Following the freezing of Next Media founder Lai Chi-ying’s assets under the National Security Law, the Hong Kong Security Bureau was recently revealed by the media to have written to banks associated with him, requesting a ban on any transactions dealing with Lai’s assets. Analysts believe that a series of moves by the SAR government have dealt a blow to Hong Kong’s reputation as an international financial center and further shaken outside confidence in the city’s banking system.
Banks linked to Lai Chi-ying warned
On May 27, Reuters reported that the Security Bureau had sent letters to HSBC and Citibank warning them not to deal with Lai’s accounts or face up to seven years in prison.
Hong Kong current affairs commentator Samp told the Voice of America that the scary thing about the national security law is that it has changed Hong Kong’s legal system, overriding civil and criminal law.
Samp said, “The Security Bureau can issue a letter and completely ignore the principle of presumption of innocence in criminal law. A letter can come out and freeze your account. This place is very scary. In the old days in Hong Kong, unless you were involved in a money laundering crime, it was difficult to freeze the money in question. Now it is the same as saying that as soon as it (the authorities) think you have violated the national security law, then it can issue a letter to freeze your account before you even wait for the trial.”
Nearly a year since the implementation of Hong Kong’s national security law, more than 100 people have been arrested and more than 50 have been charged. In addition to Hong Kong people, there are even people who are overseas who are wanted. Secretary for Security Lee Ka-chiu even vocalized in an exclusive interview with Hong Kong Cable TV last month that he would not rule out the possibility of extraditing Hong Kong people back to Hong Kong.
Some members of the banking and legal sectors told Reuters that the Hong Kong Security Bureau issued a letter warning local banking institutions, meaning that the national security mechanism extended to the operating class of the banking system.
Samp said: “We should not forget that the national security law is the ‘universe version’ of any transaction with Lai Chi-ying account, with all the financial people in the world who do transactions with Hong Kong banks. The bank’s low and middle and senior staff will also be on pins and needles. Those people are going to travel to Hong Kong if they want to. In case such evidence is in the hands of the Chinese Communist Party or the Hong Kong government, not only will they be deported, they will even be prosecuted in Hong Kong and go to jail.”
Mutual trust of bank customers is non-existent
Lo Cheng-chung, director of the Institute of Finance and Economics Law at Taiwan’s Nantai University of Science and Technology, told Voice of America that the Hong Kong Security Bureau’s move has destroyed the mutual trust between banks and their customers.
He said, “It is possible that the top wealthy people in the last wave have long felt that the risk is too great and have done asset allocation long ago. The wealthy in the middle and upper tiers may have a greater impact. You and I both have accounts at banks. My account at the bank should not have anyone to move. That’s the basis of all social confidence. If we say that today, because of politics, or assuming that my opinion is different from others, you set conditions in this way unilaterally and unilaterally and wantonly and move some of its assets, then who will have confidence? I’ll get my money out quickly. I’d rather exchange my money for gold and put it under my bed than put it in the bank for safety.”
The eve of Hong Kong’s national security law came into effect on July 1 last year, Reuters quoted sources as saying that based on doubts about the national security law, the number of Hong Kong residents inquiring about opening offshore accounts with banks has increased sharply, including HSBC, Standard Chartered and Citi, with Singapore, Britain, Australia and Taiwan being popular destinations.
Offshore accounts not 100 percent safe
Taiwan scholar Luo Cheng-tsung, however, believes that not putting money in an offshore account is a guarantee of peace of mind. He said, “The world has become less and less 100% secure. It is not that you have an offshore account will be 100% safe, just that in whose hands you put it, assuming you put it in a system related to the United States may be safer, but you put it in a place with a very shallow relationship with China, then the risk is greater.
Former Hong Kong lawmaker Xu Zhifeng, who announced his exile at the end of last year, revealed that his family’s accounts at five HSBC banks in Hong Kong had been frozen, involving millions of Hong Kong dollars in deposits.
The so-called offshore accounts may not live up to their name, cautioned Law Ka-chung, a visiting professor in the Department of Finance and Economics at City University of Hong Kong who was interviewed by the Voice of America.
