The “demon nickel” incident of China Tsingshan Group has made the London Metal Exchange (LME) and Tsingshan Group the focus of the international financial market, and gradually exposed the inside story of how the Hong Kong Stock Exchange and the Chinese Communist Party (CCP) influence the global nickel price through the LME. Industry experts believe that Hong Kong is in a unique position for Beijing to expand internationally. The CCP has always wanted to use Hong Kong’s status as an international financial center to deceive the world and do something that is not in line with international norms.
On March 16, the LME resumed nickel trading, which was suspended on March 8, but limited the daily range of nickel price fluctuations. This move greatly eased the pressure on China Tsingshan Group. After the LME resumed trading, it was impossible for nickel prices to repeat the surge from $40,000 per ton to over $100,000 that happened in one day on March 8.
In addition to acquiring the LME, the Hong Kong Stock Exchange has also attempted to acquire the London Stock Exchange (LSE). The acquisition of the London Stock Exchange was likened to “the marriage of the century between London and Hong Kong” by Charles Li, then chief executive of the Hong Kong Stock Exchange, but the “promotion” of the Hong Kong Stock Exchange soon ended in failure.
Mike Sun, an investment consultant based in the United States and an expert on China issues, told The Epoch Times about the “London-Hong Kong Marriage of the Century:” The CCP has two considerations. First, it is for the internationalization of the RMB (official currency of China); second, if something happens to Hong Kong, the London Stock Exchange can act as a replacement.
‘London-Hong Kong Marriage’ Failed
In 2019, the Hong Kong Stock Exchange “proposed” to the London Stock Exchange with a 20 percent premium. However, only 2 days after the Hong Kong Stock Exchange announced on Sept. 11, 2019, the proposal of the marriage between the East and West capital markets was rejected by the London Stock Exchange on Sept. 13, and at the same time pointed out that the Hong Kong Stock Exchange had “fundamental flaws.”High political risk was one of the main reasons why the LSE rejected the London-Hong Kong “marriage.” The BBC reported at the time that this was actually equivalent to handing the LSE “through the back door of Hong Kong into the hands of the CCP.” The Tsingshan Group “demon nickel” incident confirmed the existence of a “Hong Kong backdoor.”
At the time, Chinese state media The Paper reported Li Xiaojia saying that the pace of international expansion of the Hong Kong Stock Exchange would not be slowed down by the failure of the London-Hong Kong marriage.
A March 10 report by Broker China showed a similar view. Yu Mengguo, general manager of Jinpeng Futures, said that only by forming a “China price influence” commensurate with the scale of China’s economy can the similar Tsingshan Group “demon nickel” incident be prevented from happening again.
Unique Status of Hong Kong
When the Hong Kong Stock Exchange planned to acquire the London Stock Exchange in 2019, the two exchanges ranked fifth and sixth respectively among the world’s six largest stock exchanges. At the same time, Hong Kong is the largest offshore center for RMB, and the London Stock Exchange is the largest U.S. dollar trading center outside the United States.The top two global stock exchanges are the New York Stock Exchange and the Nasdaq Stock Exchange in the United States, followed by the Tokyo Stock Exchange and the Shanghai Stock Exchange.
Mike Sun said: “According to the situation in 2019, the fifth-ranked Hong Kong Stock Exchange and the sixth-ranked London Stock Exchange will join forces to become the third-largest in terms of scale, which is, of course, beneficial to the internationalization of the RMB. Recently Saudi Arabia is considering using Renminbi denomination as part of the price of oil sold to China. It’s an attempt to challenge the dollar’s status as 80 percent of the world’s oil trade is in dollars.”
“It is unknown whether the oil trade between China and Russia has stopped. If it continues, it will be settled in RMB. Then China has the equivalent of two stable oil supply countries, and at the same time, it can be settled in RMB. Other countries may follow suit, such as Venezuela and Angola are likely to settle with China in RMB.”
Saudi Arabia is the world’s second-largest oil storage country and the largest oil exporter. The world’s largest oil reserve is in Venezuela.
Mike Sun believes: “The current international sanctions against the wealthy Russians make them feel insecure. Chinese corrupt officials and rich people are all weighing, what will happen if the CCP is sanctioned? Will the situation be the same as that of Russia? Where should they secure, in other words deposit, their money?”
“It will be Hong Kong,” Mike Sun said. “Because Hong Kong’s special position enables the super-rich Chinese to deploy strategic offense and defense. If the CCP can’t control the situation or the state, they can transfer the money from Hong Kong to other places or countries; if the West imposes sanctions on the CCP, they can keep the money in Hong Kong.”
