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China Kills The Golden Goose On Its Doorstep

Hong Kong

The passing of the new security law by Beijing sets a clear direction for the future. Never again will Hong Kong enjoy the freedom that has driven its status as a major global financial hub and the beating heart of capitalism.

When Britain surrendered Hong Kong to China back in 1997 there was a genuine, curiously naïve, hope that the characteristics of ‘David’ would be adopted by ‘Goliath’. Recent events prove the folly of that hope. It is clear that the totalitarian approach of the Chinese state is to be forced onto the tiny territory regardless of what its citizens or the rest or the world may think.

I suspect that Beijing is too savvy for us to see tanks on the streets – Tiananmen Square 2.0 would not play well on social media. Instead there will be disappearances of anyone deemed undesirable by the People’s Republic. These will go unreported by a heavily censored media and the internet will suddenly experience the strange disappearance of mass communication like Google and Whatsapp.

The new law introduces crimes that carry sentences up to life imprisonment and allows mainland security agents to enter Hong Kong with impunity. Trials can be held in secret and without a jury, while judges can be selected by the Beijing appointed Chief Executive. In a piece of double speak worthy of George Orwell, China has established the ‘Office for Safeguarding National Security in Hong Kong’ staffed, of course, entirely by enforcers selected by Beijing. Chillingly, its staff will operate above the laws of Hong Kong and will not be subject to inspection, search or detention.

You couldn’t accuse the legislation of being too narrow in its scope – anyone, including foreign nationals, who provokes hatred of the Chinese government, will be committing a crime. This effectively makes Hong Kong a no-go area for millions of Westerners who have ever criticised China in the media.

Hong Kong entrepreneur Jimmy Lai commented ‘This means Hong Kong will become as corrupt as China. Our status as an international financial centre will be destroyed’.

Even the most ambitious expat must now think twice about staying in Hong Kong or accepting an assignment there. Perhaps the most vulnerable are those who have invested in Hong Kong real estate. The market has already been battered by a year of protests, with average new home prices down by 25% in 2019.  Most experts expect a further slide of at least 15% this year, but in light of the new laws the question will be – can you sell at any price?

As scary as Beijing’s action undoubtedly is, perhaps the bigger issue is the response from around the world which will either legitimise or challenge these draconian new laws. Already HSBC and Standard Chartered banks have meekly kowtowed to their masters in the People’s Republic. America is trying to impose financial sanctions on the senior Chinese officials involved while Britain is making noises about offering citizenship to Hong Kong citizens looking to escape. It’s a start but if I was already in Hong Kong or thinking of going there it certainly wouldn’t be enough to make me feel comfortable.       

Next weekend I am running the above advertisement in the Weekend FT to as to reassure expats currently stuck in Hong Kong and wondering what the future holds that Europe has a number of territories that offer a sunny climate and low tax living. Monaco is an expensive market to enter but the long term record of 10% per annum capital growth combined with zero income tax provide a spectacular return on investment. Gibraltar offers Category 2 residency with less than £30,000 tax on your worldwide income while developing Montenegro has some delightful Adriatic resorts while only taxing income that arises in the country.

We already know that China heavily censors internet access as it seeks ever more control over the lives of its citizens. Now more than ever we need to find ways of showing these folks that they are not alone and not being abandoned.

We are indeed cursed to live in interesting times.