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Hong Kong's future as Asia's financial centre | FT Film - YouTube
Channel: Financial Times
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new york london and hong kong are by
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most measures the world's top three
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financial centres
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other cities can claim to be part of the
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conversation but if you're doing
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business in the west you go to new york
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or london
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in asia you come to hong kong
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but hong kong is in trouble on multiple
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fronts politics and protests kovids and
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china
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and the problems are forcing everyone
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hong kongers and expats alike to
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re-examine whether the city can still
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offer them what they need
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and whether hong kong can maintain its
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status as asia's premier financial
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centre
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hong kong is the ultimate gateway
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between china and the rest of the world
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the biggest thing that is going to
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determine hong kong's success
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is going to be the need for capital in
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china
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the beating heart of hong kong's
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financial sector is a thin sliver of
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land between the sea and the mountains
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where banks and financial institutions
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have clustered
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retail giants like hsbc and standard
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charted famous wall street names like
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goldman sachs and jp morgan
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and chinese rivals like citic and cicc
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are among the dozens of banks that
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populate central hong kong
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they specialize in pulling in
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institutional capital from around the
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world and deploying it into chinese
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companies
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the prime recipient of these funds is
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hong kong stock exchange
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it's the fifth largest stock exchange in
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the world
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but what makes it stand out is that it's
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the best and safest place to invest in
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china
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where the banks go others follow
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insurers wealth managers stock brokers
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hedge funds consultants and lawyers all
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taking advantage of the world's appetite
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for exposure to the chinese economy
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while positioning themselves for the day
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that china opens up its capital accounts
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and permits access to a wallet worth 50
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trillion dollars
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hong kong is a city that is caught up in
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this massive geopolitical
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storm
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there is no way to maintain hong kong's
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reputation as an international financial
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center
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when you have
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those type of upheavals in society it
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makes it very uncertain for foreign
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investors to come in
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finance is a lucrative business
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every city in asia wants the same
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high-value well-paid jobs as central
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hong kong
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but finance is also demanding yes it
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requires deep pools of capital and a
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strong financial infrastructure but it
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also requires an attractive place for
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people to live and that means stable
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politics a happy society and the freedom
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of people to move and the freedom of
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information
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until 2019 hong kong ticks all of those
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boxes
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but then long simmering discontents with
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the territory's governments and its
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relationship with mainland china changed
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everything
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it all started with a bill which was
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proposed by the hong kong government
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suggesting that
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there would be extradition arrangements
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between hong kong and mainland china
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that the sense of betrayal was what
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triggered hong kong people to protest
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what triggered two million people more
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than a quarter of the city's population
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came out
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scenes of clashes between
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police and protesters
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tear gas
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using pepper spray produces throwing
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petrol bombs for 3 4 months
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in nearly every part of the city the
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chinese government saw them as open
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rebellions and therefore use
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extra constitutional means to introduce
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this national security law aiming at
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outlawing acts of subversion succession
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terrorism inclusion with foreign forces
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hundreds of pro-democracy campaigners
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and government opponents like student
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leaders joshua wong and agnes chao
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academic benitai and media mogul jimmy
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ly have been jailed
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samuel bickets an american lawyer was
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imprisoned after an altercation with a
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police officer during the protests
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others like political activist nathan
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law have been forced to live in exile
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i left hong kong in june 2020 a few days
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before the implementation of the
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national security law and the law
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criminalized free speech
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it's a crime to stand against the
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government now
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for some people the national security
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law made living in hong kong a far
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riskier prospect but for global business
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the impact of the law has been nuanced
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it's hard to understand how it will be
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enforced and how someone could be on the
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hook as a result of the national
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security law so as a result of that a
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lot of businesses became more quiet a
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lot less outspoken and concerned about
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what could hit them at any time i think
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to be quite blunt the national security
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law has been reasonable for the
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financial sector it's been a good thing
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for the financial sector and so far it
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gives certainty and i think that
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certainty gives a lot of investors
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confidence in hong kong
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that could have been shattered or was
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shattered for some people
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during the protests western companies
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will need to take into account very
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seriously
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the changes happening in hong kong
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including the erosion of the rule of law
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the rule of law matters because it's the
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assumption that the courts and
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law enforcement operate separately to
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the government in terms of international
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contracts and the things that foremost
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concern to businesses rule of law seems
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intact and comfortable but in our latest
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survey we've noted that pessimism has
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started to creep in i don't think hong
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kong has role flow anymore they can
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easily manipulate political cases
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i don't think
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we are far away from the date that they
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could also manipulate cases on
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commercial arguments and make favorable
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judgment to beijing
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after six months of political disruption
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in 2020 the covert 19 pandemic led the
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hong kong government to impose a
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fiercely isolationist zero covered
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strategy that has further thrown into
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question the city's future as a travel
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and financial hub we have been seeing
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strict social distancing rules in hong
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kong we have been seeing strict
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quarantine rules of up to three weeks we
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have been seeing flight bans we have
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been seeing hong kong being increasingly
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isolated with the rest of the world
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the zero covet policy implemented in
