daily turnover of Hong Kong stocks surged by 120% year-on-year, and IPO fundraising skyrocketed by 709%. The Z/Yen Group's Global Financial Centres Index shows that Hong Kong firmly maintains its position among the top three globally. However, beneath this prosperity, a profound strategic anxiety pervades Hong Kong's financial decision-making bodies. The Hong Kong Financial Services Development Council (FSDC) released Concept Report No. 72, "Hong Kong's Capital Market Leadership Path: Super-Connector - Global Capital Hub in the Digital Age," in December 2025, which is a concentrated manifestation of this anxiety and determination. The value of this report far exceeds that of an ordinary industry plan; it is essentially a public strategic "self-diagnosis" and "roadmap restructuring," with its core proposition being: Can and how can Hong Kong transcend its traditional role as a "super-connector" and transform into an autonomous "global capital hub"?
I. Strategic Upgrading: The Inevitable Shift from a "Channel" Logic to a "Hub" Ecosystem
The report's vision is clear from the outset: to build a near-seamless digital global capital ecosystem where funds, assets, and information flow. This is not merely a description of the current situation, but a fundamental reshaping of the development paradigm. For decades, Hong Kong's success has been built on a unique "channel" logic: backed by mainland China and facing global markets, it acts as a "super-connector" for capital inflows and outflows from the mainland. This model has enabled it to consistently rank among the top globally in IPO fundraising.
However, the Financial Services Authority's report soberly points out that the world has changed. Geopolitics has led to a "systemic restructuring and diversion" of capital flows, and the core of competition among global financial centers has shifted to "the level of digitalization and technological benchmarks, the level of trust gained by market institutions, and the ability to effectively respond to the actual needs of the new generation of issuers and investors." The "channel" model, which relies solely on geographical advantages, is increasingly vulnerable—traffic may decrease sharply due to policy or external environmental changes, and its functions may be partially replaced by other emerging interconnected mechanisms.
Therefore, the new positioning of "global capital hub" proposed in the report represents a profound strategic upgrade. Its implications are reflected in three dimensions: functionally, it shifts from a passive "capital transmission channel" to an active "capital formation, pricing, and allocation platform"; geographically, it expands from focusing on "north-south" (connecting China and the West) to building an "east-west capital corridor" spanning Asia, the Middle East, and Europe; and in terms of development drivers, it shifts from relying on "locational advantages" to building core competitiveness through "institutional innovation" and "technological infrastructure."
To support this shift, the report systematically proposes a "4Is" strategic framework, namely, a comprehensive upgrade of four pillars: Issuers, Investors, Intermediaries, and Instruments . These four pillars are interconnected, aiming to form a positive-cycle ecosystem: attracting diverse, high-quality issuers leads to a wealth of financial instruments; abundant instruments and active trading attract diverse, long-term global investors; and the deep engagement and complex needs of investors, in turn, drive intermediaries to enhance their service capabilities and financial innovation. The efficiency of this closed loop ultimately depends on the support of digitalization and market infrastructure. This is a stark contrast to the past emphasis on the single function of IPO financing, marking a systemic and ecological shift in Hong Kong's capital market development strategy.
II. Tackling the “4Is”: Upgrading Paths, Challenges, and Digital Empowerment of the Four Pillars
The “4Is” framework in the report is the core of the strategy’s implementation, but upgrading each pillar faces specific and profound challenges and requires the dual empowerment of systems and technology.
Issuer: The Expanding Challenges from "China's Gateway" to the "Global Stage"
The report aims to diversify the issuer structure and move beyond reliance on mainland Chinese companies. The short-term strategy is to optimize the listing regime (such as relaxing weighted voting rights) to attract more international companies to list primarily or secondarily in Hong Kong. In the medium term, the goal is to expand the Stock Connect mechanism to derivatives and alternative assets.
