林保華

Abysmal financial decline of Hong Kong
Taipei Times  2023.12.3
    By Paul Lin 林保華

On Tuesday, Taiwan’s TAIEX stock index peaked at 17,360 points and closed at 17,341 points, surpassing Hong Kong’s Hang Seng Index, which fell to 17,303 points and closed at 17,541 points. A few years ago, the gap between the Taiwanese and Hong Kong stock indices was more than 20,000 points, but this was before the 2019 anti-extradition protests.

Hong Kong is one of the world’s most important financial centers, but many Chinese Internet users joke that it is only a ruin today. When asked by a legislative councilor whether he would communicate with social media platforms in the mainland to request deleting or blocking such posts, Office of the Government of the Hong Kong Special Administrative Region in Beijing Director Rex Chang (鄭偉源) said that the office had been paying attention to the comments and would continue to trace the sources of the remarks, pledging to keep a close eye on it.

Originally, Hong Kong was known for its freedom of speech, but with the implementation of the National Security Law in 2020, online comments from the mainland might be deleted or blocked now. Is censorship worse in Hong Kong than in the mainland?

A financial center is of course more than just a stock market. However, the stock market is a key aspect, and I did not expect that Hong Kong’s stock market would drop so quickly. In 1995, Fortune magazine published a commentary on the “death of Hong Kong,” which caused Hong Kongers much discomfort. I predicted at the time that Hong Kong would “gradually shrink and dry up,” although this would be a somewhat drawn-out process due to the Chinese Communist Party’s “leftist politics, rightist economy” (政左經右) ideology, as well as Western countries’ illusions about China. Surprisingly, since the so-called “people’s leader” Xi Jinping (習近平) came to power, he has turned to “leftist politics, leftist economy” (政左經左), which has led to drastic changes in Hong Kong.

China’s “abnormal nationalism” under Xi’s leadership has caused foreign investors to leave the Chinese market. Moreover, as Hong Kong grows more like China, this would no doubt impact the territory. Not to mention that since the implementation of the National Security Law, Hong Kong has adopted a tough attitude toward foreign investors, leading to the withdrawal of massive foreign capital and talent from the territory. Hong Kong is proud of itself for “snatching talents,” but most of the snatched talents are Chinese professionals. The more talents it snatches, the faster it would be “sinicized.”

Moreover, Hong Kong is under enormous pressure to maintain the “linked exchange rate.” To keep the exchange rate within the range between HK$7.75 and HK$7.85 to US$1, the Hong Kong Monetary Authority has had to frequently enter the market to stabilize the exchange rate — 49 times in just one year — costing HK$293.6 billion (US$37.6 billion), which was been a huge drain on its foreign currency reserves. Rumor had it that China had once “borrowed” the territory’s budget or foreign reserves to solve its financial difficulties. In 1998, then-Hong Kong financial secretary Donald Tsang (曾蔭權) mobilized foreign reserves to fight against the speculators and won. Does Hong Kong still have the ability to fight another financial war?

The biggest beneficiary of Hong Kong’s downgrade would be Singapore. Despite Taiwan’s economic growth, especially in information and communications technology, the nation should work harder to develop its financial sector.

Paul Lin is a political commentator.

Translated by Eddy Chang