Global banking titan Standard Chartered is bullish on Hong Kong’s strategic role as an offshore financing hub following the special administrative region’s promulgation of its first Five-Year Plan for Economic and Social Development (2026-30) in September.

“Hong Kong’s first five-year plan emphasizes internationalizing the renminbi in a controlled way, addressing capital market controls, and making the city a prominent strategic global financial center for the world and the Chinese mainland,” Standard Chartered Group Chief Executive Bill Winters said in an interview with local media outlets.

“Hong Kong has always been an extremely attractive location for capital-raising and capital formation,” he said, as the city is a major global wealth management hub for the banking group in serving the SAR, Chinese mainland and Indian clients.

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Winters said he expects the Northern Metropolis to create an entrepreneurial hub and an enormous innovation economy in Hong Kong, fortifying the city’s attraction as a capital-raising center supported by its legal system and convertible currency.

“We remain very bullish on Hong Kong and will continue to invest in the city,” he said.

On corporate performance, he said the banking group is in good shape with strong capital, liquidity and earnings growth.

However, amid the Middle East conflicts, trade tensions, high inflation and rising interest rates, Standard Chartered recorded credit losses in its corporate banking business in the third quarter of this year. “The losses are very low although we have taken a precautionary overlay of $500 million,” he said.

While Standard Chartered has registered modest losses in the Chinese mainland’s real-estate sector, no losses have been generated in Hong Kong’s real-estate segment.

“As inflation in the United States is still stubbornly above 3 percent, I think unless there is quite a substantial change in either sentiment or actual price level, I would expect the US Federal Reserve to go ahead (in raising interest rates) in December, and I would expect Hong Kong to follow in that regard,” Winters said.

“We may need to go up another 25 to 50 basis points because inflation in the US is sticky. I think the market and the economy can absorb that.”

Winters warned that “further increases in interest rates, if they are coming because of persistent higher inflation, would lead to some credit stresses in the market that we have not seen so far”.

He said Standard Chartered could expect slightly higher losses if there was a period of higher interest rates but, at the current juncture, he is not worried this will happen. “Standard Chartered’s credit cost is about 20 basis points of the bank’s loan book, which is quite low. We think there would be a normal credit loss if the bank’s credit cost goes up to 30 to 35 basis points of the loan book,” he said.

Winters said there is “absolutely capital misallocation toward the global artificial intelligence sector but, overall speaking, there has not been an enormous AI industry bubble”.

Standard Chartered is a global banking institution focusing on cross-border businesses in wealth management, capital markets and corridor income. Besides these segments, the banking group also bets big on digital assets, having issued stablecoins and tokenized deposits, and has arranged tokenized money market funds.

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“Tokenized deposits will be an extremely important part of the ecosystem for digital money, and we want to be an early adopter through Project Ensemble. The project has a very thoughtful regulatory framework, interoperability, and is highly relevant for domestic and treasury-type applications,” said Winters.

Regulators and banks prefer tokenized deposits over stablecoins because they keep money within the regulated banking system, he said. To ensure interoperability of tokenized deposits, there must be technical rails that can handle the instrument, and a credit framework that allows banks to assess another bank’s deposits in an automated and real-time manner.

Contact the writers at oswald@chinadailyhk.com