Only a fool bets against Hong Kong

The Trump administration understands neither the city nor its people

In its history,

On July 14, US President Donald Trump announced that he was ending Hong Kong’s trading preferences with the United States, and it would no longer enjoy any special privileges. The export of sensitive technologies would also be ended, with Hong Kong being treated henceforth in the same way as the Chinese mainland.

Trump told Fox Business that the end of its special status meant that Hong Kong would lose its business attractiveness, and it would no longer be able to serve as one of the world’s leading financial hubs, alongside New York and London.

In a script which in terms of pure venom could have been drafted only by US Secretary of State Mike Pompeo, Trump explained that the “Hong Kong markets will go to hell, nobody’s going to do business.” Hong Kong would, he claimed, no longer be able to “compete with free markets” and it would “fail”.

Although Trump sought to link his actions to the National Security Law for Hong Kong, which was enacted on June 30, he failed to explain how harming the welfare of its people would serve any useful purpose. Indeed, his sheer meanness in ordering the removal of the “Made in Hong Kong” label from goods exported to the US spoke volumes about his mindset, which seeks to endanger people’s livelihoods just to spite China.

Trump’s actions are only explicable once placed in their overall context. If Hong Kong fails, this will harm China, which is now the overriding objective of US foreign policy. The new law is, quite simply, a pretext for trying to undermine China, and, if it harms Hong Kong, this is a sacrifice worth making. As time will tell, however, the US understands neither Hong Kong nor its people, and its malevolence will not succeed.

Although the US decision to withdraw trading privileges may hit Hong Kong’s GDP, including reexports, at a time when the tourism industry is on its knees, its future as a global city is not in doubt.

Apart from its impartial legal system, Hong Kong has a solid infrastructure, a sound banking system, the free flow of capital, low tax rates, and a highly effective regulatory regime. It also enjoys healthy credit ratings, with Standard & Poor’s currently giving it AA+, and Fitch AA-, with both agencies predicting a stable outlook, which undoubtedly reflects the end of protest-related violence.

Indeed, the National Security Law was widely welcomed by the business community, including the Hong Kong General Chamber of Commerce, which described it as “instrumental in helping to restore stability and certainty to Hong Kong”. A stable environment is what businesses require to thrive and make money, and it is now being restored. As Bill Winters, Standard Chartered Bank’s chief executive, said last month, “Hong Kong as a global financial center feels very, very safe to me.”

Hong Kong, under its Basic Law (Article 116), enjoys a special status as a separate customs territory, having zero tariffs with its trading partners, and it must now, by leveraging on its World Trade Organization membership, seek to develop its links with existing and new partners, wherever they may be.

After all, its position as a financial, legal and trade center, and as an aviation hub with a large port, makes it a very attractive proposition for anyone wanting to do business in this part of the world, and Trump cannot take this away. Indeed, in the World Competitiveness Yearbook 2020, published by the Swiss-based International Institute for Management Development, Hong Kong ranked fifth for competitiveness out of the 63 places surveyed, well ahead, for example, of South Korea at 23 and Japan at 34.

On Sept 10, the Fraser Institute ranked Hong Kong as the world’s freest economy for the 30th year running, and this will provide the reassurance which many companies are seeking. Since foreign investors are not involved in endangering national security, they have nothing to fear over the new law.

According to the latest Global Financial Centres Index, published on Sept 25 by London-based think tank Z/Yen Partners and the China Development Institute, Hong Kong was ranked fifth overall among the 111 financial centers surveyed, ahead of Singapore at sixth.

However, in the individual categories, the city was ranked, for competitiveness, at third for its business environment and human capital, fifth for its infrastructure and sixth for its financial sector development. And, in the rankings for the top 15 centers by industry sector, it came in third for financial services, fourth for banking and fifth for investment management. Within the Asia-Pacific region, Hong Kong achieved a creditable third place, hard on the heels of Shanghai and Tokyo, which, all things considered, was no mean feat.

Although Trump has said that Hong Kong will “no longer be a successful exchange”, this is simply wishful thinking.

In June, for example, the mainland’s Nasdaq-listed JD and NetEase raised $6.6 billion through secondary listings on the Hong Kong stock exchange, and Ernst & Young reported that initial public offerings in Hong Kong saw a 21 percent increase in total capital raised in the first six months of 2020, with JD and NetEase accounting for 62 percent.

Hong Kong of course has always been a bridge between the mainland and the rest of the world, and this will not change. As the chairman of the Securities and Futures Commission,

Tim Lui Tim-leung, explained on Aug 6, “with more companies coming to our stock exchange for a listing, I think our future prospects will be very good indeed.” By midyear, Hong Kong’s stock exchange had become the world’s largest in terms of market capitalization, which, given US hostility, was quite remarkable.

Hong Kong, moreover, must now fully participate in the economic opportunities available on its own doorstep.

The Guangdong-Hong KongMacao Greater Bay Area is home to about 70 million people and accounts for about 12 percent of the country’s GDP, and its development as a hightech economic and business hub now provides Hong Kong with greater connectivity and its people with excellent prospects. By developing itself as an economic powerhouse, the Bay Area is fast becoming a center for innovation and technology capable of rivaling Silicon Valley and the Tokyo Bay Area, and Hong Kong must play its full part.

Indeed the city can provide a bridge which, as China expands its businesses into Southeast Asia and the countries involved in the Belt and Road Initiative, connects the Bay Area and the rest of the world.

In its history, Hong Kong has faced many challenges, including invasion, natural disaster, financial collapse and plague, but it has always pulled through. Only a fool would bet against Hong Kong, as the US will find out. Small it may be, but it is also tough, resolute and proud, and it has never been afraid to stand up to bullies.

Hong Kong has

faced many

challenges,

including

invasion, natural

disaster, financial

collapse and

plague, but it has

always pulled

through.