Heard on the Street: The shrinking of Hong Kong’s horizons
Does Beijing’s imposition of a draconian yet murky national security law mean the end of Hong Kong as we have known it?
For financiers, the answer is probably no: The city retains many of its core advantages, especially preferential access to Chinese markets, a stable currency, and open capital markets. But in other ways, the damage from the law could be profound: it will make diversifying the economy away from finance to aid struggling middle class residents even harder. Everyday Hong Kongers face an unpalatable choice between relocating to faster growing mainland cities, emigrating further abroad, or worsening life prospects at home as good opportunities in Hong Kong remain scarce and civil rights erode.
Hong Kong’s incredible success as a banking center—the finance sector’s economic output has more than tripled over the past two decades—masks the reality of much slower average income growth than rival Asian hubs like Singapore and Shenzhen. Outside finance, businesses have found themselves squeezed between sky-high property prices, tycoon-led monopolies in domestic sectors, and rising regional competition in another of the city’s historic strengths—shipping and logistics.
To help average Hong Kongers thrive again would require developing new growth industries like tech or high-end manufacturing, as Singapore and Shenzhen have successfully done. Unfortunately the new security law makes this less, not more likely. Most banks and insurers will likely stay put: Hong Kong’s legal protections remain stronger, even now, than on the mainland, and joint stock listings in Shanghai and Hong Kong remain a popular option for Chinese companies.
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