Education
Not the End of Hong Kong, but an Interview With Economist Alicia García Herrero
Alicia García Herrero is the Asia-Pacific chief economist at the Natixis investment bank, France and an assistant professor of science and technology at the University of Hong Kong. Prior to joining the International Monetary Fund ( IMF), she worked as an economist.
The U.S. ramifications SupChina asked her. China speech by President Donald Trump last Friday:
President Trump announced last week that he was moving to revoke the special status of Hong Kong. Beijing approved national safety laws for the city in response. How do the two movements impact the economy of Hong Kong?
In fact, the US is not able to unilaterally decide that this may not be the case any longer; Hong Kong is a member of the WTO and the OECD is separated from China. However, for any trading or FDI problems, the US can treat Hong Kong as mainland China.
The United States could decide to impose on the continent during trade war the same import tariffs it imposed. Likewise, any FDI from Hong Kong to the United States could be regarded by U.S. authorities as that originally from the mainland – this is now very similar to the case following the overhaul of the United States Foreign Investment Commission. The special status of Hong Kong also gives the city the lax status that Hong Kong would lose for export bans on sensitive technology.
It is undoubtedly bad news for Hong Kong and particularly if others follow the United States. In recent cases, Hong Kong 's external FDI has been viewed as if it were the continental companies in terms of investment constraints in Israel or Australia.
How will that affect trade and the economy in China and the entire Asia-Pacific region, if Hong Kong's special status is revoked?
Since Hong Kong accounts for 70 percent of the continental FDI, a revocation of its special status would influence the way the mainland invests abroad and foreign companies invest in China.
China could either start investing directly worldwide or directly receive investments, but more easily. China is benefiting from the rule of law in Hong Kong and international courts for the outgoing FDI, which give its companies' offers as investors credibility.
Most notably, the US dollar funding in Hong Kong is open to China with easy access. This is true of USD bond financing. In Hong Kong , mainland corporations account for over 70% of the overall USD bond issuance. This also applies to equity finance, as demonstrated by the IPOs and secondary listings of the Hong Kong stock markets of the mainland companies.
As a bridge between China and the West, Hong Kong has played a vital role. Would revocation of the special status of Hong Kong eliminate the role of the city as this tampon, or will Hong Kong continue to fortify it as a financial center with other parts of the world?
It seems clear that Hong Kong 's role as a buffer — I would also call that "strength of arbitrage" in many ways — is at stake between China and the West. This is not really Hong Kong 's end, but its long-standing position being transformed.
For many years you've been living in Hong Kong. Nowadays in growing US-China tensions, how would you describe the mood of business and financial communities?
For almost 14 years I have been living in Hong Kong. Clearly Hong Kong is a Chinese-US survivor. Conflicts. Conflicts. Hong Kong is part of China and therefore, in a cold war environment, it is difficult for the city to maintain widespread economic independence. It was anticipated what we're experiencing.
