Case | HBS Case Collection | September 2011 (Revised August 2013)

China or the World? A Financial Reporting Strategy for Hong Kong's Capital Markets

by Karthik Ramanna, Gwen Yu and G.A. Donovan

Abstract

Set in 2010, the case discusses the strategic directions Hong Kong could pursue, particularly vis-a-vis China, as it seeks to preserve its preeminence in the region. In 2010, the Hong Kong Exchange announced that it would allow listed Chinese companies to report using Chinese GAAP without reconciliation to IFRS. The exchange was responding to the demands of its largely Chinese clientele and also coping with increased global competition to attract listings from Chinese companies. However, there were concerns around whether this change would undermine Hong Kong's position as a financial center in the long term. Hong Kong's position as a global financial powerhouse was due in part to its rigorous emphasis on compliance and enforcement; allowing companies to report under Chinese GAAP, the practice of which was highly variable, could compromise Hong Kong's high corporate governance standards.

Keywords: Governance Compliance; Global Range; Local Range; Competitive Strategy; Global Strategy; Globalized Economies and Regions; Financial Reporting; International Accounting; Hong Kong;

Citation:

Ramanna, Karthik, Gwen Yu, and G.A. Donovan. "China or the World? A Financial Reporting Strategy for Hong Kong's Capital Markets." Harvard Business School Case 112-035, September 2011. (Revised August 2013.)