The core challenge lies in persuading international companies. For established European and American companies, Hong Kong's valuations and liquidity may not be as attractive as their home markets; while for Southeast Asian and Middle Eastern companies, Hong Kong presents barriers related to its legal and accounting environment and investor awareness. The report's proposed "phased access" model—first a secondary listing, then, upon meeting the criteria, a dual primary listing and inclusion in the Stock Connect program—is a pragmatic design, but its attractiveness depends on the pace of mainland capital market opening and the determination to expand the Stock Connect program. Furthermore, traditional investment banks and law firms face challenges in their pricing capabilities, sales networks, and compliance experience when serving these new and diversified issuers.
Investors: The Product and Channel Dilemma of Attracting "Patient Capital"
Attracting long-term capital such as pension funds and insurance funds is a top priority in the report. This requires Hong Kong to provide assets that match its long-term liabilities, seek stable returns, and can hedge against risks.
The core challenge is Hong Kong's lack of a sufficient number of long-term, high-rated, Hong Kong dollar-denominated fixed-income products. The report proposes developing green bonds, infrastructure bonds, and private lending. However, the green bond market remains dominated by issuance rather than active secondary trading; infrastructure projects are complex and time-consuming; and private lending lacks standardization and transparency, making it difficult to incorporate into the regular asset allocation of large institutions. Technological empowerment is particularly crucial here. For example, asset tokenization can "segment" large infrastructure projects or private credit assets, lowering investment thresholds, improving liquidity, and achieving near-real-time profit distribution, thereby enhancing its attractiveness to "patient capital." The Hong Kong Monetary Authority's digital bonds and the EvergreenHub knowledge platform mentioned in the report represent attempts in this direction.
Intermediary agencies: Pressure to reshape capabilities and promote ecological synergy
Intermediaries are the lifeblood connecting issuers and investors. The report calls for banks, securities firms, and market makers to enhance their capabilities to support complex markets such as fixed income, derivatives, and digital assets.
The core challenges are capability mismatch and insufficient incentives. Hong Kong's investment banking ecosystem has long focused on IPOs, and its expertise and talent pool in areas such as complex debt structure design, interest rate derivatives market making, and digital asset custody lag behind those of New York and London. Meanwhile, in the thinly traded bond market, market makers lack sufficient incentive to maintain two-sided quotes. The report implicitly calls for regulatory reform and incentive measures, such as optimizing trading mechanisms, providing liquidity support for market-making activities, or tax incentives. Digitalization is reshaping intermediaries from another dimension: smart contracts can automatically execute "corporate actions" such as bond interest payments, reducing human error and operational risks; blockchain platforms can improve the transparency and efficiency of post-trade processes, reducing intermediary operating costs.
Financial Instruments: The Difficult Leap from "Equity-Driven" to "Multi-Asset-Driven"
Enriching financial instruments is fundamental to increasing market depth and attracting diverse investors. The report outlines the development of derivatives, commodities, sustainable financial products, and alternative investment instruments.
The core challenges are liquidity constraints and regulatory complexity. The success of a new financial product market requires a network effect among issuers, market makers, and investors. Hong Kong has a history of attempts to launch new products with lackluster trading. For example, while boasting one of Asia's most active equity derivatives markets, it lags far behind in complex derivatives such as interest rates and credit. Developing these products requires a highly mature institutional investor base, sophisticated risk management systems, and a matching regulatory framework. The report's proposed "pilot innovative products" approach is cautious, but a precise balance needs to be struck between the scale, speed, and risk tolerance of these pilots. Digitalization offers new possibilities: blockchain-based derivatives contracts can automate collateral management and settlement, reducing counterparty risk and encouraging wider participation.
III. The Decisive Battle: Reshaping the Listing System and Seizing the Pricing Power of "Future Assets"
Within the "4Is" framework, attracting high-quality issuers is the logical starting point, while the competitiveness of the listing system is the primary battleground. The report dedicates nearly ten pages to an in-depth analysis and recommendations for optimizing the "dual-class share" structure, directly addressing the crux of the problem.
