Hong Kong has to brace for the emerging risks of an artificial intelligence (AI) bubble bursting and quantum computers capable of hacking encrypted financial systems, the city’s de facto central banker has warned.
Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority (HKMA), also said on Sunday that the banking regulator would focus on expanding the internationalisation of the yuan in the next few years.
Speaking on a radio show, Yue cautioned that current euphoria surrounding the AI sector could mask vulnerabilities, and warned about a “stacking of risks” should a stock market correction coincide with geopolitical events that trigger inflation anxieties, causing fear that interest rates would rise.
“Whether it is their capital expenditure or their financing, it has started to increase in the debt market, whether through private credit or issuing corporate bonds,” he said, adding that it was unknown if AI could be commercialised to provide a good return.
He said Hong Kong must prepare for the possibility of an AI market downturn by ensuring local banks maintained strong capital buffers, rigorous risk management and a highly resilient financial “cushion” to absorb any sudden macroeconomic shocks.
In March, Google warned that quantum computers could potentially hack some encrypted systems by 2029, giving governments and companies less time to prepare contingencies to safeguard their data.