Why Complementarity Matters for Stability—Hong Kong SAR and Singapore as Asian Financial Centers

Vanessa Le Lesle, Franziska Ohnsorge, Minsuk Kim and Srikant Seshadri

No 2014/119, IMF Working Papers from International Monetary Fund

Abstract: There is much speculation regarding a “race for dominance” among financial centers in Asia, arising from the anticipated financial opening up of China. This frame of reference is, to an extent, a predilection that results from a traditional understanding of financial centers as possessing historical, geographic, and scale economy advantages. This paper, however, suggests that there is an alternative prism through which the evolution of financial centers in Asia needs to be viewed. It underscores the importance of “complementarity” rather than “dominance” to better serve regional and global financial stability. We posit that such complementarity is vital, through network analysis of the roles of Hong Kong SAR and Singapore as the current leading financial centers in the region. This analysis suggests that 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. We then examine the regulatory and policy challenges that may be encountered in furthering such complementary coexistence.

Keywords: WP; financial market; hedge fund; financial crisis; equivalent to the RTGS; Networks; financial institutions and services; government policy and regulation; Hong Kong SAR; ICBC Singapore; Singapore's bank; coexistence of Hong Kong SAR; Singapore in the context; Singapore's interconnectedness; Singapore MAS; case of Hong Kong SAR; Hong Kong FSA; Singapore's position; attractiveness of Hong Kong SAR; Competition; Stock markets; Foreign banks; Securities markets; Global; Asia and Pacific; Southeast Asia (search for similar items in EconPapers)
Pages: 46
Date: 2014-07-08
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Citations: View citations in EconPapers (7)

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