China’s Crackdown Killing HK Economy: Matthew Lau

At the M+ art museum in Hong Kong, hundreds of business executives and diplomats recently convened to discuss strategies for rehabilitating the city's image as a financial hub.

Legal professionals have expressed concerns about judicial independence and the rule of law, while executives noted that Hong Kong's perception abroad has become notably negative.

As reported by Reuters, a diplomat pointed out that Beijing's security law and Hong Kong's sizable bounties of one million Hong Kong dollars (approximately C$170,000) on several pro-democracy activists have had a detrimental impact on Hong Kong's ability to attract talent.

In an opinion piece for the Financial Times, Matthew Lau argued that Beijing's crackdown on Hong Kong is wreaking havoc on its economy.

Legal professionals have expressed concerns about judicial independence and the rule of law, while executives noted that Hong Kong's perception abroad has become notably negative.

The statistics underscore this shift. According to KPMG China's review of initial public offerings (IPOs) in the third quarter of 2023, global IPO activity has declined this year, but Hong Kong's IPO market has dwindled to only about one-tenth of what it was a few years ago.

Comparing the first three quarters of different years, Hong Kong IPOs were 215.9 billion HKD in 2020 and 288.5 billion in 2021, but they plummeted to 69.7 billion in 2022 and a mere 24.6 billion this year.

While a weakened Chinese economy may be a primary concern, Beijing's crackdown and the exodus of professionals and others from Hong Kong are certainly not helping.

A separate report by KPMG China, co-authored with an industry group in Hong Kong and published last month, attempted to convey optimism about the city's prospects in private wealth management.

However, once again, the data reveals the story. Assets under management for Hong Kong's private banking and private wealth management businesses reached their peak at 11.3 trillion HKD in 2020 but subsequently dropped to 10.6 trillion in 2021 and further to 9.0 trillion in 2022.

This decline can be attributed to negative market returns, and net fund inflows also saw a significant decrease, falling from 638 billion in 2021 to 121 billion HKD in 2022, compared to 656 billion in 2020.

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