I not too long ago chaired a panel wherein a trio of grandees from Hong Kong, Tokyo and Singapore every staked their metropolis’s declare to be Asia’s premier monetary centre. The environment echoed a household recreation of Monopoly working into its third hour: victory elusive, bonhomie fraying quick and nobody fairly positive whose flip it’s subsequent.

The controversy was uneven, as contributors navigated waters which have been completely whipped up over the previous 18 months, even with out the extra disruption of Covid-19. 

Avenue protests, troubling arrests and the passage of Hong Kong’s national security law in June have entrenched the speculation that the previous British colony’s standing as a monetary centre is in structural jeopardy. This can be a technique by Beijing or the unintentional consequence of China’s inexorable political instincts. There may be professional disquiet amongst overseas monetary establishments in Hong Kong. Their dilemma just isn’t solely about unquantifiable danger, constraint and the place to attract their strains of tolerance, however how defiant to be when transgressions of these strains are made. 

Regardless of the coolness, the territory’s demise as a monetary hub is a idea nonetheless awaiting an actual check. Hong Kong buddies in monetary providers repeat tales of worldwide shifting firms being run off their ft by departures, they usually all know of somebody or some fund planning to depart. They’re circumspect on their very own exit plans.

Nonetheless, the Hong Kong place in our debate was essentially the most defensive. The eleventh-hour suspension of what would have been historical past’s greatest preliminary public providing — the $37bn listing of Ant Group — this month might have a posh and contested origin. Nevertheless it loomed over the dialogue as the nice “instructed you so” sign of Hong Kong’s fast-diminishing mastery of its personal destiny. 

On the opposite facet, there was little disguising that the query marks over Hong Kong have been seen as alternatives for Singapore and Tokyo. Every have within the final yr intensified efforts to lure away each capital and those that management it. Tokyo’s solicitations, which include direct engagement with funds based mostly in Hong Kong, seem considerably higher thought-out and supported at a senior political degree than its many earlier campaigns. Tokyo, the place simply two of the 2,657 listed shares on the primary market are overseas, has additionally turn into extra wise about acknowledging its greatest turn-offs: excessive tax charges, forms and language being essentially the most distinguished. 

Singapore, in the meantime, has persistently performed up security, its position as a gateway to south-east Asia, its massive personal banking and wealth administration trade and the picture of the Financial Authority of Singapore as a cutting-edge innovator on fintech.

Nevertheless compelling both the Tokyo or Singapore pitches could also be, any exits they induce from Hong Kong now will most likely be marginal, the managers of regional funds and different establishments inform me. Something extra important would require a tipping level that, whereas now simpler to envisage below the national security law, has but to be reached. 

The reality is that each one the actual market motion is China-related. It’s a barbed narrative, however one of the best one on the market. Severe capital and its entourage can’t resist it and can “discover each conceivable workaround to stay in its shut orbit earlier than different planets”, says one senior Hong Kong-based fund supervisor. Many world monetary corporations have lengthy had operations in Shanghai and Beijing and can resolve — grudgingly, however with calculated meekness — that these should turn into the templates for a continued presence in Hong Kong.

Three days after the panel dialogue, 15 nations sealed the pan-Asian Regional Comprehensive Economic Partnership, a commerce pact that binds economies representing virtually a 3rd of world gross home product and attracts China, Japan and South Korea into such a deal for the primary time. Its implications as a supranational organisation with guidelines set by consensus and never involving the US are numerous and huge.

The precise implications for Hong Kong as a monetary centre are substantial: a great variety of the nations now signed as much as RCEP have been browbeaten or bullied by China and have trigger for wariness. Preserving the pact practical might demand a lifetime of concessions. Despite that, the collaborating nations have chosen — pragmatically — to again RCEP as an embodiment of the Asia narrative with China at its centre. The monetary trade is taking a really related choice vis-à-vis Hong Kong. In each situations, the guess will work — till very all of the sudden it doesn’t.

leo.lewis@ft.com

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