Monday, 26 September, 2022
E-paper

HK economy faces uncertain future 25 yrs after handover

HONG KONG: When Hong Kong transitioned from British to Chinese rule, Edmond Hui was a floor trader at the bustling stock exchange, witnessing the roaring growth of a city at the crossroads of the West and Asia.

Under a deal signed with Britain ahead of the 1997 handover, China promised Hong Kong could keep its capitalist system for 50 years, an arrangement that helped the city thrive as one of the world's top financial hubs, reports AFP.

Friday marks the halfway point of that experiment, with uncertainty clouding the economic future of Hong Kong -- a city reliant on an increasingly isolated China, struggling to shake off the reputational damage from political unrest and pandemic-induced border closures.

Hui, now the chief executive of a mid-tier stockbroker with nearly 300 employees, said post-handover markets have undergone a drastic shift, becoming more China-focused than ever.

"Before 1997, foreign capital propped up half of the market," he said. "After 1997, things changed gradually until the whole market was held up by Chinese capital."

China's meteoric rise in the past two decades yielded vast benefits for Hong Kong, which became the gateway for mainland firms to raise funds and for foreign businesses to access what is today the world's second-largest economy.

"Hong Kong was sort of a poster child of free trade and open markets," veteran pro-Beijing Hong Kong politician Regina Ip told AFP.

But the interlocking of its fate with China has also led to warnings about overreliance and complacency.

Chinese companies made up around 80 percent of the market capitalisation in Hong Kong's stock market this year, up from 16 percent in 1997.

And Chinese firms now account for seven of the top 10 holdings of the benchmark Hang Seng Index, which used to be anchored by homegrown brands such as Cathay Pacific and Television Broadcasts Limited.

Hong Kong's GDP, meanwhile, has gone from being equivalent to 18 percent of mainland China's in 1997 to less than three percent in 2020. Hui greeted this comprehensive shift with a mild shrug. "It's just a matter of changing who's boss," he said.

"We can only hope that our country's momentum will surpass that of Europe and the United States." As China's economic and political power has grown over the last few decades, so have tensions with Western nations -- which has also affected Hong Kong.