Abacus | Hong Kong extradition protests: ‘one country, two systems’ is good for business – and for Beijing
- Never mind the naysayers, there are reasons to be optimistic about Hong Kong’s future as the locus of choice for international business in East Asia
- Not least of them is that its special status allows Beijing to do all the trade-related things it cannot or will not do for itself, writes Tom Holland
Demonstrations, tear gas and rubber bullets on the streets. You can see why the business community is in a flap. At first glance the events of the last week in Hong Kong look like a bad day in Belfast circa 1989.
And to cap it all, in the last few weeks Hong Kong’s short-term interest rates have swung from a deep discount to US dollar rates to a small premium; evidence, as some would have it, that money is haemorrhaging out of the city in search of a safe haven elsewhere.
The fears of the business community are understandable. Recent events do undermine Hong Kong’s attractiveness – at the margin. In other words, international corporations which had been proposing to make investments in Hong Kong will now be more inclined to consider other options.
But the city – although it feels increasingly beleaguered – is a long way from seeing the sort of full-scale flight of international capital that some fear. For now at least, Hong Kong’s position is secure.
To deal with immediate concerns first: the convergence of Hong Kong interest rates with US rates is nothing to worry about. It is true that since February Hong Kong’s local currency one-month Hibor interbank interest rate has climbed from a deep 1.6 percentage point discount to the equivalent US dollar rate to reach a small premium last week.
