A new report released this week by Hong Kong Watch details why reports of Hong Kong’s decline as an essential financial centre for both China and the rest of the world are greatly exaggerated, and that the Chinese government cannot afford to allow the city’s rule of law and fundamental freedoms without incurring significant cost for themselves.
The report finds that, as China’s only rule of law city, Hong Kong remains irreplaceable:
- The city is home to the largest number of initial public offerings by Chinese mainland firms by a considerable margin
- The Hong Kong-Shanghai Stock Connect scheme is increasingly the preferred means by which Western investors access the mainland stock market
- The city mediates nearly two-thirds of direct investment into and out of China.
Hong Kong not only matters to China, it plays a key role for Western investors. 1530 multinationals have their regional headquarters in Hong Kong, which is an increase of two-thirds since 1997.
Johnny Patterson, Director of Hong Kong Watch said: “Hong Kong’s value cannot be understated nor can the cost the Chinese Government would incur in replacing it. Assessing Shanghai and Singapore and comparing them as alternative financial centres, we found that both would fall short as adequate replacements to Hong Kong in the immediate future.
Through interviews with leading business leaders about what they find valuable in Hong Kong, we concluded that the continued economic success of Hong Kong is built upon its uniqueness. It is the only city in China with freedom of capital, freedom of information, fundamental freedoms, rule of law and autonomy.
Any attempt to dismantle or undermine the rule of law and fundamental freedoms Hong Kong enjoys poses a huge economic risk for China and the rest of the world.”