American bankers are making a mint helping China Inc. go global

The unlikely U.S.-China collaboration during heightened trade and military tensions between the two superpowers is raising concerns on Capitol Hill about national-security risks. But it is producing frothy markets in Hong Kong, the place where Wall Street and China Inc. meet for mutual profit.

Hong Kong’s stock exchange is the hottest globally this year for new listings. Companies have raised $23 billion as of September in stock offerings, a bright note for a city otherwise in the news for a Beijing-led national-security crackdown and arrests of government critics.

In September, Morgan Stanley led the $3.2 billion Hong Kong initial public offering of Chinese mining company Zijin’s international gold-mining unit. BlackRock’s funds acted as an early investor underpinning the deal, which raised funds for the unit to buy a gold mine in Kazakhstan.

“This is truly a spectacular year," said Robert Chan, who helps lead the execution of equity deals at Citigroup in the Asia-Pacific region.

The world’s biggest battery maker, China-based Contemporary Amperex Technology, raised $5.3 billion in Hong Kong in May, the largest initial public offering globally this year. Auto giant BYD, consumer electronics-turned-car maker Xiaomi and internet behemoth Alibaba have all also raised billions of dollars this year via Hong Kong’s capital markets.

Facing fierce competition at home, Chinese companies are increasingly looking abroad for growth. Although the U.S. market is difficult because of high tariffs—and President Trump has threatened an additional 100% tariff—global consumers are warming to Chinese brands and their technology, meaning companies need foreign currency, such as dollars, to buy overseas assets, build factories and hire workers.

Chinese companies used to go to New York to raise that money. But Beijing authorities have grown suspicious of U.S. listings, encouraging Chinese investors to put money instead into the Hong Kong market. And U.S. stock exchanges, wary of wading into politically sensitive territory, have pulled away the welcome mat for China.

“If you’re a Chinese company and you want to raise international capital, this is really your only option," George Taylor, head of Asia-Pacific investment banking at Morgan Stanley, said of Hong Kong.

Politically speaking, the former British colony is hardly different from the Chinese mainland in its intolerance of dissenters and antigovernment speech. But in other ways, it is more like New York than Beijing. The Hong Kong dollar is pegged to the U.S. dollar and convertible with it—China’s renminbi isn’t—and travel between Hong Kong and the rest of the world is generally easy.

Chinese tourists at Victoria Harbour in Hong Kong during China's Golden Week holiday.

The result is a reshaping of Hong Kong’s role. It used to be a gateway for international firms going into China. Now, said Han Shen Lin of the Asia Group consulting firm, “it’s China’s bridge out to the world."

The question in Washington is whether Wall Street should help to build that bridge. U.S. lawmakers in July subpoenaed U.S. banks, including JPMorgan and Bank of America, seeking documents related to their work on CATL’s listing after the Pentagon said the battery maker was working with China’s military. The Chinese firm denied that and U.S. banks have said they did their own due diligence.

A congressional committee on China last month discussed Hong Kong’s role as an alleged money laundering and sanctions evasion hub, and as a spigot for Chinese companies seeking cash.

A spokesperson for the Hong Kong government said it is committed to preventing money laundering and terrorist financing and enforces United Nations sanctions. Hong Kong’s capital markets are “riding on positive momentum," and the government would implement further policies aimed at strengthening the city as a financial hub, the spokesperson said.

One of the speakers before the committee was Sunny Cheung, a former pro-democracy activist in Hong Kong who fled the city after Beijing tightened control. Cheung, who is now a fellow at the Washington-based Jamestown Foundation, said China’s use of Hong Kong to tap U.S. capital could undermine U.S. interests.

“There’s no way that the U.S. government wants to see more U.S. investment going in there to empower" China’s technology companies, he said.

Defenders of the U.S. presence in Hong Kong say Wall Street firms have built a profitable business there over decades, and they draw a distinction between working with private-sector Chinese companies in civilian businesses and helping the Chinese government.

Morgan Stanley and Goldman Sachs are the top banks for fundraising in Hong Kong so far this year based on the value of equity market deals. More than 65 companies have listed, with 200 active applications in the Hong Kong stock exchange’s listings pipeline.

CATL, the battery maker, is building a factory in Hungary. It added a Hong Kong listing to an existing one in Shenzhen, China, this year, raising money from investors including funds managed by UBS and Oaktree Capital Management.

Online retailer Shein, popular among Americans for its bargain-basement fashion, looked at a U.S. listing before facing criticism from U.S. lawmakers over its supply chain. After considering London, it filed for a Hong Kong IPO.

A visitor photographs Hong Kong's skyline. The city has suffered from a fall in its property market.

The emergence this year of artificial-intelligence company DeepSeek as a competitor to U.S. leaders such as OpenAI reinforced investors’ confidence that Chinese companies have globally competitive technology. That has helped Hong Kong’s Hang Seng Index rise 30% this year, one of the world’s best-performing markets—although the revival of U.S.-China trade tensions in the past week trimmed gains. The Zijin gold-mining stock is trading at more than double its offering price.

Morgan Stanley Chief Executive Ted Pick said on an earnings call in July that his bank’s performance in Asia was “quite extraordinary" as revenue jumped 28% to $4.6 billion in the region in the first half. Goldman Sachs reported an 8% increase in revenue from Asia in the first half compared with a year earlier.

A year ago, international banks and law firms were shedding staff in Hong Kong as the city lost its role as a conduit for Western investment into China. Some Chinese financial firms drove down prices for routine services, pushing aside pricey Wall Street investment banks.

But when it comes to raising billions from big investors in New York and London, it usually takes a Wall Street bank. For the gold miner Zijin, Morgan Stanley helped bring in BlackRock plus funds managed by Fidelity International, London-based Schroders and the Singaporean sovereign wealth vehicle GIC.

The boom in Hong Kong finance hasn’t yet translated into much economic growth in the rest of the city, which is still reeling from a broad fall in the local property market alongside mainland China’s property bust.

Still, there are signs of life: Rents are ticking up in the financial district and sales of luxury real estate are recovering, according to real-estate firm Savills. In August, local media reported the most expensive home sale of the year was a hilltop mansion that fetched 1.1 billion Hong Kong dollars, or $140 million.

Write to Rory Jones at Rory.Jones@wsj.com