Hong Kong's Future in Question, Says Former China Ally

Stephen Roach, a former chairman of Morgan Stanley Asia and once considered a staunch ally of China, has recently expressed his concerns about the future of Hong Kong. In a poignant commentary published in the Financial Times, Roach stated, “Hong Kong is now over,” attributing the city’s decline to a mix of internal politics, China‘s overarching structural economic issues, and the escalating tensions between the U.S. and China.

The Catalysts of Hong Kong’s Downfall

Reflecting on the years following Hong Kong‘s handover to China in 1997, Roach observed that the Hang Seng index has remained stagnant, showing a mere 5% increase, a stark contrast to the significant growth seen in other major stock markets like the S&P 500 and even mainland China‘s Shanghai Composite.

The introduction of the anti-extradition bill by former Chief Executive Carrie Lam, which sparked widespread democratic protests in 2019, was identified by Roach as a turning point for Hong Kong. The subsequent implementation of the national security law by Beijing in 2020 further eroded the city’s political autonomy, effectively halving the 50-year transition period initially promised.

Consequences of Political and Economic Shifts

The political upheaval led to an economic downturn, fueled by diminishing confidence in Hong Kong‘s business and investment landscape. This was evidenced by the departure of foreign firms, professionals, and local citizens.

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Roach pinpointed three primary factors contributing to Hong Kong‘s decline: the disruptive local political scene, particularly the protests of 2019-2020; China‘s looming economic structural issues, including high debt and an aging population; and the adverse effects of global developments, notably the worsening U.S.-China relations since 2018.

Global Perspectives and Local Reactions

Financial commentator Ngan Po Kong referred to Roach’s commentary as a “shock bomb” on a Radio Free Asia Cantonese talk show, suggesting it could lead others to reassess the political risks associated with conducting business in Hong Kong.

Roach, known for his optimistic views on China‘s economic reforms, represents a significant voice on Wall Street, and his change in stance could influence perceptions within investment banks and financial institutions.

Business Operations in a Changing Landscape

In a related development highlighting the challenges faced by multinational companies in Hong Kong, the American law firm Latham & Watkins LLP is reportedly restricting its Hong Kong lawyers’ access to its international database.

This move, as reported by the Financial Times, reflects the growing difficulties in navigating the complex legal and political environment post-Beijing‘s imposition of anti-espionage and data laws.

Hong Kong’s Ongoing Legislative Changes

Amid these developments, Hong Kong‘s Chief Executive John Lee has pledged to push forward with the legislation of Article 23 of the Basic Law, aiming to prohibit acts against Beijing‘s interests. The public consultation for this draft law is set to conclude soon, marking another significant shift in Hong Kong’s political landscape.

As the city once celebrated as a global financial hub faces these multifaceted challenges, the international community continues to watch closely, pondering the implications of Hong Kong‘s evolving status under Beijing‘s tightening grip.