By Tu Haiming

Critics have attributed the recent plunge in Hong Kong’s stock and property markets to the loss of investor confidence in the city following the promulgation of the National Security Law for Hong Kong (NSL), and have foretold that the upcoming national security legislation according to Article 23 of the Basic Law will only make matters worse. While weak investor confidence is an objective observation, national security protection is no scapegoat for it. This is obvious in the answers to the following two questions:

First, did Hong Kong have a better business environment before the promulgation of the NSL in June 2020? Ever since Hong Kong’s return to China, the Hong Kong Special Administrative Region government’s failure to enact national security legislation according to Article 23 of the Basic Law has allowed separatist forces to thrive in the intervening two decades, launching the “Occupy Central” illegal movement in 2014, the Mong Kok riot in 2016, and the anti-extradition riots in 2019. Each of these social upheavals plunged Hong Kong into chaos and deterred investors; traffic paralysis alone harmed business operations, and the business environment was in no way better than now.

Second, do Western countries have national security laws? Of course they have. Take the United States, for example. Not only has the US enacted a plethora of laws related to national security, but it has also increasingly generalized the concept of national security and imposed curbs on technology against other countries under the pretext of national security in violation of the World Trade Organization rules; meanwhile, the United Kingdom passed its new National Security Act last year, which is more draconian than the NSL in many aspects according to some legal experts. Yet no one has claimed that efforts to safeguard national security in the US and UK have harmed the business environment and thus dented investor confidence in the two countries.

Over the past three years since the promulgation of the NSL, there have been only 260 people who were arrested under the law, of whom 79 were convicted. Obviously, the law targets only a tiny minority who commit national security offenses. Those who blamed the NSL for Hong Kong’s economic problems, including the poor performance of the stock and property markets in the past couple of years, have viewed the law through an ideological prism, and have thus compromised their objectivity.

Economic performance from a holistic perspective

Critics have also blamed the HKSAR government for Hong Kong’s weaker-than-expected economic growth in 2023 as well as the city’s weakened public finances.

They conveniently overlooked the fact that 2023 was an extraordinarily difficult year, replete with economic roadblocks. For instance, the protracted military conflict between Russia and Ukraine has taken a huge toll on many European countries, hindering economic recovery in the entire eurozone and thus curbing demand for Hong Kong exports and services; the Israel-Hamas conflict and its spillover effects have dampened global economic recovery. Meanwhile, the dramatic increases in US interest rates have siphoned huge volumes of money out of many economies, including the Hong Kong market, into the US market.

Despite the unfavorable economic environment, Hong Kong still expects to achieve a 3.2 percent growth rate in 2023, which is no mean feat and is much higher than that of many developed economies in the West and the global average. The US is forecast to have grown by 2.5 percent last year; the eurozone secured merely 1 percent growth, with Germany, the EU’s “locomotive”, having registered negative growth. The Chinese mainland, on the other hand, realized a 5.2 percent growth rate last year, which is much higher than the 2.7 percent global growth rate estimated by the United Nations in its “World Economic Situation and Prospects 2024” report.

Long-term view of the current situation

In his blog on Jan 14, Financial Secretary Paul Chan Mo-po noted that total bank deposits in Hong Kong are estimated to have increased by more than 5 percent in 2023. With approximately HK$250 billion ($32 billion) flowing into the Hong Kong stock market via the Southbound Stock Connect, Hong Kong recorded a net capital inflow last year, indicating that the city maintained its attractiveness to investors.

The figures mentioned above indicate that Hong Kong’s economy has performed relatively well. An objective assessment of the city’s economy needs to take into consideration both the past performance and future prospects.

As a free market, Hong Kong has a strong appeal to investors and entrepreneurs. As long as “one country, two systems” — Hong Kong’s greatest asset — does not change, the city’s economic prospect will remain bright

Looking back, Hong Kong’s past economic performance is a testament to the city’s ability to rise above challenges. The city’s gross domestic product increased to HK$2.86 trillion in 2021 from HK$1.37 trillion in 1997, or an average annual growth rate of 2.7 percent. During this period, the city weathered the Asian financial crisis in 1997, the severe acute respiratory syndrome (SARS) outbreak in 2003, the global financial tsunami in 2009, and the COVID-19 pandemic, which started in 2020, and in each of these crises Hong Kong managed to turn the tide. Looking ahead, Hong Kong’s development prospects remain bright. Ever since its inauguration, the incumbent HKSAR government has strived to build up the city’s economic development potential by leveraging the combined strength of a capable and proactive government and a highly efficient market. To align with national development, the HKSAR government frequently communicates with State ministries and commissions, and interacts with local governments on the Chinese mainland to enhance mutual cooperation, especially with cities in the Guangdong-Hong Kong-Macao Greater Bay Area to speed up its development. In a bid to expand Hong Kong’s global reach, Chief Executive John Lee Ka-chiu has led delegations to visit the Middle East and Southeast Asian countries, and such efforts have begun to bear fruit. Funds from these markets have started to flow into Hong Kong and access the Chinese mainland market via the city, which is yet more proof of Hong Kong’s well-established status as an international financial center. In expanding Hong Kong’s development potential, Lee and his governing team are ramping up efforts to develop the Northern Metropolis, which will align with Shenzhen’s high-end manufacturing industry and bring Hong Kong’s technological and creative development into a new realm.

Doomsayers have been obsessed with the outflow of talent and capital and have overlooked the inflow of talent and capital. In an international metropolis, the flow of talent and capital is a natural thing. The HKSAR government’s initiatives to compete for talent and enterprises have achieved remarkable results over the past year, receiving more than 220,000 applications under various talent admission programs, with more than 130,000 of them having been approved so far, and about 90,000 high-caliber applicants have already arrived in Hong Kong. About 40 technology firms have either established their presence or are preparing to settle in Hong Kong.

Hong Kong is expected to attract more technology firms to enrich the local innovation ecosystem and help accelerate the development of the innovation and technology industries, and to host a number of international events to stimulate the economy this year.

As a free market, Hong Kong has a strong appeal to investors and entrepreneurs. As long as “one country, two systems” — Hong Kong’s greatest asset — does not change, the city’s economic prospect will remain bright. As Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, emphasized in his speech at the 10th anniversary of the Chinese Association of Hong Kong and Macao Studies, every Hong Kong resident is a stakeholder, builder and beneficiary of Hong Kong’s development, and should contribute to its betterment.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.

The views do not necessarily reflect those of Bauhinia Magazine.

Source：China Daily