From its introduction in 2018 until mid-2025, only 31 companies in Hong Kong have adopted this structure for listing, accounting for approximately 4% of all IPOs during the same period. This figure stands in stark contrast to the tech startup boom in Silicon Valley and globally. For example, research by Jay Ritter, a finance professor at the University of Florida, shows that since 2020, over 40% of US tech IPOs have used dual-class share structures. Hong Kong's caution contrasts sharply with the widespread acceptance in the US.
Appendix IV of the report provides a detailed comparison of the systems of major jurisdictions worldwide, revealing the "conservative" nature of Hong Kong's approach. Compared to the US, which has no hard cap on voting rights, and the UK, which, after its 2024 reforms, removed the market capitalization threshold and retained only the simplified requirement of "three years of operating history," Hong Kong's framework sets two high hurdles: firstly, qualitatively, the issuer must be recognized by the Hong Kong Stock Exchange as an "innovative enterprise"; secondly, quantitatively, the market capitalization must reach HK$40 billion, or "HK$10 billion market capitalization + HK$1 billion in revenue." These two hurdles may exclude a large number of "hard technology" companies that are in a high-growth phase but are not yet profitable or have not reached a large scale.
A deeper constraint lies in the limitations of the "qualified exchange" list. Currently, only companies primarily listed in New York, Nasdaq, or London (premium listings) can retain a weighted voting rights structure when pursuing a secondary listing in Hong Kong. This means that a large number of excellent companies listed on Euronext, the Swiss Stock Exchange, or other high-quality Asian markets cannot easily utilize Hong Kong as a platform for their Asian financing and liquidity management. This implicitly restricts the international diversification of Hong Kong's listing resources.
The Financial Services Development Council's report essentially sends a clear signal: in the fierce global competition to list next-generation technology companies (such as artificial intelligence, biotechnology, and clean energy), Hong Kong's existing institutional flexibility is insufficient. If it cannot provide founders with control guarantees like New York, or reduce listing costs and complexity like London, Hong Kong will continue to face a passive position in attracting "future assets." This is not merely about amending a few rules, but a battle for "pricing power" concerning the future vitality and valuation benchmarks of Hong Kong's capital market.
IV. The Infrastructure Battle: A Race Against Time in the Digitalization and Efficiency Revolution
The implementation of all strategies depends on efficient, robust, and future-oriented market infrastructure. The report devotes considerable space to warning that this is an "efficiency revolution" concerning survival, and Hong Kong cannot afford to fail.
Global post-trade systems are iterating at an astonishing pace. The US fully implemented T+1 settlement in May 2024, Europe plans to follow suit in 2027, and India has even begun a T+0 pilot program. While the Hong Kong Stock Exchange has initiated a consultation on T+1, the report clearly states that the transition involves a complex upgrade of the entire value chain—brokerage, custody, and settlement—and is "a transition project spanning many years." Efficiency is competitiveness; delays in clearing and settlement directly translate to higher capital costs and counterparty risk, which are key indicators for institutional investors assessing market attractiveness.
Meanwhile, digital financial infrastructure, represented by blockchain and tokenization, is reshaping the market landscape. Hong Kong has demonstrated a forward-looking approach in this race. From the Hong Kong Monetary Authority's (HKMA) leading the issuance of the world's first tokenized green bond in 2023, to the CMU system supporting the issuance of multi-currency digital bonds, and its continued participation in the Bank for International Settlements' "mBridge" cross-border central bank digital currency project, Hong Kong is attempting to integrate distributed ledger technology (DLT) into the mainstream financial system. The goal of these explorations is not to replace traditional finance, but to significantly improve market efficiency and create new product forms (such as tokenized real estate and private equity fund shares) by achieving near-real-time asset settlement, programmable financial contracts, and broader asset accessibility. This requires regulation and innovation to go hand in hand, clarifying the regulatory framework for virtual asset licenses and stablecoins while encouraging fintech innovations that comply with regulatory requirements.
V. Challenges and Games: The Triple Contradictions in the Deep Waters of Transformation
This ambitious report does not shy away from the difficulties ahead. It actually reveals the three deep-seated contradictions that Hong Kong must confront and resolve in its journey toward becoming a "global capital hub."
