The last six months of social and political unrest have taken a toll on Hong Kong’s economy, with both individuals and businesses who have wealth managed there either moving or considering moving assets to alternative jurisdictions. So what does this mean for the region’s position as a financial centre? James Turner, director at company formation specialist Turner Little, writes
Hong Kong has traditionally been viewed as a tax haven and the financial hub of Asia – if not the whole world. The island is well known for its zero taxation on foreign residents and corporations; however, in the midst of general unrest in Hong Kong, the question on everyone’s minds at the moment is: does China really need Hong Kong as a financial centre?
As Hong Kong enters its first recession in a decade, with the globalisation of finance and rising Chinese control of Hong Kong’s banking industry, Hong Kong’s role is likely to change.
Hong Kong has always been seen as having the world’s freest economy, with its simple and low-tax system, trade freedom, monetary freedom and government integrity.
Hong Kong’s status has always been protected by its ease of doing business, its unique role between China and the rest of the world, and the rule of law. But if it loses its status as one of Asia’s top financial centres, it could be disastrous.
There is no lack of competition for financial centres, and investors can easily turn to other cities such as Singapore, Tokyo and Shanghai.
Unsurprisingly, safety fears are also prompting the ultra-wealthy to consider other jurisdictions when it comes to offshore banking and asset protection.
While there is no definitive answer, as of yet, on what will happen to Hong Kong as a financial centre, its financial system is still holding up against weeks of unprecedented public unrest.