Hong Kong sees status as a financial center falter 25 years on
By Victor Escribano
Shanghai, China, Jun 29 (EFE).- Hong Kong celebrates 25 years since its return to China after the British colonial era with the doubt of whether it will maintain its status as an international financial center in the face of Beijing’s greater influence in local affairs.
One of the great attractions of Hong Kong for international investors was its status as a gateway to China: since 1997 its sovereignty returned to Beijing, but under the paradigm known as “one country, two systems.” This allowed the former colony to maintain its capitalist model for 50 years, with autonomy in areas such as border control or monetary policy.
Alicia García Herrero, Natixis Asia-Pacific chief economist, based in Hong Kong, told EFE that the years prior to the retrocession were marked by “uncertainty about the future” and that “they were not easy.”
Despite the high emigration rates of Hong Kongers to countries such as the United Kingdom or Canada in the 1990s due to fears of returning to China – especially after the Tiananmen massacre of 1989 – the two decades after the end of the colonial era were “absolutely promising and successful,” the expert said.
In those years, the economist, an “important ‘offshore’ financial center” was developed and other sectors such as real estate – the square meter in Hong Kong is one of the most expensive in the world – or that of luxury experienced its boom, pushed partly due to Chinese immigration and the attraction of talent for the financial industry.
However, Hong Kong’s GDP began to show signs of a slowdown as early as 2018, the year in which then-United States President Donald Trump declared a trade war against China, the effects of which were also felt in the former British colony.
However, the decline in accounts began after the pro-democracy protest movement that shook the city in the second half of 2019, with a crash in the second half that caused the local economy to contract by 1.7 percent.
For example, that year tourist arrivals – the majority from mainland China – fell by 14.2 percent year-on-year, clearly due to the protests, which on several occasions led to clashes between riot police and the most aggressive sectors of the protesters.
And, although the conflict was finally diluted with the start of the covid pandemic – in Hong Kong the trauma of the SARS outbreak, a similar disease, in 2002 and 2003 – still lasted – it also caused an even greater collapse of GDP in 2020: 6.5 percent.
In 2021, as in many world economies, there was a “statistical rebound effect,” in the words of Garcia Herrero, with a significant recovery (+6.3 percent) thanks to the reduced comparative base of the previous year. After the arrival of the contagious omicron variant, the economy suffered again, falling by 4 percent year-on-year in the first quarter of this year. EFE