Hong Kong, once celebrated as a key international financial hub and a vital conduit for foreign investments into mainland China, is grappling with a shifting identity.
The city’s gradual alignment with the mainland, diminishing its unique status as a Special Administrative Region, has raised alarm bells in the global financial community.
This unsettling shift was starkly evident at the recently convened second Global Financial Leaders’ Investment Summit. Analysts observe significant changes in China’s business climate, prompting Wall Street leaders to seek insights into the Chinese Communist Party’s (CCP) strategies and policies.
The summit, themed “Living with Complexity,” took place in Hong Kong on Nov. 7, drawing luminaries like James Gorman of Morgan Stanley, Goldman Sachs’ David Solomon, UBS Group’s Colm Kelleher, and Deutsche Bank’s Christian Sewing, alongside more than 300 other prominent figures from the world’s leading financial institutions.
Morgan Stanley’s James Gorman pointed out the potential political or geopolitical roots of future financial crises, highlighting the challenges faced by democracies worldwide.
National Security Law’s Impact
This summit marked a significant appearance by He Lifeng, the Chinese Vice Premier, assuming a major role in international finance discussions. He underscored the financial sector’s importance to China and Hong Kong and reiterated plans to bolster Hong Kong’s international financial center status, a topic discussed at China’s Central Financial Work Conference.Escalating Exodus of Foreign Capital
The European Union’s 2022 annual report on Hong Kong paints a concerning picture: a 12.5 percent migration of foreign capital away from the city, contrasted with a 17.5 percent increase in mainland Chinese enterprises establishing a presence there.Hong Kong government statistics further underscore this trend, revealing a consistent drop in the number of foreign companies based in the city from 2019 to 2022.
The workforce in foreign enterprises has seen a significant reduction, with notable cutbacks at financial majors like Goldman Sachs and Morgan Stanley, decreasing by 25,000 to a total of 468,000 employees.
Reflecting this shift, Caton Technology, a broadcast technology firm with global connections, relocated its headquarters from Hong Kong to Singapore last year. Similarly, American circuit board manufacturer TTM Technologies departed Hong Kong for Malaysia this year.
This trend is evident in the recent closures by Australian financial institutions Westpac and National Australia Bank, with the latter planning a complete shutdown of its Hong Kong operations by early 2025.
Outflow of $11.8 billion
Parallel to these developments, a substantial withdrawal of foreign capital from mainland China has been observed. The State Administration of Foreign Exchange of China reported a net outflow of $11.8 billion in direct investments in the third quarter of 2022, marking a historic downturn since China’s economic reforms began in 1998.This reversal from a trend of robust foreign investment is a significant shift.
Amid the U.S.-China geopolitical tension, these entities strive to maintain a delicate balance, avoiding conflict yet finding it increasingly challenging to navigate the complex dynamics between Beijing and the West.
Investment advisor Mike Sun, with deep insights into Chinese politics and economics, told The Epoch Times about the cautious approach of Wall Street leaders and international financial institutions gathered in Hong Kong.
Their focus, he noted, is on “the significantly altered situation and business environment in China, with a keen interest in understanding the CCP’s intentions and strategies.”