Some people in Hong Kong, including tycoons, are moving money and assets offshore as concern grows over China’s attempts to extend its control over the city, according to a Hong Kong-based hedge fund manager.
Edward Chin, who left Toronto for Hong Kong in 2000, says people have been exploring ways of getting their money out of the Chinese territory amid protests over a proposed extradition bill.
He is also the co-founder of 2047 HK Finance Monitor, a pro-democracy group for people in the financial industry. 2047 refers to the year China will take full control of Hong Kong under the handover agreement with the United Kingdom.
“You don’t have to be [Hong Kong billionaire] Li Ka Shing to set up an offshore account,” Chin told Day 6. “A normal person can do it, too.”
He says people are also sending money to family members around the world, while some are opening bank accounts in other countries. He’s talking with people running businesses in Hong Kong that are exploring what options they have.
“From what they said, it would be foolish not to open an offshore bank account,” he said.
Last month, Reuters reported that some wealthy tycoons were moving vast sums of money out of Hong Kong. That report cited one individual moving more than $100 million of his own fortune to Singapore, according to an adviser involved in the transactions.
Chin says it’s not just local businesses that are concerned. He says the original bill would give Chinese authorities the power to extradite and freeze the assets of anyone passing through Hong Kong.
“People are concerned that landing [in] Hong Kong equals landing [in] China,” he said. That could lead to international businesses investing less in Hong Kong. And that would weaken the city’s unique and highly profitable position as a financial centre and gateway to China.
Hundreds of thousands of people have taken to the streets over a bill that would have allowed China to extradite people from Hong Kong to face trial under the less-than-transparent mainland court system. More marches are reportedly planned for this weekend.
The bill would also allow China to freeze assets in Hong Kong. The extradition bill has been suspended, but demonstrators worry the measures are merely on hold.
“To me, putting it to a pause is like playing a DVD. You could play it again very easily,” Chin said.
“I hope this pause is not like watching like an Aliens movie — suddenly the aliens would pop up again and scare everyone.”
‘It is a must to leave’
Kate, 23, has been involved in previous demonstrations against increased Chinese authority. But she says this time feels differently. CBC has agreed to only use her first name because she’s worried about her safety for speaking out against the proposal.
“I feel that it is no longer my choice of staying or leaving. It is a must to leave,” she told CBC Radio’s Day 6.
She says her family is exploring options to move their personal wealth.
“Personally, with my family, we’re planning to set up an account in probably in London or Paris to move out some of the money.”
Lee, another protester in his early 20s, says his family has been talking about getting their assets out of Hong Kong.
“For me, because I’m just a student, I don’t have a lot of money,” he told CBC Radio. “But I have asked my family to consider moving the money to, if not a foreign bank, at least a foreign capital.”
HK’s reputation as financial hub on the line
For decades, Hong Kong was at once an open and free society, protected by the British legal system, that also had direct access to China’s emerging economy. Analysts say the protests and uproar over the bill show that role is changing.
“Hong Kong’s role as a ‘two-way valve’ into China is under threat,” said Karl Schamotta, chief market strategist at Cambridge Global Payments.
He says most of the direct investment into the Chinese mainland comes through Hong Kong. But the city can only play that role if it maintains the confidence of the global financial community.
‘”If confidence falls, the flow of money into large Chinese companies could drop significantly,” Schamotta said, “at a time when China is already facing severe economic challenges.”
So, even the suggestion of people trying to get their money out of Hong Kong hurts the city’s reputation as financial hub.
Schamotta says that illustrates why China has allowed the suspension of this particular proposal by the Hong Kong government. But at the same time, it shows why China will work toward a harmonization between the two systems through a number of smaller, more subtle, policy steps.
“This ‘death by a thousand cuts’ approach will ultimately bring Hong Kong under Beijing’s heel, whether the extradition bill is passed or not,” he said.