HONG KONG (Reuters Breakingviews) - Anti-government protests in Hong Kong have w...
Resident buildings and offices are seen in Shenzhen, Guangdong Province, China, September 6, 2019. Picture taken September 6, 2019. REUTERS/Athit Perawongmetha
Months of violent protests have laid bare President Xi Jinping’s failure to rally Hong Kongers around the flag: the pro-Beijing party lost control of 17 out of 18 councils in November district elections. Yet Xi still has to get along with the special administration region. A sharp crackdown will damage sentiment in the major hub for foreign trade and investment and the only exchange where local companies can raise hard currency.
The better alternative is Shenzhen, a tech hub just across the line separating Hong Kong’s relatively open political system from the mainland; host to a $3.3 trillion stock exchange and an established institutional investor community. Officials have tried to make the city a hard currency financial centre before, creating the Hong Kong dollar-denominated “B-share” board in 1992, then launching a zone to test further capital account opening in 2015. But policy dithering doomed both to moulder.
That would mean the city’s yuan supply would necessarily become convertible to foreign currencies, as in Hong Kong; initial public offerings could be denominated in yuan or Hong Kong dollars. Attracting multinationals would also require Beijing to selectively relax its visa and censorship regimes, plus roll out a hybrid legal system.
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