China’s plans to impose national security legislation in Hong Kong are expected to lead to the flight of capital and talent from the Asian financial hub, bankers and headhunters said.
The proposed legislation, which prompted concerns over freedoms in the territory, comes after large-scale pro-democracy demonstrations last year, which had already pushed some wealthy individuals to scout for investment options elsewhere.
“In some cases where clients had a bit of inertia and hoped things that happened last year will just go away, they will now step on the gas to reduce their wealth concentration risk here,” a senior banker at a European private bank said.
“In many cases last year, we saw our clients putting in place plan B and didn’t quite move the assets out of Hong Kong. I have already received some inquiries to activate that plan now,” said the banker, whose firm manages more than US$200 billion in assets.
The banker declined to be named as he was not authorized to speak to the media.
Hong Kong’s main stock market index yesterday fell more than 5 percent.
Globally, Hong Kong ranked second in wealth per adult after Switzerland in the middle of last year and the territory ranked 10th in terms of the number of ultra-high-net worth individuals or those with more than US$50 million in assets, according to a Credit Suisse report.
Hong Kong competes fiercely with Singapore to be considered Asia’s premier financial center. Global private banks including Credit Suisse and UBS, as well as Asian wealth managers, have their regional operations in the two hubs.
“We have had instances where clients were considering establishing a presence in Hong Kong ... but due to the pro-democracy protests in 2019, they decided to set up a presence in Singapore instead,” said Rahul Sen, London-based partner for wealth management headhunting and consulting firm Boyden.
“Existing banks in Hong Kong will also look at increasing their Greater China coverage from Singapore if the protests last longer or a feasible solution is not sought,” Sen said.
Pro-democracy activists and politicians in Hong Kong have for years opposed the idea of having to adhere to Chinese national security laws, arguing they could erode the city’s high degree of autonomy, guaranteed under the “one country, two systems” handover agreement reached in 1997.
The proposed legislation would safeguard the central Chinese government’s “overall jurisdiction” as well as Hong Kong’s “high autonomy,” a draft said.
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