The U.S. and China have escalated their tug-of-war in Hong Kong. The U.S. Consulate General in Hong Kong is selling its property in the market, but the Hong Kong SAR government is obstructing it, and the relevant departments have unprecedentedly refused to register the transaction on the grounds of foreign affairs. Some members of the financial sector believe that the Hong Kong government this approach, will greatly weaken the confidence of foreign investors to invest in Hong Kong.
The U.S. government sold the consulate dormitory property at 37 Shouson Village Road in Hong Kong at the beginning of the year, which was bid by Hong Kong’s Hang Lung Properties for $2.566 billion, at a price of about $54,000 per square foot of floor space, a bid that was lower than market expectations. The sale was scheduled to be completed on Wednesday. However, Hang Lung Properties issued an announcement that the transaction could not be completed as scheduled because the Hong Kong government informed that the transaction involved diplomatic affairs between China and the United States and was not an ordinary business practice.
The letter also mentioned that the Chinese government had told the Hong Kong government that if the U.S. side intended to lease, acquire or sell real estate in Hong Kong, “the U.S. government should apply to the Chinese government 60 days in advance through the Office of the Commissioner of the Ministry of Foreign Affairs in Hong Kong” and that “the relevant procedures can only be carried out after obtaining the consent of the Chinese government in writing”.
Hang Lung Properties said it received a response from the U.S. side on Dec. 29, saying it had complied with the relevant obligations and responsibilities, but that the diplomatic obligations related to the sale of the property in question were matters between sovereigns and did not affect the ownership of the property, and that the SAR Land Registry had no authority not to register the memorandum of agreement. However, the U.S. side agreed that the transaction involved diplomatic matters and “should be handled in accordance with applicable diplomatic norms,” and therefore failed to meet the deadline to complete the transaction.
A spokesman for the U.S. Consulate in Hong Kong replied to our inquiry, saying that the buyer and seller needed more time to complete the administrative procedures for the transaction and would not comment on the specific terms of the ongoing contractual deal at this time. For its part, Hang Lung Properties said it is now seeking legal advice on the appropriate actions that can be taken in relation to the transaction, including studying the possibility of extending the transaction time.
A spokesman for the U.S. Consulate in Hong Kong argued that the Land Registry has no authority not to register the memorandum of agreement. But agreed that the transaction involves foreign affairs, “should be handled in accordance with the applicable diplomatic norms,” said the buyer and seller need more time to complete the administrative procedures of the transaction. (Photo by Deng Yingtao)
Stopping the transaction on “diplomatic” grounds makes investors feel the risk of investing in Hong Kong doubled
The former Hong Kong HSBC global market economist Lin Haobo told the station that the reason why Hong Kong has become a “safe haven” for foreign investors is that it is linked to the U.S. dollar, and investors can trade freely at any time, except for criminal factors are not subject to any reason to hinder, he believes that the authorities to “diplomatic” reasons to set a precedent, will make other foreign investors feel that investment in Hong Kong will be increasingly risky.
Lin Haobo: “Some degree of change on behalf of the market, some definitions are not clear, which belongs to diplomacy, which does not belong to diplomacy. A U.S. funding agencies to do certain things, but was crowned with diplomacy, not allowed to cash in, in fact, is very ‘mainland’ approach, can let you say, and people are worried about this point precisely. Many investors think that I will later put the funds in Hong Kong as a safe haven, there may be this risk later, and this risk can not be ignored.”
For the U.S. side to obtain the permission of the Chinese Communist Party to continue related transactions, Lin Haobo laughs that the Chinese Communist Party “do not understand how to play this game”, that this move will only accelerate the loss of investor confidence in Hong Kong assets.
Lin Haobo: “Hong Kong has done these things to make people very worried, but also let people understand that the mainland does not seem to understand how to play this game, the international financial center is not that you have the hardware, the so-called legal system, the implementation of the judge can be achieved, but to have the confidence of investors. And this incident is precisely what may make foreign investors lose confidence in investing in Hong Kong assets.”
Academics: China intends to stop the deal due to “face problems”
Ross Feingold, a U.S. political risk management consultant, said in an interview with the station that the sale of real estate in Hong Kong at a time of political uncertainty is a highly sensitive matter, “whether the buyer is American, Chinese, or Hong Kong people, someone will always come forward to accuse the appropriateness.
He said the Chinese Communist Party (CCP) has been speculating that it intends to stop the sale, but he believes that the CCP may be considering the current political environment in Hong Kong and does not want to convey the perception of “national security law effect” to the public.
Fang: “Maybe some people don’t feel good about it, meaning, do they feel that because of the instability in Hong Kong, or because of the change in the importance of Hong Kong in financial terms, because of other factors such as the anti-sending of China or the National Security Law, these countries, whether it’s the United States or other countries, feel that Hong Kong is not that important anymore, that it no longer plays an important role. For Beijing, they don’t want the media to report that these so-called U.S. and other countries are retreating from Hong Kong.”
Economist Luo Jiacong, on the other hand, estimated that the deal was not fruitful, probably because the Chinese Communist Party did not want the U.S. side to cash out its assets. He also said that after the anti-Send-China campaign and the National Security Law, many business activities have to consider political factors first.
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