Issue of the week: Hong Kong’s future
It has long been Asia’s financial hub. But Hong Kong’s role as an East-West crossroads is now under threat
For four decades, Hong Kong has thrived as a “perfect middle ground”, said Tom Mitchell in the FT – a place where “Western businesses could dip their toes in the new Chinese economy and where China’s Leninist system could engage with the modern, globalised economy”. But that “unique role”, and Hong Kong’s standing as Asia’s leading financial hub, is now “hanging by a thread”. After a year in which pro-democracy protests brought large sections of the city to a standstill, the territory has been further undermined by America’s threat to remove its special trading status – a “hugely symbolic” move prompted by Beijing’s tightening grip. Some reckon that Hong Kong could effectively be finished as a global financial centre.
Regional politicians, as well as market-makers, are certainly worried, said Bloomberg. The Japanese economy minister, Yasutoshi Nishimura, has highlighted the “risk to the global economy” if Hong Kong ceases to be the international crossroads between China and the US. But in truth, the direction of travel has been clear for some time, said The Economist. “The number of foreign firms with Asian headquarters in Hong Kong fell last year” – evidence that many Western companies have been harbouring second thoughts about dealing with Beijing. The “cruel detention” of two Canadians in December 2018 (viewed as pawns against America’s bid to extradite Huawei’s CFO, Meng Wanzhou, from Canada) has also exercised minds. Indeed, some British companies “say they are struggling to persuade executives to move to Hong Kong”. Meanwhile, business in the former colony is becoming far more Chineseled. At the end of last year, mainland companies accounted for 73% of the Hong Kong stock market, compared with 60% five years before.
If Hong Kong’s star is fading, it could spell new opportunities for rival regional centres such as Singapore and Taiwan – the latter has been positioning itself to “poach” fleeing “Hong Kong talent”, said Robyn Mak on Reuters Breakingviews. Still, the shift poses particular risks for companies with deep roots in the former colony. A case in point is HSBC, said Christopher Williams in The Sunday Telegraph. Its stated position as a “neutral party” has come under “mounting pressure”. Europe’s largest bank is still based in the City of London. Yet it relies on China and Hong Kong for around four-fifths of its profits. And when push came to shove this week, said the FT, it came out in favour of Beijing’s tough new Hong Kong national security law – as did the trading houses Swire and Jardine Matheson. Interesting times, indeed.