Recently, much attention has been drawn to the comments of American economist Stephen Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia. In a widely publicized update, Roach doubled down on his assertion that the “Hong Kong of old is over”, having acknowledged that his initial claim that “Hong Kong is over”, floated in an article published two and a half years ago, didn’t age well.
Roach’s new piece pushes the argument that while Hong Kong Special Administrative Region has actually demonstrated economic resilience, and has succeeded in overcoming the combined challenges of the 2019-20 riots, various geopolitical shifts and the COVID-19 pandemic, the city is not the same because it is now overreliant on the Chinese mainland, citing as evidence the massive influx of mainland companies for initial public offerings in the city. He repeatedly called the city “Xianggang”, the Mandarin pronunciation of Hong Kong, in support of his announcement that Hong Kong has transformed into “just another big Chinese city”, and hinted at there having been an exodus of Western expatriates.
First, what exactly is the “Hong Kong of old” Roach speaks of? If one can hazard a guess, it refers to Hong Kong as an international financial center, a hub of Western influence and presence, and most predominantly his idea of a city that ought to be “separate” from China, as if the assumption was that it was completely detached and independent economically. I believe to some degree, Roach’s argument is based on a sense of romanticism that fundamentally denies not only the HKSAR “as it is”, but most importantly “for what it always was”, even under the era of British rule.
Against the background of rising geopolitical challenges, Hong Kong has continued to successfully court new capital from all over the world. The city has comprehensively deepened ties with Southeast Asia, Central Asia and the Middle East, all of which see massive opportunity in Hong Kong. This is very much in line with the so-called “Hong Kong of old”. So what we really have here is not an end to Hong Kong as it is, but an international financial center evolving in line with geopolitical and economic shifts, perhaps the fading of a “Eurocentric Hong Kong”, so to speak
The fundamental purpose of Hong Kong has always been to serve as a gateway between the mainland and the broader world — this is a permanent feature of geography. In raw terms, China is the world’s second-largest economy with a population of 1.4 billion and the third-largest country in territorial size. This creates a force of economic gravity, which makes it one of the most significant economies in the world; no number of geopolitical grievances can rewrite that. The HKSAR, located on the periphery of China’s Guangdong province, was designed precisely as a bridge so it could act as an economic benefactor, as a free port and an open market for tapping into the mainland’s immense opportunities.
The very reason the British occupied the territory in the first place was because Britain sought to exploit, by force, the Chinese market, having based its own prosperity upon being a maritime trading nation. Hong Kong’s system was therefore not created to trade with France, Germany, Japan or wherever, but to dominate and benefit from trade with the mainland while also acting as a base for expansion into Southeast Asia. As a result, the presence of the mainland was always woven into the economic logic of Hong Kong’s very purpose, and without it, the city’s status as an international financial center would not have existed. Just look at a map.
But there are more factors to keep in mind; the world economy in the pre-handover era of Hong Kong was very different. While we might depict the old Hong Kong as the West “benefiting from China”, such an arrangement constituted an era of Western dominance in the global economy, whereby the Chinese mainland was divided, poor and fraught with conflict. These circumstances no longer exist, and the change is irreversible. China has developed into a major economic power, the British empire is gone, and of course more importantly, the city was returned to China in 1997. As a result, the economic incentives and strategic purpose of the city have evolved, and it is logical that China’s own economic presence in its own territory has increased accordingly. While Hong Kong was once exclusively about Western companies benefiting from the Chinese mainland, now it is also about mainland firms increasing their presence in the HKSAR. Why? Because the city provides access to capital, on a global scale, and if it were “over”, as Roach claims, why would that international capital still be there? And why bother if it were “just another big Chinese city”?
Once upon a time, mainland firms aspired to list themselves on the prominent global stock exchanges of America’s Wall Street, but years of geopolitically motivated hostility, and an effective declaration that “you’re not welcome”, have dramatically altered the incentives. So why list in New York when you can list in Hong Kong? Does that not serve the same purpose?
Against the background of rising geopolitical challenges, Hong Kong has continued to successfully court new capital from all over the world. The city has comprehensively deepened ties with Southeast Asia, Central Asia and the Middle East, all of which see massive opportunity in Hong Kong. This is very much in line with the so-called “Hong Kong of old”. So what we really have here is not an end to Hong Kong as it is, but an international financial center evolving in line with geopolitical and economic shifts, perhaps the fading of a “Eurocentric Hong Kong”, so to speak. And thus, what do we have? An international financial center that derives the bulk of its wealth and economic purpose from the mainland, because this is what Hong Kong is and always was.
The author is a British political and international-relations analyst.
The views do not necessarily reflect those of China Daily.
