In response to controversial national security legislation on the city, demonstrators returned to streets to protest two pieces of legislation that they are unlikely to stop. Trump administration informed the US Congress that Hong Kong is no longer suitably autonomous from China - a crucial step in deciding whether Hong Kong will continue to receive preferential economic and trade treatment from the United States. This shock wave comes with possibility of higher trade tariffs, tougher investment and banking rules, asset freezes and more onerous visa rules.

I agree with the argument that the legislation for a national security law for the Hong Kong special administrative region is purely China’s internal affair. The new national security legislation may see a domestic intelligence agency in Hong Kong, possibly an expansion of current works of Security Wing with about elite 700 officers to a similar set up like the colonial-era Special Branch - the colonial machinery of repression. The intensification of Beijing's crackdown on Hong Kong is a sign that when the Chinese Communist Party feels its core interests are threatened.

As an investment professional, I however, do care about Hong Kong’s century long status as a separate legal jurisdiction as it stands as a financial hub in future. Its independent judiciary provides great confidence to global business community be it from business arbitration or extradition perspectives. It remains to be seen the efficacy in balancing political freedoms in Hong Kong and convincing international investors that this place remains viable as financial hub. According to 2019 Annual Survey of Companies in Hong Kong with Parent Companies Located outside Hong Kong (SCoP), there are 1,413 Japanese companies, 1,344 US companies, 713 United Kingdom companies and 446 Singapore companies have operations here. Of that, 1,541 are operating as regional headquarters and 2,490 as regional offices in the city. Some of these regional headquarters are the hub for the Asia-Pacific Region, while others serve as the hub for the Greater China region. By sector, import/export trade, wholesale and retail topped the list (4,181), followed by financing and banking (1,787) and professional, business and education services (1,373). The city also headquarters journalists from all over the world, including many from mainland China as they can speak relatively free without fearing government reprisal. My Hong Kong friends are opting for VPN and scrubbing their public profiles. The danger is not theoretical!

Understanding China’s legal system will be a key challenge to a lot of professionals. I would be passionate to bring liberal-progressive values to China’s effort in promoting Shenzhen and Shanghai as next financial hub. Role of Hong Kong’s in-betweenness since its inception as a colonial trading post, will erode further. Hong Kong is increasingly been locked by increasingly bitter, nationalist competition, with powerful states wrestling for control over diminishing returns.

To my Chinese friends, China needs to find a balance between President Xi’s political ambition against Hong Kong as China’s financial lifeline, which has become more important than ever as Chinese companies are on the brink of being expelled from the US capital market and are forced to plan secondary listings in Hong Kong. China now faces most severe state of recession since the 1990s.

It is getting harder for Hong Kong’s future to be won on its own terms. Whatever the calculations being made, the fact is that Hong Kong is the latest battlefield between China and the West.

Chee Seng, Wong
CIO, Athena Advisors
wong-chee-seng@outlook.com