Hong Kong bankers worry that new laws could lead to capital flight

Hong Kong competes fiercely with Singapore to be considered Asia’s premier financial center. (AFP)
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Updated 22 May 2020

Hong Kong bankers worry that new laws could lead to capital flight

  • Globally, Hong Kong ranks second in wealth per adult after Switzerland in mid-2019

HONG KONG: China’s plan to impose national security legislation in Hong Kong is expected to lead to the flight of capital and talent from the Asian financial hub, bankers and headhunters said on Friday.
The proposed legislation, which prompted concerns over freedoms in the semi-autonomous city, comes after large-scale and often violent pro-democracy demonstrations last year, which had already pushed some wealthy individuals to scout for investment options elsewhere.
“In some cases where clients had a bit of inertia and hoped things that happened last year will just go away, they will now step on the gas to reduce their wealth concentration risk here,” said a senior banker at a European private bank.
“In many cases last year, we saw our clients putting in place plan B and didn’t quite move the assets out of Hong Kong. I have already received some enquiries to activate that plan now,” said the banker, whose firm manages more than $200 billion in assets.
The banker declined to be identified as he is not authorized to speak to the media.
Globally, Hong Kong ranked second in wealth per adult after Switzerland in mid-2019, and the city ranked 10th in terms of the number of ultra-high net worth individuals or those with more than $50 million in assets, according to a Credit Suisse report.
Hong Kong competes fiercely with Singapore to be considered Asia’s premier financial center. Global private banks including Credit Suisse and UBS, as well as Asian wealth managers have their regional operations in the two hubs.
“We have had instances where clients were considering establishing a presence in Hong Kong ... but due to the pro-democracy protests in 2019, they decided to set up a presence in Singapore instead,” said Rahul Sen, London-based partner for wealth management headhunting and consulting firm Boyden.
“Existing banks in Hong Kong will also look at increasing their Greater China coverage from Singapore if the protests last longer or a feasible solution is not sought.”
The American Chamber of Commerce (AmCham) in Hong Kong said the enactment of the law could “jeopardize future prospects” for international business, particularly if details are not spelled out.
“No one wins if the foundation for Hong Kong’s role as a prime international business and financial center is eroded,” Robert Grieves, chairman of AmCham in Hong Kong said in a statement.
Hong Kong’s vaunted rule of law is widely seen as a major factor for global financial institutions that make the former British colony their regional home and use it as their main trade and other dispute-resolution center.
Pro-democracy activists and politicians in Hong Kong have for years opposed the idea of having to adhere to Chinese national security laws, arguing they could erode the city’s high degree of autonomy, guaranteed under the “one country, two systems” handover agreement reached in 1997.
The proposed legislation would safeguard the central government’s “overall jurisdiction” as well as Hong Kong’s “high autonomy,” according to a draft seen by Reuters.
The head of the city’s legislature rejected fears that “one country, two systems” was dead.
Some bankers said that Hong Kong would now also struggle to attract talent, as individuals and financial institutions focus on the implications of Beijing’s latest move.
“We’ve seen fewer people willing to move (here), you’d think that could be the case more now,” said a senior banker at a leading European investment bank in Hong Kong.
With Hong Kong activists calling for people to rise up against Beijing’s plan, there are also concerns about the economic impact of more protests in a city already in recession.
“The Hong Kong economy will definitely continue to be under a lot of pressure,” said Anthony Chan, chief Asia investment strategist at Union Bancaire Privée, referring to the possible resumption of protests.

EU pledges to stay green in virus recovery

Updated 29 May 2020

EU pledges to stay green in virus recovery

  • To help economies from the 27-nation bloc bounce back as quick as possible

BRUSSELS: The European Commission pledged on Thursday to stay away from fossil-fueled projects in its coronavirus recovery strategy, and to stick to its target of making Europe the first climate neutral continent by the middle of the century, but environmental groups said they were unimpressed.

To weather the deep recession triggered by the pandemic, Commission President Ursula von der Leyen has proposed a €1.85 trillion ($2 trillion) package consisting of a revised long-term budget and a recovery fund, with 25 percent of the funding set aside for climate action.

To help economies from the 27-nation bloc bounce back as quick as possible, the EU’s executive arm wants to increase a €7.5-billion ($8.25 billion) fund presented earlier this year that was part of an investment plan aiming at making the continent more environmentally friendly.

Under the commission’s new plan, which requires the approval of member states, the mechanism will be expanded to €40 billion ($44 billion) and is expected to generate another €150 billion in public and private investment. The money is designed to help coal-dependent countries weather the costs of moving away from fossil fuels.

Environmental group WWF acknowledged the commission’s efforts but expressed fears the money could go to “harmful activities such as fossil fuels or building new airports and motorways.”

“It can’t be used to move from coal to coal,” Frans Timmermans, the commission executive vice president in charge the European Green Deal, responded on Thursday. “It is unthinkable that support will be given to go from coal to coal. That is how we are going to approach the issue. That’s the only way you can ensure you actually do not harm.”

Timmermans conceded, however, that projects involving fossil fuels could sometimes be necessary, especially the use of natural gas to help move away from coal.

The commission also wants to dedicate an extra €15 billion ($16.5 billion) to an agricultural fund supporting rural areas in their transition toward a greener model.

Von der Leyen, who took office last year, has made the fight against climate change the priority of her term. Timmermans insisted that her goal to make Europe the world’s first carbon-neutral continent by 2050 remained unchanged, confirming that upgraded targets for the 2030 horizon would be presented by September.

Reacting to the executive arm’s recovery plans, Greenpeace lashed out at a project it described as “contradictory at best and damaging at worst,” accusing the commission of sticking to a growth-driven mentality detrimental to the environment.

“The plan includes several eye-catching green `options,’ including home renovation schemes, taxes on single-use plastic waste and the revenues of digital giants like Google and Facebook. But it does not solve the problem of existing support for gas, oil, coal, and industrial farming — some of the main drivers of a mounting climate and environmental emergency,” Greenpeace said.

“The plan also fails to set strict social or green conditions on access to funding for polluters like airlines or carmakers.”

Timmermans said the EU would keep investing in the development of emission-free public transportation, and promoting clean private transport through the EU budget.