One of the odder tics in discussions of Hong Kong’s 10-week political trauma is the notion that the protests rocking the territory are bad for business. Something nearer the opposite is true: These protests are one last chance to preserve the city’s economic reputation, at enormous cost—and risk—to Hong Kongers, who understand exactly what’s at stake.
There is confusion about what this mass popular mobilization means for the economy because the protests are disruptive by design. This week’s airport shutdown called attention to a longer-running decline in travel to Hong Kong in recent weeks. Meetings have been canceled, conferences postponed.
How can this be good for a tiny territory whose main business is doing other’s people’s business—serving as a hub and conduit for trade and finance across a region? And this isn’t the only blow to Hong Kong’s reputation. No firm relishes putting its employees in danger simply by asking them to commute to and from work; no one enjoys sending frequent security updates to staff. Growing numbers of companies have to do both in their Hong Kong offices.
This is leading to murmurs about whether Hong Kong remains a viable place to do business. Some leaders in the expat business community warn of “significant” damage to the territory’s reputation from the upheaval. Another common theme is that when it comes to business attitudes, the protests are as bad as the Chinese intrusions into Hong Kong’s legal system that triggered them.
But let’s be clear about the real dangers to Hong Kong’s economy, because Hong Kongers sure are. It isn’t anything so passing as a protest.
What’s bad for business in Hong Kong is a form of regulatory capture born not so much of outright corruption as of political inadequacy. One of the territory’s most important roles is to serve as a porthole between the mainland Chinese economy and global capital markets. Yet Hong Kong’s regulators face notorious difficulties imposing the rule of their law on mainland companies listed on the territory’s stock exchange. The danger to Hong Kong’s reputation for consistent, business-friendly rules has grown more acute as Chinese President Xi Jinping has tightened his political grip on the state-owned companies listed in Hong Kong.
What’s bad for Hong Kong’s reputation is the perception that it’s a preferred parking place for the wealth of Chinese apparatchiks who have no obvious reason to be wealthy. That includes real estate in the territory worth tens of millions of dollars, allegedly owned at one time or another by relatives or associates of senior Chinese officials, and lucrative business deals between Hong Kong companies and relatives of other senior officials from the mainland.
What’s bad for Hong Kong’s economy is the extent to which Beijing’s preferred method of control to date has been to vest political authority in a relatively small set of professional guilds. Half the members of the territory’s legislature are appointed by “functional constituencies,” comprised of special-interest groups or trade associations for professions such as law, architecture and insurance—a method devised to thwart pro-democracy voters. This has fed a creeping corporatism at the expense of Hong Kong’s reputation for economic freedom.
Despite these lapses, Hong Kong has more than earned its place at the top of league tables of the world’s freest economies. That freedom is sometimes controversial among Hong Kongers, some of whom might prefer a more interventionist social-welfare state funded by higher taxes or tighter regulations of this or that domestic concern. Hong Kongers, however, also understand the importance of relative freedom and rule of law as counterbalances to the indignities Beijing inflicts on them.
This is why so many Hong Kongers see the danger posed by the extradition bill that started this fracas. That proposal, intended to make it easier to ship individuals from Hong Kong into the maw of China’s opaque Communist Party “justice system,” would gut the rule of law that underpins the territory’s prosperity. It would accelerate the barely tolerable, crawling mainland-ization of the territory’s economy into a gallop.
Who could reasonably think acquiescence to this would protect Hong Kong’s hard-won reputation as a business hub?
Hong Kong’s protests could yet turn tragic if Mr. Xi sends in China’s tanks despite all the warnings that doing so would hurt both his own global standing and China’s economy. But even if they don’t ultimately succeed, Hong Kongers have reminded the world of two important facts.
One is that freedom still tugs at the hearts of millions of ordinary people. The other is that despite the convictions of bien-pensant business leaders, China-infatuated authors and populist-fearing politicians, sometimes the crowd really does know better what’s in its own economic interest.
Source: The Wall Street Journal August 15, 2019 | By Joseph C. Sternberg