If Hong Kong continues to be a barometer for China’s commitment to economic openness and political engagement with the world, the current reading shows a “mixed picture,” according to at least one expert speaker in Atlanta May 13.
In a seminar whose title acknowledged a level of uncertainty around the city’s current role — “Hong Kong Still Matters” — stakeholders with deep experience living and working in the Asian financial center debated how much its recent political turbulence may affect its growth prospects and hub status over the long term.
Long a preferred beachhead into Asia, many Western companies have departed Hong Kong or sought alternatives after China imposed a National Security Law in 2020 that criminalized “sedition” and “subversion,” and, many say, undercut the city’s special advantages under the “one country, two systems” policy.
Critics point to the law as a draconian sign that China seeks to bring the city to heel after years of turbulent protests over the fate of its political future. Some have gone as far as to say that it has effectively ended the legal autonomy that has served as Hong Kong’s competitive advantage since the handover from British to Chinese rule in 1997.
Kurt Tong, a partner at The Asia Group and a former U.S. consul general in Hong Kong and Macau, wouldn’t go that far, noting that in many ways, the city is still the legal equivalent of “a piece of London that got transported accidentally to China,” with an open business environment and strong regulatory framework, especially in finance.
“That, interestingly enough, despite the changes and in Hong Kong in recent years, continues to be the case, partly because of the competitive landscape in the region where there are not as many alternatives, and partly because of the pool of wealth and the proximity to China,” Mr. Tong said, addressing the live audience at the Metro Atlanta Chamber over Zoom.
But a rising risk of doing business in the Hong Kong special administrative region, as it’s known, is “the fact that there are now two sometimes inconsistent bodies of law operating in Hong Kong — the original common law system, and a set of rules that that that flow from the National Security Law,” he added.
So far, business has been mostly unaffected, but foreign companies face the increasingly real prospect of hitting roadblocks when their goals conflict with Beijing’s political aims, he said. The free flow of information has been hampered by the chilling effects of ambiguous rules that have already been used to stamp out dissent, especially among media critical of the government.
“One can still find information on private-sector matters which is reliable and unfiltered, but there is increasing pressure on the media to control its reporting on political matters. And again, there’s a risk that it crosses over into things which actually directly impact business,” Mr. Tong said.
After more than a decade of relative openness and promises of greater autonomy, Beijing swung away from the “two-systems” approach to managing Hong Kong and began asserting the “one country” aspect. That can be seen in the way, Mr. Tong believes, Hong Kong has been unable to buck Beijing’s priorities on COVID-19 containment.
As a potential positive, Mr. Tong cited the Greater Bay Area, a Chinese government initiative to link 11 cities in the Pearl River Delta region — including Hong Kong, Shenzhen, Guangzhou, Macau and other metros the surrounding Guangdong province — into one mega region focused on driving forward technology, trade and financial services.
“If that incremental reform and opening — Deng Xiaoping 2.0, if you will — were actually done in a serious way, it would create tremendous opportunity,” Mr. Tong said, referencing the Chinese leader that championed post-1979 policies unleashing a decades-long growth tear that lifted hundreds of millions out of poverty.
This bloc of 86 million people, which combined would constitute the world’s 11th largest economy, will actually put the cities’ complementarity to work, said InvestHK Director of Investment Promotion Stephen Phillips, who also joined the audience virtually. And it’s baked not only into Hong Kong’s strategy but also the central government’s five-year plan.
The diversity of systems between the mainland cities and Hong Kong and Macau is “part of the overall recipe that makes the Greater Bay Area very unique,” Mr. Phillips said. “I would suggest it’s too big or significant to ignore, or if you are going to ignore it, at least do it after a conscious analysis of the opportunity.”
He added that Hong Kong is not only a great base for companies that have both China and broader Asia ambitions, but it’s asserting itself as a bridge to Southeast Asia — especially after the signing of the 16-nation Regional Comprehensive Economic Partnership trade deal.
“We’re going to see a gradual shift of investment flows to north-south rather than the traditional east-west that we have all experienced in our business careers,” Mr. Phillips said.
It goes outward too: Hong Kong is increasingly becoming a platform for mainland firms going global, both through stock listings and by finding savvy partners that can guide them internationally. And it has a thriving startup ecosystem in which one-third of the companies are foreign-owned, he added.
Hong Kong has also been a conduit for financing projects under the Belt and Road Initiative, Chinese President Xi Jinping’s signature infrastructure-building spree planned for more than 60 developing countries. Its implementation has been stalled by COVID-19, tamping down strident U.S. criticism — at least for the moment.
Yawei Liu, director of The Carter Center’s China program, lamented the ending of Hong Kong’s trade advantages by the U.S. Congress, which he said alienates China and hurts Hong Kong’s economy.
“The more the U.S. criticizes what China is doing in Hong Kong, the more upset the leadership in Being is going to be,” Dr. Liu said, noting that both sides need to make space for dialogue. “Hong Kong is a barometer, Hong Kong is a binocular, Hong Kong is a periscope, through which American leaders, American business, are looking to China.”
Conversely, Hong Kong is vital to China as a political crucible, he said.
“Hong Kong is a model of governance and the rule of law. Hong Kong’s government is clean, it’s efficient, it’s responsive, it’s dedicated, it’s professional, it’s fair minded,” Dr. Liu said. “Hong Kong is also a lab for political experiments … I cannot imagine the Chinese having free elections for any foreseeable future, but I can imagine that what is working in Hong Kong may be transported to China. Hong Kong could be a pilot.”
For now, Beijing seems to be holding the reins tightly and bringing its influence in: new Chief Executive John Lee Ka-chui, a former security chief who oversaw the crackdown on protests in June 2019, will succeed Carrie Lam as the latest pro-Beijing chief executive July 1.
Fred Teng, president of the America China Public Affairs Institute, moderated the panel and question-and-answer session in which some wondered aloud whether Hong Kong still mattered when Chinese cities like Shenzhen have risen to such economic prominence.
“I’ve seen Hong Kong through thick and thin, up and down, and personally, I think Hong Kong is a great city,” said Mr. Teng, who moved to the city in 1959 at the age of 5. “Businesses are very vibrant, it really has good people, good food and it’s really a fun place to be. Anyone in this world — it should be on your bucket list to visit at least once in your lifetime.”
Henry Yu, president of the Hong Kong Association of Atlanta, a key organizer of the event, provided closing remarks and committed his organization to helping firms in Georgia set up shop in Asia via Hong Kong.
Candy Nip, director of the Hong Kong Economic and Trade Office in New York, which sponsored the event, provided opening remarks in person at the Metro Atlanta Chamber, followed by a welcome from John Woodward, the chamber’s vice president of global commerce.
The seminar attracted 150 combined attendees, with virtual participants joining from 13 states as well as from Belgium, Canada, China and Hong Kong, according to a summary by the Hong Kong Association of Atlanta. The in-person crowd included business leaders from industries like banking, construction, real estate, logistics, aviation, insurance and more.