The Jakarta Post
Senior officials of the Hong Kong Special Administrative Region and China used the 4th Belt-and- Road Initiative (BRI) summit held here on Sept. 11-12 as an opportunity to reinvigorate international confidence in the city’s status and role as a global financial, logistics and business hub and as the gateway to the world’s second largest economy.
Hong Kong’s reputation has taken a beating from more than 14 weekends of anti-government demonstrations, which were ignited by an extradition bill viewed as Beijing’s interference in the territory’s autonomy under its “one country, two systems” principle. The bill was finally withdrawn early this month.
The leaders in Hong Kong and Beijing both seemed to increasingly realize the deep interdependence between the semi-autonomous territory and mainland China, as Hong Kong Chief Executive Carrie Lam reiterated during the summit and which was confirmed by data from the Hong Kong Trade Development Council (HKTDC).
“By steadfastly upholding the ‘One Country, Two Systems’ principle and the Basic Law, we can find our way back to reasoned discussion, to the social stability essential to the long-term stability and prosperity and well-being of us all,” Lam told the over 5,000 summit participants from nearly 70 countries.
Meanwhile, vice chairman Ning Jizhe of China’s National Development and Reform Commission (NDRC) said that more than a quarter of mainland China’s imports and exports were transported through Hong Kong.
Xie Feng, the Chinese Foreign Ministry’s commissioner in Hong Kong, and Chinese commerce vice minister Wang Bingnan assured business leaders from Asia, the Middle East and Europe that Beijing fully supported the “one country, two systems” principle.
The Hong Kong Basic Law guarantees the “one country, two systems” of governance principle whereby the territory is guaranteed that its democratic and capitalist system “shall remain unchanged for 50 years” from July 1, 1997. Under the law, the city’s residents have freedoms that Chinese mainlanders do not.
Hong Kong Financial Secretary Paul Chan also assured business leaders and government delegations that the recent turmoil had not affected Hong Kong's core competitiveness, including the rule of law, free movement of capital, goods, information and people, freedom of expression, its sound regulatory system and independent judiciary.
But several business giants, including Alibaba, have postponed planned initial public offerings through the Hong Kong stock exchange. Hotels and retailers have cried out over steep falls in turnover. The tourism industry, which accounts for almost 5 percent of Hong Kong’s gross domestic product, is hurting.
The South China Morning Post cited the Hong Kong Monetary Authority that the territory’s foreign exchange reserves fell from a record high of US$448.4 billion in July to $432.8 billion in August. But the newspaper also quoted analysts who said that the cause of capital flight out of Hong Kong could be attributed to not only the prolonged protests, but also China’s cooling economy and its trade war with the United States.
HKTDC Chairman Peter Lam reiterated that Hong Kong’s strong rule of law, good governance practices, credible regulatory system, first-class infrastructure, full integration into the global supply chain and strategic location in Asia had made the territory one of the region’s biggest financial, trade and logistics hubs.
These factors, he added, also make Hong Kong a very important link and conduit in the development and success of BRI infrastructure development. Hong Kong’s trove of professional services talents enables the territory to act as an integrator of infrastructure and real estate projects in the region.
The BRI scheme was launched in late 2013 by Chinese President Xi Jinping to build a network of overland road and rail routes, oil and natural gas pipelines and other infrastructure that will stretch from central China through Central Asia to Europe and Africa.
HKTDC data show that over 60 percent of China’s foreign direct investment was channeled through Hong Kong and that 70 percent of the capital raised on the Hong Kong stock exchange – most recently estimated at a cumulative total of $2 trillion – was for Chinese companies. Moreover, more than 1,500 multinational companies have set up their regional headquarters in Hong Kong.
In turn, China supplies more than 25 percent of Hong Kong’s electricity, most of its drinking water and more than 75 percent of its tourists, who totaled 65.1 million last year.
Most business leaders from Europe, the Middle East and Asia were optimistic that even though the financial centers in Shenzen and Shanghai had grown, Beijing would continue to need Hong Kong as the most international Chinese territory to support China’s policies on global integration and opening up to foreign investment.
Business panelists Mochtar Riyadi, founder and chairman of Indonesia’s Lippo Group, Dhanin Chearavanont, chairman of Thai Charoen Pokphand, and Victor Chu, chairman of the First Eastern Investment Group, agreed that the social unrest in Hong Kong for the last three months would not prevent the city from playing a significant role in China’s development and its plans to grow global trade links.
However, in the face of the prolonged political turmoil and waves of street protests, there remained a risk that Hong Kong could lose the fundamental advantages that had made it a highly dynamic financial and logistics hub in Asia.
“No other place can replicate Hong Kong. But its role as a super-connector could be in jeopardy if the social unrest continues,” cautioned Richard Shirreff, cofounder and managing partner of Strategia Worldwide, a UK risk management and consulting company.
Several other analysts privately raised concerns that a prolonged turmoil might provoke Beijing into forceful intervention to quell the protests and to pressure Hong Kong businesses to fully toe its stance, like Cathay Pacific Airways experienced amid the heightened demonstrations last month.
The dilemma, though, is that Beijing’s heavy-handed measures in Hong Kong could affect BRI projects, with Chinese companies facing suspicion from the projects’ host countries. If the demonstrations in Hong Kong continue to persist, Chinese overseas investments will suffer. The perceived influence of Beijing on the territory’s businesses in the current anti-government climate may also stymie Chinese companies’ overseas interests.
The writer is senior editor of The Jakarta Post, who attended the Belt and Road Initiative summit on the invitation of the Hong Kong Trade Development Council.