Why Complementarity Matters for Stability—Hong Kong SAR and Singapore as Asian Financial Centers
IMF Working Papers, July 8, 2014
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Bibliographic details
- Authors: Vanessa Le Lesle, Franziska L Ohnsorge, Minsuk Kim, Srikant Seshadri
- Published: July 8, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498334464.001
Summary and central thesis
- The paper challenges the “race for dominance” framing regarding financial centers in Asia that is driven by anticipated financial opening up of China and traditional views emphasizing historical, geographic, and scale economy advantages.
- It proposes an alternative prism: the importance of “complementarity” rather than “dominance” to better serve regional and global financial stability.
- The paper uses network analysis of the roles of Hong Kong SAR and Singapore as the current leading financial centers in the region to support this proposition.
Key analytical findings (network analysis)
- Complementarity between financial centers can reduce systemic vulnerability compared with a competition for dominance.
- 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.
- The roles of Hong Kong SAR and Singapore are analyzed as illustrative of how complementarities can support regional and global stability (detailed network metrics and methods are contained in the full paper).
Policy and regulatory challenges identified
- Furthering complementary coexistence between leading financial centers involves regulatory and policy challenges.
- Policymakers must consider how to design frameworks that preserve beneficial complementarities while avoiding excessive interconnectivity that can amplify shock propagation.
- The paper examines specific regulatory and policy considerations for Hong Kong SAR and Singapore in the context of evolving financial ties with the People’s Republic of China.
Subject coverage and keywords
- Subjects: Banking, Competition, Financial institutions, Financial markets, Financial services, Foreign banks, Securities markets, Stock markets
- Keywords: Asia and Pacific, attractiveness of Hong Kong SAR, case of Hong Kong SAR, coexistence of Hong Kong SAR, Competition, equivalent to the RTGS, financial crisis, financial institutions and services, financial market, Foreign banks, Global, government policy and regulation, hedge fund, Hong Kong FSA, Hong Kong SAR, ICBC Singapore, Networks, Securities markets, Singapore in the context, Singapore MAS, Singapore's bank, Singapore's interconnectedness, Singapore's position, Southeast Asia, Stock markets, WP