Hong Kong as a financial centre could drown if ‘river water’ from China continues to rise
A more mainland-dominated Hong Kong would threaten the city’s robust regulatory regime, high corporate governance standards, and freedom of the press and information, putting its status as Asia’s financial centre at risk
Former Chinese president Jiang Zemin famously said that well water and river water do not mix. Jiang’s point, made soon after the 1989 Tiananmen Square killings, was that Hong Kong shouldn’t try to pollute the mainland with ideas about democracy. Cadres from up north, in turn, wouldn’t try to inflict communism on postcolonial Hong Kong.
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Of course, the idea that Hong Kong would be as separate from China after 1997 as it was during British colonialism was never realistic. Now, although Hong Kong’s extradition bill is dead, that river water from the north threatens to submerge the special administrative region.
It’s worth going beyond the political sloganeering and thinking more concretely about what a more mainland-dominated – and politically restrictive – Hong Kong means for business, if the special administrative region is more fully merged before 2047. The reality is likely to lie somewhere between the utopian idea of a harmonious and vibrant Greater Bay Area and dystopian visions of the sort of surveillance state now being trialled in Xinjiang.
If limits on permissible behaviour tighten, if the red lines continue to constrict, Hong Kong is likely to fade into a place of marginal international significance. This drift into irrelevance will happen not with a bang, but with a whimper.
Journalists, press photographers, journalism schoolteachers and commentators take part in a silent march against police violence, from Harcourt Garden to the Hong Kong government headquarters in Admiralty, on July 14. Photo: Edmond So
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Hong Kong’s continuing importance – or lack thereof – as an international financial centre is key. A Hong Kong more like China will be one where stock markets benefit insiders with privileged access to information. Insider trading, market manipulation and other forms of fraud won’t attract meaningful penalties – except for those who anger someone more powerful.
Free markets need free information. Financial markets need fast, honest information. Financial markets are at the heart of Hong Kong’s economic success. Freedom is the reason Hong Kong has the most important international financial market in Asia. The lack of a robust, critical local and foreign press tends to go hand in hand with stunted capital markets. Singapore, despite admirable corporate governance standards, hasn’t developed in part for this reason.
