Don’t discount the millions of Hongkongers who voted with their feet – by staying

Many Hongkongers who are eligible to live elsewhere have not moved, a testament to their confidence in the city
And a disappointing stock market performance is no indicator of poor economic prospects – Hong Kong has gone through some low points, but bounced back each time

Weijian Shan

Published: 9:15am, 28 Apr 2024

Why you can trust SCMP

The US State Department recently released its 2024 Hong Kong Policy Act Report, which includes a notable statistic: the number of Americans living in Hong Kong as of the end of 2023 had reached 84,000, the highest since the pandemic and 30 per cent more than in 2014, when such data was first released.

Americans aren’t the only ones returning to Hong Kong in large numbers. Immigration statistics registered a net inflow in both 2022 and 2023, an increase of 152,300 people in total, compared to a net outflow in 2020 and 2021, a decrease of 97,200 in total.

This must be news to Stephen Roach, a friend and occasional co-author of mine, who argued in an op-ed that “Hong Kong is over” and more recently bemoaned a “major exodus of talent”. His data must be dated, or he needs to prove that the city has replaced talent with dumber people.

People choose to live in Hong Kong. The vast majority of the population have the option to live elsewhere, in a country equally rich or richer. In addition to 84,000 Americans, there are about 300,000 Canadians, 100,000 Australians and 37,000 Britons, among many other foreign nationals.

Around 5.4 million residents – nearly three out of four Hongkongers – are British National (Overseas) status holders, or dependants or children of BN(O) holders, who are eligible to live in the United Kingdom under a “bespoke” immigration policy. By the end of 2023, only 157,576 people, less than 3 per cent, have taken up the offer.

What makes Hong Kong so attractive? It remains a free and open society with arguably the freest capitalist system in the world. Its legal system is based on the common law with a judiciary so independent that nine out of 17 seats on the bench of the highest court are filled by foreign judges from Britain, Australia and Canada. Of the remainder, four are also foreign citizens.

A man hugs his mother as he leaves for the UK with his wife in 2021. Although Britain has created a “bespoke” immigration route for around 5.4 million Hong Kong residents, only a very small number have taken up the offer. Photo: Getty Images

There is a free flow of information and a free flow of capital. Tax rates are low, at about 15 per cent for personal income and nil for capital gains and dividends. Almost all imports are duty-free. Both English and Chinese are official languages. The streets are extremely safe even at night. There are direct flights to and from all major metropolises in the world.

As for Hong Kong’s much-debated national security law, it is no more draconian than, say, the United Kingdom’s National Security Act 2023. Few in Hong Kong fear the national security law for the same reason that few in Britain fear their national security act.

Beijing wants Hong Kong to reinvent itself. Does it have courage to be bold?

Roach considers the recent performance of Hong Kong’s stock market a sign of the city’s “demise”. There is however no statistical evidence that a stock market is a good predictor of economic prospects. Hong Kong’s bourse has outperformed Singapore’s over the past 30 years, even though Singapore’s economy has grown much more.

The most glaring example is China, whose economy expanded by about 12 times in 30 years, but the MSCI China stock index has declined 58 per cent in that time. Hong Kong’s stock market had seen sharper drops than the most recent one, and each time it bounced back.

From peak to trough, it dipped 56 per cent between 1997 and 1998; 53 per cent between 2000 and 2003; and 59 per cent between 2007 and 2009. Now it has fallen about 50 per cent from its 2018 high. Who can say it won’t bounce back again? Typically, bulls roam at the market peak and bears come out at the bottom. Given this history, when bears are roaring, is now a good time to run away from the market?

People walk by the Exchange Square Complex which houses the Hong Kong stock exchange, in Central district, on January 19. Hong Kong’s stock market had seen sharper drops than the most recent one, and each time it bounced back. Photo: Xiaomei Chen

Roach’s bearish view on Hong Kong is based on his conviction that its growth will decelerate in tandem with mainland China’s. Statistically, however, Hong Kong’s economy has in fact been much more correlated with the United States than with mainland China. In terms of real gross domestic product, its growth trajectory almost hugs that of the US, up 2.3 times in 30 years versus America’s 2.1 times. Both pale in comparison to China’s expansion.

Why so? One important reason is that the Hong Kong dollar is pegged to the US dollar, which means Hong Kong monetary policy must follow that of the US. When the Federal Reserve raises interest rates, Hong Kong does likewise, even though its economic circumstances are very different. Hong Kong doesn’t have an inflation problem, unlike the US, and tight money supply hurts its economy. As long as the currency peg stays, this will not change.

Nobody has a crystal ball to tell the future. But there is no reason for gloom. Hong Kong’s institutions under the framework of “one country, two systems” have endured, as has its way of life. The city has gone through some rough patches, to be sure.

But now the worst seems over, and the economy has resumed growing – by 3.2 per cent in 2023 – as has the talent pool. Just by sticking around, people have given a vote of confidence to Hong Kong and its future. That’s what really matters.

Weijian Shan is the author of “Out of the Gobi”, “Money Games” and “Money Machine”. The views expressed in this article are the author’s own