Is Hong Kong's Era Over? Ex-Morgan Stanley Chief and Mainland Chinese Say Yes, Hong Kong Government Disagrees

Stephen Roach, the former President of Morgan Stanley Asia, has reiterated his controversial view that "Hong Kong is over." During a recent visit to Hong Kong, Roach emphasized that the region's deep economic integration with mainland China makes it difficult for Hong Kong to independently recover from economic challenges. This sentiment is echoed by many mainland Chinese commentators, who argue that Hong Kong's past economic success was heavily dependent on its role as China's primary trade gateway. The Hong Kong government, however, disputes these claims, highlighting the city's ongoing strengths and robust economic performance.

Key Takeaways

Stephen Roach maintains that Hong Kong's economy is increasingly influenced by Beijing, limiting its ability to rebound independently.
Many mainland Chinese commentators agree, attributing Hong Kong's historical economic success to its former status as China's main trade hub.
The Hong Kong government disputes these claims, citing strong economic growth figures and substantial financial market activity.
Significant investments and an increase in high-net-worth individuals and family offices underscore Hong Kong's position as a major financial center.

Deep Analysis

Stephen Roach, a prominent figure in finance and academia, has sparked debate with his assertion that "Hong Kong is over." His analysis, grounded in the region's deepening economic integration with mainland China, suggests that Hong Kong's economic policies are increasingly influenced by Beijing, limiting its ability to independently address economic challenges. Roach points to changes in the definition of "One Country, Two Systems" since 2019, arguing that it now has "more Chinese characteristics."

Roach's view is not isolated. Some mainland Chinese commentators argue that Hong Kong's economic boom was historically due to its unique position as China's main trade gateway. They believe that as mainland China has developed direct international trade links, Hong Kong's role has diminished. According to these commentators, Hong Kong's current economic status is heavily reliant on Beijing's policies, primarily to save face. They warn that without preferential policies, Hong Kong's economy could collapse rapidly.

Despite these grim outlooks, the Hong Kong government presents a contrasting narrative. They highlight that the mainland's economy grew by over 5% last year, positioning it as one of the fastest-growing major economies globally. Hong Kong's economy also showed resilience, with a 3.3% growth last year and a projected growth of 2.5% to 3.5% this year. These figures, the government argues, showcase Hong Kong's robust economic health and its ability to maintain significant growth even amid global uncertainties.

The government further emphasizes Hong Kong's strong financial markets. The market capitalization of Hong Kong stocks has increased tenfold since 1997, and initiatives like the Shanghai-Hong Kong Stock Connect have facilitated substantial capital flows between Hong Kong and mainland China. Additionally, the daily trading volume of exchange-traded funds (ETFs) has seen significant growth, and futures trading activity has also surged.

In the realm of asset management, Hong Kong boasts a substantial scale, with assets under management exceeding HKD 30.5 trillion. The presence of over 2,700 family offices further highlights its appeal as a hub for high-net-worth individuals. Moreover, Hong Kong continues to attract top-tier enterprises and talent, with numerous firms establishing or expanding their presence in the city.

Did You Know?

Hong Kong's stock market capitalization is over HKD 33 trillion, which is ten times higher than when the city was handed back to China in 1997.
The daily trading volume of ETFs in Hong Kong exceeded HKD 13 billion in the first quarter of this year, representing a growth of over 70% compared to 2021.
Following the launch of "Cross-boundary Wealth Management Connect 2.0" in late February, the amount of cross-boundary remittances surged nearly eightfold in March, highlighting new opportunities for Hong Kong's financial and professional services.

Roach's commentary, supported by many mainland Chinese viewpoints, and the Hong Kong government's detailed rebuttal paint a complex picture of Hong Kong's economic landscape, reflecting both the challenges and strengths of this global financial hub.

Is Hong Kong's Era Over? Ex-Morgan Stanley Chief and Mainland Chinese Say Yes, Hong Kong Government Disagrees