Hong Kong's end of year report

Richard Grasby 吳理察德 TEP CAMS

Offshore regulatory, trusts and private wealth lawyer. Private Client Global Elite 2023. WWL Thought Leader.Member of IAETL. Expert in family offices, trusts, succession, private label funds, compliance, governance.

发布日期: 2021年12月21日

In late 2020 (published in early 2021), I wrote a piece entitled “The Future of Hong Kong as an International Finance Centre[1] ”.

I began with a Churchill quote – “It is always wise to look ahead, but difficult to look farther than you can see.” So now we are one year on, I thought I would reassess the position (without getting overly political).

In terms of general comments:

(1)??COVID-19 continues to impact Hong Kong -albeit in a different way to most other places.

(2)?The authorities have clamped down on several of the protagonists of the protests. Through a combination of the National Security Law and COVID-restrictions there are no protests.

(3)?Hong Kong's electoral journey continued this weekend. The format and results were as expected and reflect Hong Kong’s status as a Special Administrative Region of the PRC.

In terms of the factual pieces in my earlier article please note the following:

1.?????“Wealth Management Connect" launched in September / October 2021.

2.?????Hong Kong has risen two places in the Global Financial Centres Index Report 30[2] and now occupies 3rd place (noting that the score itself was lower) and is the leading Chinese city.

3.?????Hong Kong fell from 75th to 87th in the Economist Intelligence Unit Democracy Index 2020[3] relegated from "flawed democracy" to "hybrid regime". This is consistent with Hong Kong’s electoral experience.

4.?????Of most interest, is the fact that Hong Kong and Macau no longer feature in the Index of Economic Freedom[4] . Hong Kong was second in 2020. The 2021 Index states:

" Hong Kong and Macau are thus no longer included in the Index. No doubt both Hong Kong and Macau, as Special Administrative Regions, enjoy economic policies that in many respects offer their citizens more economic freedom than is available to the average citizen of China, but developments in recent years have demonstrated unambiguously that those policies are ultimately controlled from Beijing. As appropriate in the future, developments in Hong Kong or Macau that are relevant to economic freedom will be considered in the context of China’s evaluation in the Index".

5.?????In terms of financial statistics, what do the HKMA figures show for the period Feb-Sep 2021?[5]

a.?????“With total deposits increasing moderately during the review period, there was no sign of significant outflows from the Hong Kong banking system. Looking ahead, uncertainties related to the Fed’s monetary policy, lingering China-US tensions, the pace of economic recovery along with the development of the COVID-19 pandemic, as well as the equity-market activities may heighten volatility in fund flows. Nonetheless, Hong Kong is able to withstand the volatility, given its ample foreign reserves and robust banking system.”

6.?????What about IPOs?

a.?????Hong Kong’s unique status may give it a slight edge in terms of “overseas” (sic) listings by mainland Chinese businesses. This is a current hot topic.[6]

b.?????Hong Kong will allow “SPACs” from 1 January 2022[7]

c.?????In terms of IPO statistics[8] [9] , Hong Kong has fallen in 2021 from its 2020 performance but there is optimism for 2022.

7.?????In my 2020 article I referred to the Boston Consulting Group Global Wealth Report 2020. What does the 2021 Report say?[10]

a.?????“Switzerland was the largest cross-border booking center in 2020. But we expect Hong Kong to take the lead in 2023 by overall size, with strong inflows from mainland China driving AuMs to a staggering $3.2 trillion by 2025.”

8.?????In terms of emigration from Hong Kong, the BNO scheme has received a lot of attention. In statistical terms the figures from the UK suggest that approx. 65,000 Hong Kongers have utilised the scheme in the first half of 2021. The HK government statistics estimate a reduction in population of 1.2%[11] ?but many are reluctant to return because of Hong Kong’s quarantine restrictions.

?Let's see what 2022 has in store.