(Yicai) June 22 -- The capital markets of Hong Kong and Shanghai have become an important channel for international funds to allocate Chinese assets thanks to their scale, depth, and development potential, according to the financial secretary of the Hong Kong Special Administrative Region.

"The collaboration between Shanghai and Hong Kong is shifting from quantitative expansion to qualitative enhancement," Paul Chan said at the Lujiazui Forum, which ran in Shanghai from June 17 through 18. The two should jointly establish a full-chain investment and financing channel as well as enhance the international functionality of the Chinese yuan and support companies in their "going global" efforts, he suggested.

The full-chain investment and financing channel involves facilitating more innovative tech firms to pursue dual-direction financing, introducing more diversified capital flows into the market, he said, adding that Shanghai and Hong Kong can actively explore ways to unlock the potential of long-term capital, such as pension and insurance funds, working together to invest in small, early-stage, long-term, and hard tech projects.

In addition, global investors' demand for yuan allocation continues to increase, so Shanghai and Hong Kong can jointly enrich investment products and risk management tools, Chan noted. In the gold and commodities area, they can collaborate with Shanghai's futures and spot markets to promote the implementation of more "China price" products in the redback, he pointed out.

China's foreign direct investment also needs to be expanded, with companies venturing overseas requiring a coordinated approach to manage domestic and international resources, providing a professional financial service platform for global operations, according to Chan.

The Securities and Futures Commission will continue to support the Hong Kong Stock Exchange in launching more yuan foreign exchange futures, yuan-denominated gold futures, and structured fixed income products, said Chief Executive Julia Leung. It will also work in collaboration with mainland regulators to expedite the inclusion of yuan stock trading counters into the Stock Connect program, she added.

In the secondary market, the SFC is actively promoting the development of electronic trading platforms for relevant bonds, in conjunction with the establishment of market-making qualifications and the repurchase market, aiming to significantly enhance the efficiency of bond trading and the overall liquidity of the market, she pointed out.

The mutually reinforcing role of the capital markets in Hong Kong and Shanghai can be further enhanced in two ways, according to Fang Xinghai, former vice chairman of the CSRC and vice president of the China Society for Finance and Banking.

First, creating an index that encompasses the three regions of Shanghai, Shenzhen, and Hong Kong, which would cover the entire Chinese market as well as industry-specific indexes, Fang said, noting that this would be beneficial in attracting more international capital for investment.

Second, Hong Kong has been dedicated to attracting international institutional investors to establish a presence there, but there are also a number of strong quantitative investment institutions from the mainland willing to operate in the city, Fang stressed. Hong Kong, Shanghai, and Shenzhen can jointly promote efforts to attract more international capital to invest in the SAR and the mainland, he added.

This year's Lujiazui Forum was jointly organized by the People's Bank of China, the National Financial Regulatory Administration, the CSRC, and the Shanghai government. It was held under the theme "Financial Development and Cooperation Under Global Governance Initiative: New Visions, New Challenges, and New Opportunities."‌‌

Editor: Martin Kadiev