Some big banks (investment banks) like Morgan Stanley and Goldman Sachs also have open files in Hong Kong, so if you have enough money to open an account with them, it’s truly offshore and will be much safer,” said Lo. As for HSBC, you know very well from its statements over the past period of time that it is quite cooperative with the Chinese Communist Party in freezing funds. From the customer’s point of view, if the offshore (account) can also be frozen, then it’s not offshore.”
And according to a Reuters report, Hong Kong’s Secretary for Security Li Ka-chiu wrote to the bank mentioning that Lai Chi-ying’s relevant assets were involved in crimes against national security and had to be frozen, stressing that it had nothing to do with normal business.
Some Hong Kong public opinion, however, believes that the Security Bureau’s move is aimed at cracking down on Next Media Group’s operations.
Lo Ka Chung said, “Blocking the newspaper’s funding source. It’s not using bright and honest means, it’s using some rather dirty means. You say ‘normally unaffected’. What is ‘normally unaffected’? In the case of foreign investors, they are used to rules that are written down in black and white.”
Hong Kong’s property market has not seen any fluctuations
Chinese officials and the SAR government have been emphasizing that the national security law only targets “a small group of people” and will not affect Hong Kong’s business environment, but various data show that foreign businesses have “voted with their feet”. According to a survey released by the American Chamber of Commerce in Hong Kong last month, more than 40% of the surveyed members plan to leave Hong Kong, and more than 60% of the respondents who plan to leave Hong Kong clearly expressed their concerns about the national security law in Hong Kong.
At the same time, since the implementation of the National Security Law, the real estate market, which is regarded as one of the lifeblood of Hong Kong’s economy, has not seen significant fluctuations. The first quarter of 2021 Global Property Price Index report released by property consultant Knight Frank on June 2, for example, showed that property prices in Hong Kong rose by 2.1% year-on-year, the first increase since the first quarter of 2020.
Hong Kong economist Gary Lo said that Hong Kong’s property market remains buoyant in terms of numbers and has a lot to do with the so-called “new Hongkongers,” or mainland Chinese residents who have settled in Hong Kong.
Those ‘new Hongkongers’ may have money,” said Lo. Their eyesight may be from second- and third-tier cities to invest in first-tier cities. After all, Hong Kong’s property transactions are not said to be booming now. Last year, the buying power was delayed due to the epidemic, piled up, and then now exploded. Now it’s mainly primary, and the real second-hand transactions don’t seem to be that brisk. The prices they are putting out are not necessarily ideal if they are eager to sell.”
According to the analysis of the Hong Kong real estate sector, the outbreak of the epidemic last year suppressed some of the local purchasing power. With the epidemic easing down, the atmosphere in Hong Kong’s property market is gradually picking up. The demand for housing accumulated earlier is being released one after another. However, it is worth noting that the second-hand housing market, which can truly reflect market demand, has not seen a strong transaction so far. Whether the Hong Kong property market can maintain the rise remains to be seen.
The “new Hongkongers” know what they want?
Li Zhaobo, a senior lecturer at the Chinese University of Hong Kong’s School of Business Administration, believes that mainland Chinese may not be deterred from investing in Hong Kong by the implementation of the National Security Law. In an interview with the Voice of America, he said that “new Hongkongers” are aware of the risks of investing in Hong Kong.
Chinese people living in the mainland environment should be very clear about what to do and what not to do, and they should have a much better concept of this than Hong Kong people,” said Li Zhaobo. The vast majority of mainlanders they do not have to worry too much, just about monopoly and unfair trade (of assets) but rather some danger. Of course, people who feel more risky may be suitable to move their assets to other places.”
Hong Kong and Singapore are also international financial centers, and outsiders have been comparing the two places directly. An AFP analysis last year pointed out that Singapore lacks democracy, but has a certain quality of life as well as a stable business environment, and has always been a sovereign state. In contrast, Hong Kong has gradually been tightened by Beijing’s control.
According to economist Li Zhaobo’s observation, Hong Kong is still the first choice of investment for many wealthy mainland Chinese, at least until now.
In fact, there are many restrictions in Singapore, and it is not as free as people think, including the political system,” said Li Zhaobo. Problems can also occur when you put your money overseas. With the current relationship between China and Europe and the United States, transferring a large amount of assets to these countries cannot be ruled out that these countries will use taxation as a suppression (tool). This will all pose a risk to investment.”