Exodus of HK funds and people over security law
Drafting of Hong Kong’s national security law
According to South China Morning Post, the National People’s Congress (NPC) endorsed a resolution, authorising its standing committee to craft the law, which is meant to “prevent, stop and punish” threats to national security by outlawing acts and activities of secession, subversion, terrorism, and foreign interference in the city’s affairs.
The Hong Kong government will be required to set up new institutions to safeguard national security and also allow mainland agencies to operate in the city “when needed”.
Fractures in the old globalised order
The old globalised order is fracturing, as a result of geopolitical tensions and disruptions caused by the COVID-19 pandemic. According to the Financial Times, the United Kingdom will soon leave the European Union.
A volatile United States president is snubbing allies and going it alone in the Middle East.
Seeking asset safe havens
According to Reuters, rich Chinese are expected to park fewer funds in Hong Kong on worries that Beijing’s proposed national security law for the city could allow mainland authorities to track and seize their wealth, bankers and other industry sources said.
More than half of Hong Kong’s estimated private wealth of over $1 trillion is from mainland individuals who have parked money there. The city has benefited from its proximity to China and separate legal system, as well as its dollar-pegged currency, but there are now worries about it losing its edge as a global financial centre due to capital and talent flight.
Interviews with half a dozen bankers and headhunters have revealed that some Chinese clients are looking for other hubs as their main offshore wealth base with Singapore, Switzerland and London high on the list.
Rise in migration enquiries
A South China Morning Post report stated that property and migration consultants are seeing a rise in inquiries about Singapore as turmoil grips Hong Kong. Interested Hongkongers are attending webinars amid the coronavirus pandemic to learn more about living, working and investing in the city state.
Those asking about Singapore tended to be “high net worth individuals” who could afford to invest at least S$3 million (US$2.1 million). The city state appealed due to its sound legal system and simple tax system.
In conclusion, legal and political stability play an important role in the preservation of wealth within a territory. The lack of stability can motivate capital and talent flight.