Hong Kong’s status as trade hub based on political stability, EU figures in protest-racked city warn

EU voices add to international perception that Hong Kong’s political situation is threatening to stymie its position as an international commercial centre

City remains a ‘gateway to China’ and protests have only had a ‘minor impact’ on inbound investment, but this could change, Rhodium Group economist warns

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EU voices have voiced concern that Hong Kong’s political crisis could undermine the city’s reputation for stability. Photo: AFP

Published: 9:00pm, 27 Nov 2019Updated: 12:07am, 28 Nov 2019

Hong Kong’s status as a trade and investment hub is based on its political stability and “operational efficiency”, both of which could be jeopardised by a significant deterioration in the city’s ongoing political crisis, economists and European trade officials warned on Wednesday.

A five-month long protest movement has roiled Hong Kong and sent its economy into its first recession for a decade, with a 9.2 per cent slump in exports in October, and a 50 per cent slump in tourist arrivals in the first half of last month.

However, so far it has only had “a minor impact” on investment flows into China, an audience of diplomats, as well as Hong Kong government officials and business figures heard at the European Union Office to Hong Kong and Macau on Wednesday. But with the eyes of the world now trained on the city, this could soon change, said Thilo Hanemann, a partner at research house Rhodium Group.

“We haven’t reached that point yet, where the perception of Hong Kong as an investment destination is irreparably damaged,” Hanemann said in an interview on the sidelines of the event. “But there are looming longer-term concerns about the situation potentially escalating, and undermining the rule of law and institutional set-up that have made Hong Kong such a special place for international investors.”

There are looming longer-term concerns about the situation potentially escalating, and undermining the rule of law and institutional set-up that have made Hong Kong such a special place for international investors

Thilo Hanemann

International scrutiny of the city increased after the rapid passing of the Human Rights and Democracy Act through the US Senate and Congress last week. The bill, which could pave the way for diplomatic action and economic sanctions against Hong Kong, has stoked tensions between Washington and Beijing that were already running high amid a 17-month trade war that has stripped away much of the bilateral trade.