CCP’s Transformation of Hong Kong in Its Own Image Is Becoming More Apparent

Commentary

Beijing is transforming Hong Kong into a more communist China-like entity with each passing day. While this may please Chinese Communist Party (CCP) leader Xi Jinping in some ways, the expulsion of Americans and other foreigners is reducing Hong Kong’s global significance. This shift goes against the CCP’s goal of achieving financial, economic, and diplomatic dominance on the world stage.

Currently, Hong Kong remains a major global financial center, ranking in the top three alongside London and New York according to the Global Financial Centers Index. However, there are signs indicating a decline in its status. As Beijing exerts more influence over the city, many foreign financial institutions and corporations that once made Hong Kong a truly global hub are departing. In recent years, Chinese companies have outnumbered foreign entities in the city, with the gap widening. The percentage of initial public offerings underwritten by foreign firms has decreased significantly, signaling a shift in the city’s financial landscape.

While Beijing’s control may appear as a triumph, it has led to a decrease in Hong Kong’s global orientation. This trend is gaining momentum, resulting in a decline in investment banking activities and revenues in Asia (excluding Japan). New listings on the Hong Kong stock exchange have dropped to their lowest level in two decades. Major international financial institutions like Goldman Sachs, Morgan Stanley, and UBS have announced layoffs, especially in Hong Kong. Similarly, international law firms are downsizing their presence in the city.

This shift towards a more China-focused approach has contributed to a loss of business and global prominence for Hong Kong. Corporate recruiters now prioritize candidates who are fluent in Mandarin, reflecting the city’s increasing alignment with Chinese interests. Mainland practices are gradually taking over Hong Kong’s investment banking sector, causing foreign players to retreat. This departure from international business norms is evident in the pre-underwriting arrangement of new issues in Hong Kong, a departure from standard practices observed in other global financial hubs.

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This shift in Hong Kong towards a more China-centric model inadvertently undermines Beijing’s aspirations of becoming a global financial powerhouse and potentially replacing the U.S. dollar with the yuan as the premier international currency. Beijing’s substantial investment in the Belt and Road Initiative and collaboration with other BRICS nations demonstrate its grand ambitions in the financial realm. A thriving, globally connected Hong Kong would have been a valuable asset in these endeavors, but the current trajectory set by the CCP is steering the city away from that path.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.