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hong kong is one that clearly comes from
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beijing but after two years watching the
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rest of the world uh with the exception
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of china really emerge from kovid and
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learn to live with it people are really
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tired and fed up
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so it's created this mini exodus which
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has really shifted the atmosphere
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the data show the extent of the brain
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drain from hong kong
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many hong kongers have fled to the uk
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while expat workers have permanently or
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temporarily relocated to singapore or
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tokyo or returned to their home
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countries
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the migration has fueled conversations
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about whether alternative cities in asia
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have expressed their ambitions to become
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global financial centres could challenge
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hong kong's dominance
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there are three other cities in asia
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that can credibly claim to be regional
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financial hubs
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singapore tokyo and shanghai
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singapore has english and it's used to
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bringing in expatriates and it's asia
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light in the sense that it's very
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comfortable for people to be there it's
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definitely a place which is seen as the
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sort of second option as a financial hub
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in asia but singapore isn't perfect it
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definitely does not have the financial
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flows and the capital markets that hong
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kong has while singapore has one of
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asia's biggest wealth management sectors
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its stock market is shallow and under
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capitalized i don't think it's an
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alternative to hong kong because simply
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put it doesn't have the connectivity to
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china that hong kong does
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there's people moving to
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tokyo
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the idea that banks or investment banks
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in tokyo are going to rival the american
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banks or the chinese banks or become a
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financial center threat to hong kong is
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kind of ridiculous to be quite blunt
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japan is the world's third largest
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economy and tokyo has deep capital
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markets
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however tokyo has some big disadvantages
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its finance sector actually has closer
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financial ties with europe and north
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america than it does with the rest of
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asia
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and japan's risk-averse financial
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culture makes it unattractive for many
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investors at the end of the day
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you know the japanese financial sector
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is really good at raising money for
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japanese banks and japanese capital and
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japanese companies
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it is really bad at raising global
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funds for anything outside of japan
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shanghai is already a far bigger
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financial centre than hong kong in terms
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of overall value
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it has asia's biggest stock markets and
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a huge market for bond trading banking
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and trade finance
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the problem is that no city in mainland
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china can realistically play a
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significant international role china
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does not have
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an open market it does not have the
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infrastructure that hong kong has to
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handle this immense
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flow of money and deals and people
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moving about freely beijing demands
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control over the flow of both money and
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information
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china severely limits access to media
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from outside its borders
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while currency controls stop people from
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moving their money abroad
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so i think that you have to you know
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stop this
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competition thing because really every
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place has
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natural advantages if you want to access
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u.s capital you go to new york you don't
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go to london
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in the short term hong kong status as
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the gateway to mainland china appears
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unassailable but in the long term things
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aren't quite so clear
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in the rest of the world financial
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centres thrive on freedom of information
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of people and of capital and that
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clashes with china's insistence or
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control
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hong kong is becoming and arguably has
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become a chinese city a china-focused
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financial center which allows chinese
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companies to list raise money
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still do business with the rest of the
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world on
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chinese terms
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if one is willing to accept that and
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sees the opportunities associated with
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that they have a strong future in hong
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kong but for people expecting hong kong
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to be like it used to then hong kong is
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gone one hong kong government official
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said to me china really just wants to
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shut that window of foreign influence in
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hong kong you know the idea of wylo or
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foreigner or expat hong kong is actually
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a funny thing we're going to look back
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on this 30 years from now and wonder wow
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how did it go on for so long
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as china has growing confidence over its
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more totalitarian technologically
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sophisticated aurelian model there's no
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need for them to keep hong kong as an
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example for them to catch the west we
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definitely haven't seen the end of the
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line for hong kong as a financial center
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beijing has still been giving support to
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hong kong in terms of financial services
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there's still a lot of dependency on
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hong kong for its financial services for
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its unique position
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there is an awkwardness for american
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companies
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when it comes to china in terms of risks
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and rewards
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walking away from it is simply
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not
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a choice that they have is the financial
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sector going to be bigger here in 10
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years than it is today absolutely unless
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we think china's going to stop growing
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they're going to need more financial
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help they're going to need to be
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integrated further in the global
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financial system and this is going to be
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good for bankers here bankers here will
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still be able to make
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good money going forward hong kong is an
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incredibly resilient place
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and the entrepreneurial spirit of people
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in hong kong will go a long way to keep
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hong kong as a viable financial center
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albeit somewhat diminished
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hong kong is still asia's leading
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financial centre even though its
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reputation has been tarnished but it
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should come as no surprise that beijing
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has tightened its grip over the city
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like it or not ultimately beijing is in
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charge
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and even though china needs
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international finance in order to invest
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trillions of dollars of household wealth
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over the next few decades
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it will require those intermediaries to
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be subservient to the needs of the
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chinese communist party
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international business in china faces a
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choice play by china's rules or leave
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that makes some people uncomfortable but
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for others it's a compromise they're
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more than willing to make especially
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those that see an opportunity to make
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far more money in china
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