The first contradiction lies in the mismatch between short-term market structure and long-term strategic goals. While the report outlines a blueprint for a multi-asset hub, Hong Kong's current situation—characterized by strong stocks and weak bonds, and a lack of liquidity in small- and mid-cap stocks—is deeply entrenched and difficult to reverse. The report even explores the feasibility of providing stamp duty relief for stocks with persistently low liquidity, highlighting the intractability of the problem. Attracting long-term capital requires a robust bond market, while deepening the bond market requires even more long-term capital participation—a chicken-and-egg cycle. Breaking this cycle requires the government to continuously issue long-term bonds to build a yield curve and design incentives to guide private sector issuance.
The second contradiction lies in the double-edged sword effect of geopolitics and the risk of path dependence. The report views the return of Chinese concept stocks to Hong Kong as a significant opportunity, which is indeed a unique advantage for Hong Kong. However, over-reliance on issuers from a single source may make market cycles more deeply intertwined with policy risks in specific regions. At the same time, attracting established European and American companies to list in Hong Kong faces substantial obstacles: for example, the EU's Markets in Financial Instruments Directive II (MiFIR) requires dealers to prioritize routing orders for EU stocks to "equivalent" third-party markets, a designation Hong Kong has not yet received. This limits the positive impact of European companies listing in Hong Kong on its domestic liquidity. Turning to the Middle East and Southeast Asian markets requires overcoming a series of non-institutional barriers, including legal, accounting, and cultural barriers.
The third, and most crucial, contradiction lies in the inherent tension of regulatory philosophy. Throughout the report, phrases like "worthy of further study" and "requires further research by regulators and the market" appear frequently. This accurately reflects the perpetual balancing act of Hong Kong regulators between "enhancing market competitiveness" and "maintaining market stability and investor protection." Any significant institutional breakthrough, such as relaxing the threshold for dual-class shares or introducing new digital asset products, requires regulators to make accurate and timely judgments in a rapidly changing market. Being too conservative may lead to missed opportunities, while being too aggressive may trigger risks. This report provides direction, but striking the right balance will be the biggest challenge facing the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority in the coming years.
A self-revolution concerning the future
The Financial Services Development Council's Report No. 72 is less a development plan and more a declaration of strategic awakening. It marks a fundamental shift in the mainstream narrative of Hong Kong's capital market: from enjoying the benefits of being a "super-connector" to committing to building a "global capital hub" with its own ecosystem capabilities. This shift is a proactive response to the new forms of globalization and the new landscape of capital competition.
The report's success lies in its systematic diagnosis and coherent logic. By working collaboratively across four dimensions—systems, products, funding, and infrastructure—it outlines a clear upgrade path. However, the report's true value will depend on its "implementation conversion rate."
Hong Kong's competitive landscape has quietly shifted. It is no longer merely a competition for ranking within Asia, but rather a top-level contest in defining the rules of the future financial system against the backdrop of a dual global revolution in capital and technology. Hong Kong needs to prove itself as a "trustworthy and neutral platform" that transcends geopolitical fluctuations and relies on institutional credibility, market efficiency, and technological empowerment.
The road ahead is destined to be bumpy, filled with the interplay and compromises arising from the aforementioned triple contradictions. However, this report at least clearly points in the right direction: the future of Hong Kong's capital market depends not on past glories, but on its courage, wisdom, and execution in undertaking self-revolution. This profound restructuring has begun, and its success or failure will determine Hong Kong's place in the global financial landscape for the next decade.
Some of the information comes from the following sources:
• Hong Kong Stock Exchange's latest disclosure: Average daily turnover in the first five months of this year increased by 120% year-on-year.
• Hong Kong Capital Markets' Leading Path: A Global Capital Hub in the Digital Age of Hyperconnectivity
• The Hong Kong Stock Exchange released key market data for the first half of 2025, showing strong secondary market performance.
Author: Liang Yu; Editor: Zhao Yidan
