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Tuesday, June 02, 2020, 10:41
SAR will continue to maintain its global financial center status
By Ho Lok-sang
Tuesday, June 02, 2020, 10:41 By Ho Lok-sang

There is little doubt that Hong Kong will continue to thrive as a global financial center, notwithstanding the threat of sanctions from the United States.

Will Hong Kong be affected? Of course. But the negative effects will be more than offset by the positive effects.

US Secretary of State Pompeo has called the proposal of a national security law for Hong Kong a “death knell” for Hong Kong’s autonomy. US national security adviser Robert O’Brien warned that Hong Kong could lose its status as a major hub for global finance. The Hang Seng Index fell a whopping 1,350 points after the announcement that Beijing will enact a national security law for the SAR. More people are talking about emigrating. However, as the National People’s Congress deputy, Fok Chun-wan, said recently, Hong Kong has gone through many episodes of confidence crisis; each time those who lost confidence lost out. This time will not be an exception.

There is little doubt that some people are worried. However, the greatest worry is not an erosion of personal freedoms in Hong Kong. It is the fallout from the emerging US-China cold war. Pompeo has already announced that the US State Department no longer considered Hong Kong to have significant autonomy under Chinese rule, implying that American sanctions will come.

The national security law will not adversely affect the lives of 99.9 percent of law-abiding citizens. Instead, they will enjoy more personal freedoms and job security than without it

Most serious commentators, however, doubt that America would take drastic actions that would hurt its own interests. For the record, Hong Kong is the trading partner that allowed America to garner the greatest trade surplus globally, which was US$33.4 billion in 2018 according to official US data. The revocation of the special status currently enjoyed by Hong Kong will cause problems for the more than 1,300 American companies with business operations in Hong Kong, including nearly every major US financial firm. Some 85,000 US citizens lived in Hong Kong in 2018. Strict Chinese visa requirements for US nationals will impede business travel and would require work visa approvals.

As of 2018, the stock of US foreign direct investment in Hong Kong stood at US$82.5 billion, according to US Commerce Department data. Hong Kong’s investment in the US rose US$3.5 billion in 2018 to US$16.9 billion.

I will not speculate on what sanctions America will impose. America is used to imposing sanctions in order to get its way. But life has to go on. Worry is of no use. Ask people living in California Bay Area: Do they worry about a major earthquake which is long overdue? Certainly. But life has to go on. People cannot do anything to prevent a devastating earthquake if it should come. Yet homes, buildings, and infrastructure can be better constructed to minimize damage.

The cold war is certainly hurting both Chinese and American interests. Hong Kong will no doubt suffer economically as a result. However, there is little likelihood for a real decoupling of the American and Chinese economies. As much as the Trump administration tout it and even offer grants to encourage American firms to leave China, few American firms are moving out of the Chinese mainland. The huge market and the growing potential, the mature and still-improving logistic support, social and political stability, the skilled and affordable labor force, the efficiency of the government, the improving rule of law, the great infrastructure … The list goes on. In this highly competitive world, the Chinese mainland is simply too attractive to give up. Especially when the rest of the world is not really that peaceful.

Tesla was able to get its new Shanghai plant up and running in 10 months. Foxconn was to build a plant in Wisconsin, creating 13,000 jobs. The factory was set to start production by the end of 2020, but as of December 2019, construction had yet to begin.

The US China Business Council a few days ago asked leaders in both countries to take necessary steps to deescalate tensions, promote economic recovery and the rule of law, and preserve “one country, two systems”.

Indeed, Beijing stands by its commitment to “one country, two systems”, which means that all provisions in the Basic Law, including the rights of assembly, the rights of expression and of demonstration, and the freedom to form and join trade unions and to strike will be preserved.

So Hong Kong suffers from the clash between China and the US; the damage is from that clash and is regrettable. But Hong Kong has more to gain: Hong Kong will be better safeguarded from the riots, and the risks from national insecurity. Already in 2019, Hong Kong’s business environment was hurt severely. The title of an article in Forbes on Jan 3 read: “Latest data shows protests sucking the life out of Hong Kong economy”. So with or without sanctions, Hong Kong’s economy was going to die due to persistent social unrest. With the national security law, complemented with the mechanism to enforce it, at least Hong Kong will have a chance to survive.

I am sure the national security law will not adversely affect the lives of 99.9 percent of law-abiding citizens. Instead, they will enjoy more personal freedoms and job security than without it.

The author is a senior research fellow at Pan Sutong Economic Policy Research Institute, Lingnan University.

The views do not necessarily reflect those of China Daily.

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