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Wednesday, April 24, 2024

What will be Hong Kong’s future?

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"It remains very competitive, according to analysts."



Two months ago, in response to Beijing’s enactment of a National Security Law for Hong Kong, the United States passed the Hong Kong Autonomy Act imposing sanctions against individuals, entities and financial institutions. US President Donald Trump then announced the revocation of Hong Kong’s special status and preferential treatment.

The sanctions announced by Trump included a ban on the export of sensitive technologies and the removal of the “Made in Hong Kong” label from goods exported to the US.

The US move to end its preferential treatment of Hong Kong was apparently intended to make the former British colony and now a Special Administrative Region (SAR) of the mainland lose its business attractiveness, and lose its status as one of the world’s leading financial hubs, alongside New York and London.

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But is Hong Kong bothered at all by all by the US sanctions? That doesn’t seem to be the case, if we go by recent comments from analysts.

In a recent article in the China Daily, Grenville Cross, a senior counsel, law professor and criminal justice analyst and former director of public prosecutions of the Hong Kong Special Administrative Region, brushed aside the doom-and-gloom predictions for Hong Kong.

“Although the US decision to withdraw trading privileges may hit Hong Kong’s GDP, including re-exports, 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 and 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.”

He then quoted Bill Winters, Standard Chartered Bank’s chief executive, as saying that “Hong Kong as a global financial center feels very, very safe to me.” 

Cross believes that Hong Kong’s position as a financial, legal and trade center, as well as an aviation hub, “makes it a very attractive proposition for anyone wanting to do business in this part of the world.”

In fact, 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 of South Korea at 23, and Japan at 34.  Last month, the Fraser Institute ranked Hong Kong as the world’s freest economy for the 30th year running.

Moreover, the World Bank’s Rule of Law Indicator ranked Hong Kong among the top 5 percent in 2018 among all jurisdictions ranked, up from the top 30 percent in 1996. In “Control of Corruption”, Hong Kong advanced from the top 10 percent to the top 8 percent. 

That’s not all. According to the latest Global Financial Centres Index, also published in September by the 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. 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.

Another perspective on the issue is offered by Ho Lok-sang, a senior research fellow at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute at Lingnan University.

While acknowledging that COVID-19 has taken on Hong Kong’s economy—massive layoffs, many business closures, a surge in the government fiscal deficit, and the tourism industry, one of its four pillar industries, suffocating for lack of both incoming and outgoing tourists, with no reprieve in sight—the writer is convinced that “Hong Kong is not going to be beaten. That is, if we have the mindset and the culture to prevail. Just like people, Hong Kong is bound to face challenges from time to time. There are always things beyond our control that could become an ‘existential threat’ if we do not hang together and if we do not have the stamina and wisdom to face them.”

His conclusion: “If Hong Kong people will hang together for a good fight against all odds backed by our Chinese values and culture, tomorrow can only be better. I’m sure.”

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