On Aug 11, the Australians refused to allow Chinese bidders, including investors from Hong Kong, to purchase Ausgrid, the electricity company serving New South Wales. The UK has had concerns about allowing Huawei to conduct operations and more recently British Prime Minister Theresa May called for an investigation into the security risks of the Hinkley Point nuclear power plant — an 18 billion pound ($23.7 billion) UK-China joint project which former prime minister David Cameron agreed to earlier in principle. The EU this May refused to grant China market economy status knowing fully that this would be a political back-step in relations with China. Foreign governments clearly ask questions about China’s motivations for doing business with them.
China has been emerging as a global business leader for some time now and Hong Kong is long established as a sophisticated global finance leader and international business city. Chinese politicians and entrepreneurs are well respected for their appropriateness and propriety in public engagement — and Hong Kong people especially for their pragmatism and modern business practice. Corporate governance on the mainland has improved and indeed has been praised by the Organisation for Economic Cooperation and Development for breaking through since around the mid-2000s. Hong Kong also has an excellent reputation in naming, shaming and prosecuting corruption in both the public and private sectors by rooting out financial misdeeds and abuse of power.
In terms of support from the north, President Xi Jinping has instigated what most would agree has been a successful and prolonged crackdown on corruption. According to the vice-minister for corruption whom I met with several weeks ago, hundreds of runaway corrupt “tigers and flies” who had fled China have been brought back to face the music in their motherland. They have all been thoroughly investigated and where there is sufficient evidence of wrongdoing, handed over to the Ministry of Justice to undergo prosecution. Hong Kong has independent corporate governance watchdogs, consultancies with specific fraud investigation remits and a long history of efficient legal institutions to deal with financial and other kinds of business fraud regionally. Yet in spite of all that, a pattern has emerged that attempts to limit Chinese influence and participation in certain sectors of economies.
So why is it that foreign countries ask questions about China in the modern age? Security is one answer. And at the top of the list of security concerns must be those around cyber security, communications security, strategic sector intelligence and of course, intellectual property. These are not mutually exclusive security concerns by any means. President Xi has recognized that China must upgrade its security potential and there is undoubtedly a cyber and security agenda that China is engaging on. However, no one has managed to produce any concrete evidence that China has engaged in security crimes or malicious use of cyber activities in a criminal or unfriendly manner. The UK after an investigation found that Huawei posed no risk to national security, for instance. If foreign countries wish to engage China in business, they must accept that China has become competitive and operate on equal terms. Security, while a valid concern, should not preclude welcoming China onto the global business stage and furthering the integration of Chinese companies and investments.
The Ausgrid deal shows that it is not enough simply to have Hong Kong investors involved either. Hong Kong is positioned well to provide trusted consulting to the recipient governments. With its abundance of high-end advisory teams, record of outstanding legal and governance frameworks and wealth of international business acumen, Hong Kong can be utilized more from a political and consulting perspective to help unblock the rather clandestine information flow which is causing these setbacks in deal-brokering. A plan that integrates and centralizes Hong Kong’s qualities could afford a better outcome next time, especially when Hong Kong investors are involved. Moreover, foreign governments involved in decision-making about Chinese business deals should not engage in contempt prior to investigation regardless, and should provide hard evidence of why there are specific concerns and avoid engaging in discriminatory public relations exercises.
The author is a fellow at the King’s College London Lau China Institute. He works on microeconomics, finance and policy with a specialty in China.