[ad_1]
BEIJING’s enactment of a strict new national security law for Hong Kong raises concerns that it will remove much of the autonomy and freedom that underpin the territory’s role as Asia’s world city. Beijing did so in an attempt to restore order to end the “chaos” on the streets.
The new law aims to protect national security and gives Beijing authority to combat the crimes of secession, subversion, terrorism and collusion, with severe penalties.
Critics, however, have been highly hypocritical and have adopted double standards. For years, the United States has enforced its own security laws, the most recent being the Patriot Act of 2001 against terrorist attacks.
The United Kingdom, Canada, Australia and France have also introduced laws to preserve the security of their nations and the safety of citizens; So why shouldn’t Hong Kong do the same for the safety and well-being of the city and the country as a whole?
In my opinion, the law is likely to be applied with a relatively light touch. Life is returning to normal; there is already a lot less chaos in the streets.
Hong Kong’s preeminence
In response, the United States has since downgraded the legal privileges it grants to Hong Kong, which treats it as autonomous from China. Britain intends to make it easier for up to three million Hong Kongers to go there to live and work, and eventually become citizens.
In my opinion, Hong Kong’s place in the world depends on having: (i) the rule of law; (ii) a reliable reputation and smooth access to global financial markets; (iii) fair courts; (iv) an independent central bank; and (v) free movement of capital. These foundations form the basis of almost US $ 10 trillion in cross-border financial claims (such as loans) that are registered in the territory. Hong Kong is also the place where mainland banks and businesses go to trade in US dollars, the world’s dominant currency.
Some $ 10 trillion transactions flowed through Hong Kong’s bank-to-bank payments system in 2019. But the trade war, a year of street protests (and violence) and China’s fierce response raise new questions about stability. From Hong Kong.
China’s actions also raise questions about the inviolability of contracts. If these concerns spread, they could destabilize Hong Kong and cause a financial shock to China and far beyond.
The good news is that, so far, there are no signs of capital flight. Hong Kong’s broad deposit base has been stable. Investors are reassured by its holdings of $ 440 billion in foreign reserves and a long record of good financial management. The flood of Chinese quotes will also bring in new cash and generate business for the city.
At the same time, China has moved to accelerate the development of the continent’s financial capabilities: attracting more global banks and investment managers to the mainland. In 2019, it relaxed licensing rules for Wall Street companies. She also made another big push to boost the global role of the yuan and reduce China’s dependence on the US dollar. It is now considered to be promoting a central bank digital currency.
Hong Kong vs Shenzhen
Not far from Hong Kong is the mainland city of Shenzhen, now home to China’s tech giants Huawei, Tencent, and DJI. China’s intention is to strengthen the role of the Pearl River Delta in southern China: merging 11 cities (including Hong Kong and Shenzhen) into a single Greater Bay Area (GBA) hub, to rival countries like the Area from the San Francisco Bay, the vast metropolitan area of Manhattan, New York; and even Greater Tokyo.
Still, Hong Kong has several important advantages over Shenzhen: (a) free Internet access; (b) freedom of expression; (c) the rule of law; (d) free flow of capital; (e) the world’s largest overseas yuan trading center; f) Hong Kong’s leadership as a global financial center (world number 3; Shenzhen number 9); (g) Hong Kong is still way ahead of Shenzhen in terms of ease of doing business; (h) it also benefits from its unique link between China and the world; (i) Hong Kong’s six universities far outperform Shenzhen’s (all made the Times Higher Education’s top 500 world university rankings in 2020, compared to just one in Shenzhen); and (j) Hong Kong International Airport is more active as an international transportation hub. From Shenzhen, airlines fly to 173 destinations, mainly in China, and the airport processed around 50 million passengers in 2018. While nearly 75 million travelers passed through Hong Kong in the same year, flying to more than 220 destinations. all over the world.
Career
A successful global financial center needs: liquid markets, a large amount of capital, convertible currency, low tax rates, and good infrastructure; yes, they all count. Above all, something more is needed: confidence in the rule of law and freedom of expression.
All of this has for decades cemented Hong Kong’s position as Asia’s leading financial center. Recently, observers from China told me that, to be fair, investors should measure Hong Kong’s future financial situation in three measures.
First, how independent China implements the new security law. Second, if the United States aims to dilute the US dollar payment system in Hong Kong, which has so far served financial intermediation very well. And third, if China not only intends to crack down on the protests, but also compromises Hong Kong’s independent institutions (including its courts, central bank, and regulatory regime). Hong Kong must pass these tests. Realistically, China needs to keep Hong Kong’s financial fires burning.
Of course, the new law will bring the much needed calm to the territory to promote the continued interest of global investors in the pursuit of rapid growth and rapid returns. In addition, Hong Kong serves to attract US funds to promote one of Beijing’s strategic goals: to create a technology and financial network in GBA as a gateway to China. It is now home to a growing number of dynamic technology companies.
Then, what are we going to do?
“It is clear then that the best association in a state is the one that operates through the intermediate people, and also that those states in which the intermediate element is large, and stronger if possible than the other two together, or in any case stronger than any of them by itself, they have every chance of having a well-managed constitution. “Aristotle, Politics
As I see it, the world of Hong Kong today does not compare well. Compared to Shenzhen, Hong Kong has a huge and wealthy middle class; but also a huge gap between the very rich and the very poor.
Its stability is based on a prosperous and growing middle class.
Today, this stability is threatened by the fear of being caught on the wrong side of the new security law. Lately, there have been a series of events that will make Hong Kong very different from the one we are used to: (a) the UK revoked its extradition treaty and withdrew Hong Kong’s special economic status; (b) Naver, South Korea’s largest technology company, leaves Hong Kong as a data storage base for an expanded site in Singapore; (c) Silicon Valley giants (including Facebook, Twitter and Google) are reviewing their Hong Kong operations in response to the incorporation of the Internet within the Great Firewall of mainland China; (d) Google, together with Facebook, is looking for alternative destinations for a planned submarine high-speed Internet cable between the United States, Taiwan and the Philippines, which now excludes Hong Kong; e) Cloud computing companies are shifting their focus to Southeast Asia and South Asia (Singapore is likely the beneficiary); (f) Google, which is behind its rivals Amazon Web Services (AWS) and Microsoft globally, has become the first to launch its “cloud region” in Indonesia; and (g) Hong Kong has positioned itself as a data center in Asia, as has Singapore.
AWS and Alibaba have targeted Indonesia (Alibaba launched its first data center in 2018, while AWS will follow in 2021). In general, a return to stability means, in particular, reductions in global inequality and poverty.
It also means doing it with new innovations. Into this already tense situation has arrived the Covid-19 pandemic with its enormous adverse impact: Policies now aim to create and sustain a vigorous middle class, while ensuring an effective safety net. Politics has to be equal treatment for all.
Former banker, Harvard-educated economist, and British Chartered Scientist, Sunway University Professor Lin is the author of Trying Troubled Times Amid Trauma & Tumult, 2017-2019 (Pearson, 2019). Comments are welcome. The opinions expressed here belong to the author.
[ad_2]
