Hong Kong and China in drive to restore city’s reputation

Hong Kong and Chinese officials on Wednesday touted the city’s connection to the world’s second-largest economy as they looked to restore its reputation as a global financial hub after years of Covid-19 crackdowns.

Hong Kong’s status as a premier financial centre has been clouded by strict antivirus restrictions, antigovernment protests in 2019 and China’s imposition of a sweeping national security law on the city a year later.

An international business conference on Wednesday was the biggest corporate event in Hong Kong since it shut its borders in 2020 to combat the pandemic. Those measures have badly hit the economy and have resulted in an exodus of talent.

“Hong Kong remains the only place in the world where the global advantage and the China advantage come together in a single city,” Hong Kong CEO Lee told about 250 participants in the Global Financial Leaders’ Investment Summit, organised by the city’s de facto central bank, the Hong Kong Monetary Authority (HKMA).

“This unique convergence makes Hong Kong the irreplaceable connection between the mainland and the rest of the world.”

Some of the world’s biggest banking bosses, including Goldman Sachs’s David Solomon and Morgan Stanley’s James Gorman, were in Hong Kong for the first time in almost three years for the summit.

For foreign financial firms operating in China and Hong Kong, the summit comes as they navigate mounting US-China tension, which has also caught the former British colony in the crosshairs.

Two US legislators last week urged top US bankers to cancel their attendance, saying participation would contribute to human rights abuses by China’s government. Beijing rejects accusations of rights abuses.

Firm foundation

In interviews recorded for the summit, China’s top regulatory officials pledged their support to Hong Kong and said reforms and liberalisation will continue in China to attract foreign investors.

China Securities Regulatory Commission vice-chair Fang Xinghai said its opening-up policy has a “firm foundation”, while criticising international media coverage, saying that many reports “really don’t understand China very well”.

UBS Group chair Colm Kelleher agreed. “While we are all very pro-China, and like vice-chair Fang said we are not reading the American press, we actually buy the story, but it is a bit [of a] waiting for zero-Covid-19 to open up in China and see what will happen,” he said.

China is fighting its worst Covid-19 outbreak since the summer as cases again erupt across the country, triggering concern that Beijing’s heavy-handed response to outbreaks is exacting a worsening toll on the world’s second-largest economy.

Hong Kong chief Lee said the city will continue working towards lifting Covid-19 restrictions.

The city’s economy shrank faster in the third quarter, down 4.5% from the previous third quarter, the third quarterly downturn running, thanks to  geopolitical tension, China’s slowdown and lingering pandemic worries. 

Lee said that Hong Kong is working to attract top talent to offset a major brain drain in the past three years due to pandemic rules.

Hong Kong eased Covid-19 curbs in recent weeks, scrapping a hotel quarantine requirement for all visitors in September.

Rapidly expanding

The summit saw business leaders gather in a hotel ballroom without face masks, which are still mandatory outdoors.

“It is great for Hong Kong to open up, and we are glad to be back,” Anand Selvakesari, CEO of personal banking and wealth management of Citigroup said on the sidelines of the conference.

Global financial institutions have long flocked to Hong Kong as a springboard into China, looking to tap into its rapidly expanding economy and its trillions of dollars worth of financial markets.

The summit takes place against a backdrop of heightened market volatility. Top bankers there said central banks will get inflation under control, but there will be turbulence in the near term due to monetary tightening and geopolitical risk.

Inflation and a quick tightening of monetary conditions after more than a decade of relatively accommodative monetary policies make the world more volatile and uncertain, said Goldman Sachs CEO David Solomon.

It “allows exposures where there’s leverage in the system to be amplified very quickly”, he said, pointing to recent market volatility in the UK as an example of how things can go wrong in a liquidity squeeze.

Reuters