Hong Kong enjoys special economic, trade, and investment status, which redounds to Beijing's advantage
WASHINGTON—Hong Kong is a critical financial gateway for mainland China, therefore increased meddling in the city’s affairs by Beijing would backfire, causing significant capital flight, experts say.
Hong Kong is one of the largest hubs for equity and debt financing in the world. Thanks to its long history of good governance, ease of doing business, and sound judicial system, the city has been a boon for Chinese companies seeking foreign capital.
Chinese companies use Hong Kong’s capital markets to attract foreign investors, while international companies use the city as a base to expand into mainland China. Experts warn that Beijing would shoot itself in the foot if it takes an increasingly hard line against protestors, seriously damaging Hong Kong’s standing as a stable financial center.
There’s $3 trillion in dollar-denominated debt issued by Chinese companies, according to estimates.
And Hong Kong, an important source of capital for China, provides roughly a trillion dollars of that amount, according to Victor Shih, a professor of political economy at the University of California–San Diego School of Global Policy and Strategy.