HONG KONG Hong Kong
Exchanges & Clearing Ltd. (HKEx) both coexists and competes
with China, a situation that wont change as China opens
up its capital account and links between the two countries
deepen, a senior HKEx executive said.
HKEx, which is looking to grow
its business in China while acting as a conduit for both
international and onshore investors, is well aware of the
competition in commodities from other Chinese domestic
exchanges, head of market development Romnesh Lamba said.
"I like to call it
coopetitionwe cooperate, but today or in the
future we will compete with China, particularly with those who
operate on both markets (onshore and offshore)," Lamba said in
"Theyre well ahead of us
with non-metals and they have good experience in metals, so
its a question of trying to work with China to create a
win-win situation, where it doesnt feel were
cannibalizing its business," he said. "Hopefully, if we do it
right, LME members shouldnt feel that theyre
cannibalizing their businesses, either. But we have to find a
way to create this harmonious coexistence."
However, while China is
HKExs biggest growth driver, it is not its puppet master,
Lamba said. "We always talk about our business in the context
of China, but its very important to distinguish that
China is not telling us what to dowere far from a
puppet for China."
China poses a contradiction for
HKEx, which completed its acquisition of
the London Metal Exchange this week (
amm.com, Dec. 6). "On the one hand,
were saying we have access to China and we hope we can
work with it to facilitate some of the things we think are good
for China and the LME, but theres no guarantee," Lamba
said. "On the other hand, were saying, dont think
that China told us to do this and therefore well do
HKExs promise of potential
growth in China was a key reason why the exchange, which had no
previous experience in base metals, won its bid for the LME.
This growth potential includes the possibility of new
contracts, increased trading volumes, additional clients and
the establishment of warehousing facilities in China.
As a special administrative
region of China, Hong Kong operates under the principle of "one
country, two systems."
Hong Kong has specific rules
around connected-party transactions that require the Chinese
government to be at arms length. "We created a very rigid
framework that made life difficult for China, but convinced it
that it had to agree to those rules in order for foreign
investors to buy its company shares. We still have that in
place, although weve relaxed some parts of it since,"
"We have to work with China, use
our relationship in order to get more out of them, and
were perfectly positioned to do that as their trusted
partner, but thats very different from saying, we
should do this deal because it helps China
policy, " he added.