September, 2020
In recent weeks, because of the protests in Hong Kong and the words and actions of the US and Chinese governments, many have asked whether the territory still has a future.
Hong Kong’s importance to China has declined as the Chinese economy has grown. Shanghai once accounted for over 80% of China’s GDP in the fifties and sixties but only around 4% today. Yet, Shanghai remains a vibrant and prosperous city.
Hong Kong is a resilient place and has reinvented itself several times since the end of the Second World War, changing from a manufacturing center into logistics and trading, then into finance and professional services. Hong Kong’s open economy, low taxes, and minimal government interference undoubtedly help this process.
Hong Kong is also open to human capital. There have been significant changes over time, with an exodus of British residents after the handover in 1997 but influxes of other nationalities. For example, the number of French citizens in Hong Kong has increased two and a half times over the past ten years to around 25,000.
Hong Kong has faced and overcome challenges before and will in the future. Most recently, the territory has had tremendous success in dealing with the Covid virus, recording only 1,100 cases and four deaths despite high population density and a land border with China.
Sanctions postulated by the Trump administration will likely hurt the USA more than Hong Kong, as there are major American interests in the territory. The growing anti-Chinese sentiment internationally is a concern but may also be an opportunity for Hong Kong to act as an intermediary.
The Chinese government has been upset by the protest movement in Hong Kong and has mandated the introduction of a national security law. This was intended to be part of Hong Kong’s constitution—the Basic Law—enacted in 1997 but never implemented. It must operate within the context of the territory’s legal and judicial system, where there are substantial checks and balances. The reaction to this measure has been overblown. The protest movement is in noticeable decline—the majority of Hong Kongers are apolitical and fed up with minority activists.
Change is always present, but it brings opportunities as well as difficulties.
