The future of Hong Kong: Business fears are growing

China announced on Thursday that it plans to introduce a law in Hong Kong that is expected to ban sedition, secession and harassment against Beijing. This will enable Chinese national security agencies to operate in the city.

The response from investors was quick and frightening: Hong Kong’s benchmark Hang Senong Index (HSI) It sank more than 5% on Friday, the worst ODI percentage drop since July 2015.
Beijing’s move was so interesting that it signaled a larger intervention in the city that allowed the former British colony to run its own affairs more than 20 years after it became a semi-autonomous region of China. Beijing is willing Enforce the law on behalf of the city, Bypassing its legislature.

“Hong Kong today stands as a model for free trade, strong governance, free flow of information and skills,” said Robert Greaves, chairman of the American Chamber of Commerce in Hong Kong. “No one can win if the foundation of Hong Kong’s role as a major international business and financial center is destroyed.”

A traditionally stable place to manage

Hong Kong’s political and legal independence, which is not found on the mainland, has made it easier for foreign companies to see the city as a stable place to operate, freeing them from restrictions on doing business in other Chinese cities, such as Shanghai or Shenzhen. (Many American and other Western organizations Do business in the mainland alreadyAlthough they are often Need to work with local partners. Others are still completely locked out of China))
The facility also works the opposite way: Chinese companies use the city as a place To raise capital and widen their investor base, Or as a launch pad for overseas expansion.
Confidence in the city waned during anti-government protests last year, with most companies eventually choosing not to leave Hong Kong. And the banner of the city’s stock exchange was the year – it was Top position in the world for IPOs, Beatings among rivals New York and London.

Nevertheless, Hong Kong’s position as a global business destination has never felt secure since the protests spread.

Flagship Airlines, Cathay Pacific, Resigned last summer Which angered Beijing after it became embroiled in a controversy over career protests. And the city’s richest man, Li Ka-shing, Appeal for peace As the protests spread to the latter half of the year.

“The road to hell is often paved with good intentions,” Lee said in August. “We need to be aware of the unnecessary consequences.”

Late last year, the city became embroiled in tensions between the United States and China after Washington. A law is passed In support of the protesters. The law combines Hong Kong’s special business position with the annual review of its unique independence.
This status exempts the city from the tariffs that the United States has imposed on Chinese goods Trade war between the two countries, For example.
Almost in context 40 740 billion In the goods and services business between the top two economies in the world in 2018, the city is a small player.

The United States imported about 17 17 billion worth of goods and services from Hong Kong in 2018, while exporting $ 50 billion.

These numbers, however, do not tell the whole story of US-Hong Kong relations, and the city of special status offers much more than business opportunities.

“[It’s] Somewhat confusing … because the United States views trade through Hong Kong as trade with China, “said William Raines, chair of the Center for International Business at the Center for Strategic and International Studies in Washington.” Regardless, I think the real issue is that the actual amount of business is less than the signal of a change of status regarding the unreliability of doing business with Hong Kong. “

A serious development

City analysts say the threat to revoke Hong Kong’s special status in the United States could “unbalance business confidence”, with more than 1,300 companies operating alone in the United States, City analysts said.

“It remains to be seen whether the United States will immediately repeal this law,” they wrote in a research note on Friday. “Our economists have argued for its special status [Hong Kong] The United States and China, both of which have significant interests in maintaining stability, are likely to be nearby. “

Tensions between the United States and China, however, have recently escalated as the two seek to blame each other for the coronavirus epidemic. For example, the Trump administration last week moved to limit Chinese technology company Huawei. From working with US agencies. Beijing’s response may be Blacklists foreign companies.
The U.S. has had a crackdown on Chinese stocks
U.S. lawmakers, government agencies and stock exchanges Beijing has also recently taken steps to limit access In America’s huge capital markets. The State Department is needed now American journalists are working for the Chinese state media To provide personal information including details of their spouse, children and anyone else living with them in the United States.

Foreign Minister Mike Pompeo also said Friday that Beijing’s plan for Hong Kong’s autonomy was promised “a death knell.” And if it goes ahead, it will affect Washington’s assessment of the state of the region.

“The United States urges Beijing to reconsider its disastrous proposal, to abide by its international obligations, and to strongly respect Hong Kong’s superior autonomy, democratic institutions, and civil liberties, which are key to maintaining its special status under U.S. law,” he said. .

“This authoritarian national security plan must be called into question [Hong Kong’s] Stephen Ines, chief global market strategist at Axi Corp, wrote in a research note on Friday, “Dignity as a World Bank center.” I think it’s pretty serious. “

Companies doing business in Hong Kong are also concerned about what Beijing’s national security law might be for those working in the city, and whether it could have a cooling effect on its ability to attract foreign workers.

Tara Beijing, president of the American Chamber of Commerce in Hong Kong, said in a statement that “the Beijing-inspired National Security Act provides an explanation of how this law will be implemented.”

The business lobby group added that enforcing a vaguely defined national security law would make it more difficult to recruit and retain top-level talent. “

Steve Austin

Steve is a really a Tech Geek sitting behind this blog with his awesome team, who are passionate about discovering new things online and writing about them. Get most of his Brian by following this blog.

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