Since the protests in Hong Kong over an extradition bill and Beijing’s imposition of sweeping national security legislation, there has been speculation about which city can replace it as a financial hub in the region or globally.
Hong Kong ranked sixth in the latest Global Financial Centres Index (GFCI) for competitiveness as a financial center, falling three notches from the previous survey, indicating its clouded future.
The index, which is compiled by the London-based consultancy Z/Yen Group and the Shenzhen-based think tank the China Development Institute, is released twice per year to chart the status of the world’s leading financial centers in terms of business environment, human capital, infrastructure, financial sector development and reputation.
The 27th edition was released in March and provided evaluations of future competitiveness and rankings for 108 major financial centers, with New York, London and Tokyo remaining the world’s top three, with complete freedom of capital movement and sound financial infrastructure, followed by Shanghai, Singapore and Hong Kong.
However, it seems that the social unrest and political confrontations over the past two years have reduced the stability and attractiveness of Hong Kong as a financial hub.
Taipei’s ranking fell from 34th in September last year to 75th in the latest poll, with the city’s evaluations for financial systems and human capital relatively unsatisfactory compared with other centers.
Taiwan’s financial policies are fairly conservative, as the nation aims to safeguard its currency’s exchange rate stability and has more regulations on capital flow. In addition, the mindset of Taiwan’s financial authorities is mainly to prevent fraud and curb money laundering, resulting in insufficient financial innovation. In addition, the brain drain from the nation has increased so much that it has become a national security risk.
As a result, Taipei’s GFCI ranking has slid from 21st in September 2016, to 26th and 27th in 2017, 30th and 32nd in 2018, and 34th in both of last year’s surveys. While other centers in the region have advanced in the rankings, Taipei has continued to slide and is now not only well behind the three other Asian Tigers — Hong Kong, Singapore and South Korea — but also China’s Shanghai, Beijing, Shenzhen, Guangzhou and Chengdu, as well as Kuala Lumpur and Bangkok.
Taipei’s poor showing has poured cold water on any discussion of replacing Hong Kong as Asia’s financial center, but that does not mean the nation has no ambition to find a niche in the fast-changing global finance landscape and become a hub with its own characteristics.
Taipei’s chances of rising again in the rankings are not gone, but it needs to consider how Taiwan envisions itself and how it can improve its financial infrastructure, talent cultivation and compliance with international laws. How can Taiwan leverage its democracy, healthcare, culture and social structure when there is a potential exodus of financial professionals from Hong Kong?
However, becoming a niche financial center is not easy. Over the past two or three decades, the government has on numerous occasions proposed plans to make Taiwan an “Asia-Pacific financial center,” an “Asia-Pacific fundraising and asset management center” or a “yuan-related wealth management center.”
Since last year, the Financial Supervisory Commission has been working on deregulating offshore banking units and allowing more new products in financial institutions’ wealth management portfolios.
However, the biggest difficulty lies in the world’s perception of Taiwan’s business environment — whether it is stable or risky. Influencing the international perception of the nation and its financial status is neither simple, nor can it be achieved through slogans.
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