HONG KONG, March 21 — Hong Kong’s stock exchange may have to dial back its ambition to become the indispensable conduit between China’s capital markets and the rest of the world.

A slew of developments this month suggest that Chinese officials are increasingly focused on building up the nation’s domestic markets, rather than deepening ties with Hong Kong Exchanges & Clearing Ltd. The latest evidence came today, when a Shanghai Stock Exchange official poured cold water on HKEX’s proposals to expand its cross-border trading links to initial public offerings and exchange-traded funds.

Those initiatives had been central to HKEX Chief Executive Officer Charles Li’s plan to build a trading hub in Hong Kong big enough to rival those of New York and London. His vision now looks precarious as Chinese officials move to improve foreign access to mainland markets and convince the country’s technology giants to list their shares at home.

“There would be an inevitable dilution effect for Hong Kong if China wants to boost foreign trading and attract more new-economy companies,” said Ben Kwong, an executive director at KGI Asia Ltd in Hong Kong. “There is undoubtedly a competition going on between Hong Kong and mainland exchanges.”

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An HKEX spokeswoman didn’t immediately reply to a request for comment.

The proposed IPO trading link, which would let Chinese investors participate in new share sales in Hong Kong, would be legally “impossible,” Fu Hao, the Shanghai exchange’s director of global business, said at an industry event today, adding that he was expressing his personal view. While an effort to build an ETF link is underway, Fu said it faces challenges including a lack of interest in ETFs among Chinese investors who prefer to buy individual stocks.

His comments come amid signs that Beijing will soon unveil so-called Chinese depositary receipts as a way of enticing mainland technology giants to list on their home stock market. The chief executives of Baidu Inc, Netease Inc and 58.com Inc are among those who have expressed interest in CDRs after Chinese regulators said they were looking into the structure.

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Yesterday, Li said plans for CDRs were “courageous” and a possible “landmark event,” while adding that Hong Kong remained a market of choice for new listings and had grown in tandem with its Chinese peers.

In an interview with Bloomberg News in June, the HKEX chief said additional trading links, including those for ETFs, derivatives and commodities, would see Hong Kong become a “global deployment center’’ for Chinese wealth. He added that the IPO link would allow companies such as Apple Inc to raise money from Chinese investors in Hong Kong by way of a secondary listing on his exchange — a new twist on the dual-listing model used for years in the city by British firms including HSBC Holdings Plc and Standard Chartered Plc.

Hong Kong is still in a strong position despite China’s recent focus on developing its domestic markets, said Hao Hong, chief strategist at Bocom International Holdings Co.

“There are still lots of issues to be solved before China can attract foreign capital to its stock market, such as rules about frequent suspensions and cross-border fund flows limits,” he said. “Even if they open the door, it doesn’t mean” investors will come in, Hong said.

Still, some analysts have warned of increasing risks to HKEX. Goldman Sachs Group Inc yesterday lowered its price target on the stock and took it off the bank’s conviction list, in part due to the threat from mainland China. CDRs and other rule changes could challenge Hong Kong as it tries to attract more Chinese technology companies, Sharnie Wong, a Bloomberg Intelligence analyst, wrote in a note yesterday.

HKEX shares were down 1.2 per cent at 3.12pm  in Hong Kong, heading for the lowest close in five weeks. — Bloomberg