HONG KONG – The implementation of last year’s highly controversial national security law could cost Hong Kong its international luster as a financial hub, experts told VOA.
More than 130 residents, activists, politicians, journalists and others have been arrested under the law despite the government’s initial promise that the law will not affect ordinary citizens.
Discussions of how this might affect the city’s beloved financial sector became more heated.
Hong Kong Monetary Authority Managing Director Eddie Yu, whose agency responsibilities include upholding Hong Kong’s status as an international financial center, sought to reaffirm the city’s financial stability in a February blog post, claiming that concerns are often “misinformation or misinformation,” reassuring investors that the level of capital flowing into the city has not declined and the number of asset managers continues to rise .
Yue declined to offer updated comments regarding more recent arrests under the law when approached by VOA.
This year, the Hong Kong Stock Exchange recorded the third highest level of IPO products, after the New York Stock Exchange and the Nasdaq, with some experts predicting further momentum in the coming months.
Asset freeze shakes international investors
However, Hugo Brennan, senior geopolitical analyst at global risk management firm Verisk Maplecroft, said the forced shutdowns and frozen assets of pro-democracy newspaper Apple Daily “rocked investors.”
“Hong Kong-based companies and investors who do not follow Beijing’s policy line are the most vulnerable to asset foreclosures,” Brennan told VOA.
With founder Jimmy Lai in prison and a few executives arrested under the National Security Act, the newspaper’s financial assets were frozen before any conviction. It is widely seen as a government move to silence opposition voices and a crackdown on press freedom.
Hong Kong’s score on Maplecroft’s Freedom of Opinion and Expression Index over the past three years has deteriorated from the 112th lowest performing in the world in 2018 to 73rd, Brennan said.
A legal expert warned of potential risks to company assets under the law that “can be very unpredictable and changeable like the wind.”
“The national security law is capable of breaking a business. Assets can be frozen for certain vaguely defined causes by law, so investors will certainly need to be aware of this risk, ”Horace Young, associate professor at the University of Leicester, told VOA.
This concern is shared by nearly half of Hong Kong-based expats, according to a May report. investigation by the American Chamber of Commerce in Hong Kong. The report showed that there had been “growing underlying tensions and lingering fears”, mainly due to “the discomfort due to the national security law”.
Losing its place even as a gateway to the vast Chinese market?
While AmCham spokeswoman Tara Joseph told the BBC earlier this year that capital flows between Hong Kong and mainland China “are very difficult to replicate,” Brennan predicted that the investment share Chinese in Hong Kong relative to international capital flowing to Hong Kong “is likely to increase over the next decade.
“International investors are increasingly worried about being caught in the crossfire in Hong Kong as Beijing tightens its grip through national security law and Western states thwart international sanctions,” Brennan said.
Alfred Wu, an associate professor at the National University of Singapore specializing in Chinese politics, said companies are now forced to choose between moving their offices to mainland China, which would move their business further to China, or relocating their offices. abroad. He also said companies may choose to move their offices to mainland China, as Hong Kong’s rule of law advantage is now waning.
Earlier this year, major commercial bank HSBC announced plans to open an office in the Greater Bay Area of China – China’s effort to link Hong Kong, Macau, Guangzhou and several other cities into one hub. unified business – after Asia’s leader signed a petition in support of the National Security Act in June last year.
“These implications can boil down to the fact that Hong Kong’s financial situation has been compromised. In the future, the city will likely become the financial center of China, instead of an international hub, ”Wu said.
Brennan added that the city’s rule of law has been Hong Kong’s traditional competitive advantage over rivals, but recent erosion “is likely to prompt some international companies to move their regional hubs to alternative shopping centers, such as than Shanghai or Singapore “.
China’s support for Hong Kong’s capital flows between Hong Kong and China could keep the city afloat as a national financial hub, “as a means of increasing its control over the territory,” Brennan said. .
Young said domestic and international companies “would reconsider their options for headquarters locations in order to control their exposure to political and legal risks.”
“Hong Kong has always played and capitalized on its role as an intermediary between East and West. If it becomes “One Country One System” in Hong Kong, I don’t think Hong Kong will continue to attract international companies.
“They can choose any major city in China, including Beijing, Shanghai, Guangzhou, and Shenzhen, as their regional headquarters, especially if China is their target market.”
Hong Kong may still have a role to play as a financial gateway to China, if there are still restrictions on capital movement on the mainland, Young added.
Wu added that Hong Kong may still be an attractive place for the money laundering of wealthy families and corrupt officials in mainland China, despite the loss of its international luster.
“But now Hong Kong is really part of China in terms of jurisdiction. If China steps up its anti-corruption campaign, it may affect Hong Kong, so money and talent could also move to Singapore, ”Wu said.