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UAE to cooperate with Hong Kong on fintech, crypto as China ties grow

China’s relations with the UAE and other Gulf states are strengthening, particularly regarding economic and energy matters.
This photo taken on May 27, 2023 shows customers in a cryptocurrency exchange office in Hong Kong. Retail investors in Hong Kong may soon be able to buy popular cryptocurrencies like bitcoin at government-licensed exchanges, thanks to new rules meant to bolster the city's standing as a digital asset hub. (Photo by Peter PARKS / AFP) / TO GO WITH HongKong-China-economy-Cryptocurrency,FOCUS by Holmes CHAN (Photo by PETER PARKS/AFP via Getty Images)

The United Arab Emirates’ Central Bank pledged on Tuesday to expand cooperation with its Hong Kong counterpart, furthering the country's growing ties to China.

The UAE Central Bank and the Hong Kong Monetary Authority held the meeting in Abu Dhabi. The two said they will form a “joint working group” and agreed to strengthen cooperation related to financial infrastructure, financial market connectivity between the UAE and Hong Kong, and virtual assets regulation. The UAE Central Bank and the Hong Kong Monetary Authority also said they facilitated discussions between the Innovation Hub in the UAE and its Hong Kong counterpart, Innovation Hub@HK, on fintech and knowledge exchanges, according to a press release from the UAE Central Bank. 

Innovation Hub@HK was established by the government of Hong Kong in 2022 to showcase the city's research related to science, technology and more. The UAE's Innovation Hub is a partnership with Google that trains youth in technology and was launched in 2018. 

The two central banks also held a meeting on Monday with several banks that have a presence in the UAE and Hong Kong. First Abu Dhabi Bank, Abu Dhabi Islamic Bank, Emirates NBD, Industrial and Commercial Bank of China, Bank of China, HSBC, Standard Chartered, Bank of China and Citi were among the participants, according to the outlet.

Hong Kong is a special administrative region in China. Beijing has been exercising more control over the city's affairs in recent years.

Why it matters: The meeting comes amid growing relations between the UAE and China. The following is a list of some notable developments involving Emirati and Chinese entities recently:

  • China purchased 65,000 tons of liquified natural gas from the UAE in March using China’s currency, the yuan. This was the first time China used the yuan for an energy deal with the UAE.
  • In April, the China International Capital Corporation told Bloomberg it plans to expand in the UAE and Saudi Arabia. The corporation conducts investment banking, wealth management and other related services.
  • The UAE and China signed several nuclear energy cooperation agreements in May.
  • The Dubai-based logistics giant DP World signed deals in May with two Chinese ports on the automobile industry chain.
  • The UAE and Kuwait became dialogue partners of the China-led Shanghai Cooperation Organization in May.

The UAE Central Bank’s discussion of virtual assets with Hong King is also noteworthy. The UAE established its Virtual Assets Regulatory Authority in 2022 in order to regulate cryptocurrency and related technology. Emirati officials have repeatedly said they want to attract more cryptocurrency firms to Abu Dhabi and Dubai, even following the crypto crash that began in 2021.

Know more: China’s influence in the Gulf is primarily economic and energy-related and could become a concern for the United States in the future, Dr. Karen E. Young wrote in a memo for Al-Monitor PRO earlier this month.

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