Can Hong Kong survive as a financial hub?

As Beijing tightens the screws on Hong Kong, many fear the death of the territory's autonomy – and of its status as a global financial hub.

With the world distracted by the virus, Beijing has been tightening the screws on Hong Kong, says Timothy McLaughlin in The Atlantic. The Chinese Communist Party says that it will impose a national security law on the semi-autonomous city, bypassing Hong Kong’s own legislature. Opponents fear that this spells a “fundamental shift” in the “one country, two systems” framework under which the financial hub enjoys rights such as an independent judiciary and freedom of speech. US secretary of state Mike Pompeo has said that the “disastrous proposal” would sound the “death knell” for Hong Kong’s autonomy. 

Why British blue-chips are exposed

The local Hang Seng index plunged by 5.6% last Friday, its biggest one-day fall since 2015. The property sector was hit especially hard. Shares in local magnate Li Ka-shing’s CK Asset Holdings fell by 8.4%. British blue chips are affected by events in Hong Kong, says Jim Armitage in the Evening Standard. Shares in HSBC, exposed to the local property market, closed down 5%, while Asia-focused Standard Chartered also took a hit. Most vulnerable of all is Prudential, which makes one-third of its sales in Hong Kong. Some observers hope that Beijing is just “grandstanding” for a domestic audience, but others warn that this could prove “the final straw” for expatriates and investors after a turbulent year of political unrest. 

Hong Kong may survive as a financial hub, but it could look like a very different one, says Nathaniel Taplin in The Wall Street Journal. Foreign investors are gradually pulling back, but the city may enjoy a wave of secondary listings from mainland Chinese firms such as Alibaba, which are gradually being evicted from US exchanges. That would make Hong Kong and its markets more dependent on Beijing than ever. One thing is certain: “the city will never be the same”.

A new cold war?

Hong Kong is becoming “ground zero” in the emerging US-China cold war, says Brian Fong for The Diplomat. The city offers Western businesses access to China’s vast market buttressed by all the guarantees of British-style common law. Perhaps not for much longer. China has no rational interest in burning its “own bridge to the world”: Hong Kong is its most important source of foreign capital. Yet with mounting challenges at home and abroad, the leadership has seemingly “decided to make Hong Kong its battlefield with the West”. 

The US-China contest is also being played out in the currency markets, says John Authers on Bloomberg. The People’s Bank of China, the country’s central bank, has been allowing the yuan to weaken against the dollar in order to boost a sluggish economy. Tuesday’s exchange rate of 7.1293 is the lowest since February 2008. The yuan generated international headlines when it broke through the seven-to-the-dollar mark last summer, drawing the ire of the White House. A weaker yuan boosts Chinese exporters at the expense of US businesses. At such a tense time, this looks like a “very provocative gesture”. 

Recommended

What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022
These 3 top value stocks offer
Share tips

These 3 top value stocks offer

Professional investor Adam Rackley of Cape Wrath Capital highlights three overlooked value stocks to buy.
29 Sep 2022
Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
Bank of England spends £65bn to “restore orderly market conditions”
Budget

Bank of England spends £65bn to “restore orderly market conditions”

The Bank of England has said it will spend £65bn buying bonds to stabilise the financial markets after the government’s mini-Budget. Saloni Sardana ex…
29 Sep 2022

Most Popular

Earn 4.1% from the best savings accounts
Savings

Earn 4.1% from the best savings accounts

With inflation topping 10%, your savings won't keep pace with the rising cost of living. But you can at least slow the rate at which your money is los…
27 Sep 2022
How the end of cheap money could spark a house price crash
House prices

How the end of cheap money could spark a house price crash

Rock bottom interest rates drove property prices to unaffordable levels. But with rates set to climb and cheap money off the table, we could see house…
28 Sep 2022
What changes to the pensions charge cap mean for you
Pensions

What changes to the pensions charge cap mean for you

The government could raise the pensions charge cap – the amount you can be charged in your workplace's default pension fund. Saloni Sardana explains w…
27 Sep 2022