According to Economic Journal: In the past 12 years, Hong Kong has seen its interconnection level multiply more than 400 times from HKD 900 million to an impressive HKD 367 billion. This growth is largely accredited to the closed-loop and cross-border direct settlement scheme the region operates with the mainland, offering reassurance to mainland officials.
Such exponential interconnection growth plays a significant role in bolstering Hong Kong's core competitiveness. By attracting more mainland funds through interconnection, the region could stir up stock trading volume in the Hong Kong market and escalate valuations. This rise in valuations could lure other domestic and overseas companies to stage their initial public offerings (IPO) in Hong Kong, magnetizing more overseas funds to trickle into the territory.
The introduction of platforms like "Bond Connect" bolsters this strategy, ensuring seamless cross-border bond investments, further fostering financial ties between Hong Kong and mainland investors. This strategy reiterates the potential Hong Kong possess as an attractive investment destination, serving as an international financial center.