For most 16-year-olds, being assigned to work as an offshore oil driller in the extreme temperatures of China’s northern Bohai Bay would seem like a prison sentence. For Charles Li, architect of the Hong Kong stock exchange’s high-risk bid for its London counterpart this week, it was better than the alternative — tilling the land in China’s arid north-west, his home during the chaos of Mao Zedong’s Cultural Revolution.
“Being a petroleum worker meant you wouldn’t be ‘sent down’ to the countryside,” Mr Li, 58, told a Chinese magazine shortly after the former corporate lawyer and investment banker became Hong Kong Exchange and Clearing’s chief executive in 2010. “There was free food and every year you got two pairs of leather boots, which at that time felt pretty fortunate.”
Working on that oil platform would prove the start of a long run of fortune for Mr Li, who was coming of age just as China embarked on a new era of “reform and opening” that would lead to previously inconceivable opportunities for a poor boy from Gansu province.
These included a university place studying English literature in the early 1980s; a stint as a journalist and editor at the state-controlled China Daily newspaper; a journalism degree from the University of Alabama followed by a Columbia law degree; and 20 years at two New York law firms and US banks Merrill Lynch and JPMorgan before joining HKEX. Mr Li, married with two children, was last year paid more than HK$29m ($3.72m) and held more than 1m HKEX shares, which on Thursday closed at HK$237.40.
All of Mr Li’s predecessors at HKEX had been members of the local establishment. He was an outsider who spoke Mandarin and English but not Cantonese, Hong Kong’s dominant dialect.
Mr Li’s decade-long tenure at HKEX has been characterised by an outward-looking agenda to match his international background. He has overseen the launch of “connect” programmes that allow Hong Kong investors to buy and sell Shanghai and Shenzhen-listed stocks, and mainland Chinese investors to do the same with those listed in Hong Kong.
He has also, controversially, allowed companies to list dual-class shares in an effort to lure back some of the groups, such as Jack Ma’s Alibaba, that chose New York over Hong Kong for their initial public offerings.
While at JPMorgan in Hong Kong, where he became chairman of the investment bank’s China business, Mr Li’s remarkable journey would come full circle. The oil company that provided him with free food and boots as a teenage roughneck would later be absorbed into the Chinese state’s flagship offshore energy company, Cnooc. In 2005 Mr Li advised Cnooc on its $18.5bn bid for California-based Unocal, which was ultimately sunk by political opposition in the US.
Mr Li may face an even tougher challenge in convincing the London Stock Exchange to accept — and the UK government to approve — its proposed £32bn offer, which if accepted would derail LSE’s own audacious $27bn bid for Refinitiv, the data and trading group.
When he was advising Cnooc in 2005, China had been a member of the World Trade Organization for only four years and the government in Beijing appeared committed to ever greater economic reform and opening.
But seven years into President Xi Jinping’s transformational and authoritarian presidency, that no longer holds. As Mr Li said in an interview with Asiamoney last year: “China is so big and so different and no longer willing to change itself to fit into the rest of the world because they have their own ecosystem [and] own logic . . . The world is now going to have to change itself to fit into China.”
Seven of HKEx’s 13 directors are appointed by Carrie Lam, Hong Kong’s chief executive, who in turn is appointed by the Chinese government. The protest movement against the territory’s extradition bill, which has morphed into a larger pro-democracy campaign, has illustrated how little room Ms Lam has to make big policy decisions without Beijing’s approval.
Mr Li is also a member of the Chinese People’s Political Consultative Congress, a government advisory body that convenes alongside the country’s rubber-stamp parliament in Beijing every March. And while HKEx’s statement outlining its bid for the LSE did not mention Mr Xi’s signature foreign policy project, the Belt and Road Initiative aimed at building infrastructure links across the Eurasian landmass, it laid out a similar vision. If completed, HKEX said, the deal would bring together “the largest and most significant financial centres in Asia and Europe”.
As David Webb, an activist shareholder and longtime critic of HKEX, says of the deal: “This looks like an ego trip. I just don’t know who’s driving it.”