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(Bloomberg) — Hong Kong passed a local security law in record time, placating Beijing and antagonizing Western governments. Currently, we have the difficult task of strengthening the city’s position as an international financial center.
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City Leader John Lee has repeatedly said the urgent need to focus on economic development is one of the reasons for moving quickly on the bill. Since coming to power in 2022, Mr Lee has prioritized national security, even at the expense of Hong Kong’s reputation as a free-spirited hub. The government has taken steps to encourage foreign investment and stimulate consumption, but the city’s financial markets are weak and the economy is struggling.
The question now is whether the government can succeed, given growing international concerns about the future of cities in the wake of the new security law, and the numerous headwinds from China’s economic slowdown to US-China tensions. Please.
“This could be an opportunity for Hong Kong to refocus on the economy,” said Dongshu Liu, an assistant professor specializing in Chinese politics at City University of Hong Kong. “Whether the Hong Kong government actually does it is another story.”
At stake is the future of one of the world’s most important financial hubs. Hong Kong is an important funding center for Chinese companies seeking access to international capital markets, as well as a major route for foreign companies to invest in China.
While more companies are choosing Singapore as their base in Asia, Hong Kong’s role as a financial center is dwarfed by that of its rivals. The city is still home to the Asian headquarters of Wall Street banks, and its $4.8 trillion stock market is the fourth largest in the world.
Read more: Wealthy flock to Singapore as bankers cling to Hong Kong
However, Hong Kong’s challenges are growing. Borrowing costs have risen due to the currency peg with the dollar. Expatriates and young locals are leaving the country in droves as financial sector jobs dry up and concerns grow over increased Chinese government surveillance.
More broadly, as China’s economic slowdown weighs on domestic consumption, foreign capital is increasingly leaving China. The Chinese government’s crackdown has ensnared industries from technology to real estate, with several developers defaulting on their debts.
Hong Kong’s important role as a pipeline for Chinese capital means that its success is of national importance. When President Xi Jinping visited the former British colony for President Lee’s inauguration in 2022, he ordered Premier Lee to strengthen Hong Kong’s position as an international financial center.
In a sign of Beijing’s growing concerns, officials from China’s Ministry of Finance will visit the city in December to meet with banking executives including HSBC Holdings and Standard Chartered, reinforcing the city’s status as a hub. We talked about methods.
“The mainland regime wants foreign investment and free trade,” said Carsten Holz, a professor of economics at the Hong Kong University of Science and Technology. “The last thing we want is for news that is unfavorable for Hong Kong to continue to be broadcast on the television screens of Western viewers.”
There is an urgent need to restore Hong Kong’s attractiveness. The country’s real estate market is in a slump, with home sales falling to their lowest level in nearly 30 years last year and office vacancy rates hitting record highs. The Hang Seng Index, the domestic stock benchmark, has fallen more than 40% in the past three years, while MSCI’s index of global stocks has risen 15%.
However, there are limits to Hong Kong’s ability to overcome major hurdles, said Chong Jia Ian, an associate professor of political science at the National University of Singapore.
“Hong Kong’s economy mainly relied on acting as a conduit between China and the rest of the world,” Chung said. “At a time when China faces further economic headwinds and foreign policy frictions, other governments are pursuing divestment and diversification. These options are not available in Hong Kong.”
City Treasurer Paul Chan vowed last month to make the city more attractive to businesses and talent. Speaking at the annual budget, he said the Middle East and Southeast Asia were potential new sources of capital, adding that the city’s stock exchange would seek to attract issuers from these regional countries. Last year, Chan led an industry group on a trip to Europe and the United States to boost the appeal of Hong Kong as the city reopens with zero coronavirus infections.
Read more: US companies ask Hong Kong to stop talking about national security
For many Western governments, the new law poses a potential threat to companies operating in Hong Kong and could overshadow the city’s goal of focusing on economic development.
Under the law, authorities will have a wide range of tools to minimize dissent, while police will be given expanded powers. The law’s broad definition of state secret crimes brings Hong Kong into line with China’s vague laws on espionage, which have spooked foreign investors over the past year.
The European Union said in a statement on Tuesday that the bill “could exacerbate the erosion of fundamental freedoms” in Hong Kong. A US State Department spokesperson said the law could “accelerate the closure of Hong Kong’s once open society.” British Foreign Secretary David Cameron said in a statement that the law will have “far-reaching implications”.
Hong Kong government officials said the law is based on similar laws in countries such as the United States and the United Kingdom, and that human rights and freedom of speech are protected under the law. I got it.
Read more: Why Hong Kong passes another national security law: Q&A
Since the handover in 1997, Hong Kong has been required to enact its own security law based on a mini-constitution, but successive governments have been unable to do so due to strong public opposition. In 2020, the Chinese government implemented its own national security law in Hong Kong in response to pro-democracy protests. This gave local authorities the power to crack down on dissent and pave the way for new laws.
The 212-page bill was unanimously approved by Congress, clearing opposition, late Tuesday, 11 days after it was introduced. This is the earliest legislation passed since the city returned to Chinese control. The law will go into effect on Saturday after Lee signs it.
–With assistance from Alan Wong and Shawna Kwan.
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