Financial giants gather in Hong Kong to worry about political factors triggering market crisis | International Finance | Investment | Morgan Stanley

[The Epoch Times, November 10, 2023](Reported by Epoch Times Special Topic Department reporter Zhao Bin) Hong Kong once became China’s main window for introducing foreign investment by virtue of its status as an international financial center and its proximity to mainland China. However, in recent years, Hong Kong has been rapidly being mainlandized. This “close relationship” with mainland China, which has lost its “special zone” characteristics, has caused multinational companies such as international financial institutions to hesitate or even withdraw completely.

This uneasy trend became even more apparent at the second International Financial Leaders Investment Summit held recently. In this regard, expert analysis said, “China’s situation and business environment have changed drastically, and Wall Street financial bosses are eager to know the CCP’s intentions and plans.”

International financial leaders: Hong Kong will no longer be a global financial center

The second International Financial Leaders Investment Summit was held in Hong Kong on November 7. Morgan Stanley Chairman James Gorman, Goldman Sachs Chairman David Solomon, UBS Chairman Colm Kelleher, Deutsche Bank CEO Christian Sewing and other 300 global financial leaders Senior officials of the organization attended the meeting.

The theme of this year’s summit is “Living with Complexity”, which seems to be in line with the current economic realities of mainland China and Hong Kong. Hong Kong Chief Executive Lee Ka-chiu said at the opening ceremony that “the world today is more complex and challenging than ever before.”

At the summit, the next financial crisis became a topic of concern, and some investment banks invariably mentioned the political factors related to it. Christian Sewing, CEO of Deutsche Bank, said: “The biggest fear is that if there is another escalation of the geopolitical situation, it may happen very quickly, causing the market to become turbulent and trigger a market crisis.” He believes that the financial community must remain highly alert to risks. , conduct stress testing.

James Gorman, chairman of Morgan Stanley, believes: “(The financial crisis) may be related to politics or geopolitics. I mean, it is obvious to see that democracy is challenged in some countries.”

Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, said: “Hong Kong is no longer a global financial center, and I don’t think it will ever be again. It will become an offshore center for the mainland. It will certainly create jobs, but it may not. It will be the same employment situation as before.”

Hong Kong’s ranking of IPO funds raised plummets after national security law

He Lifeng, Vice Premier of the State Council of the Communist Party of China, attended the summit. This is the first time He Lifeng has participated in a large-scale international financial summit after taking over from Liu He in charge of finance. He said at the summit that the financial industry is very important to China and Hong Kong. He also mentioned that at the central financial work conference held at the end of October, he would support the promotion of Hong Kong’s status as an international financial center.

Since the implementation of the national security law in Hong Kong, the United States has triggered the cancellation of many special treatments for Hong Kong. Hong Kong’s new stock fund-raising has dropped from the world’s first to 11th this year. The former international financial center no longer has its former glory.

Ho Lifeng made three suggestions for Hong Kong. First, strengthen its own construction and increase its influence; second, expand its circle of friends and tell the story of China and Hong Kong on the international stage; third, participate in the construction of the Guangdong-Hong Kong-Macao Greater Bay Area. .

Ho Lifeng also said that Hong Kong has always been an important bridge and link connecting mainland China and the rest of the world, and he hopes that Hong Kong will actively participate in the construction of the Guangdong-Hong Kong-Macao Greater Bay Area.

However, in recent years, with the implementation of the National Security Law for the Hong Kong Area, Hong Kong has gradually lost its status as a “special zone” and has been rapidly mainlandized. Its “close ties” with mainland China have made international banks, investment companies and technology companies feel… Uneasy, there was a general retreat from Hong Kong.

Foreign capital continues to move away from Hong Kong and China

The EU’s annual report on Hong Kong shows that 12.5% ​​of foreign investment will withdraw from regional centers in Hong Kong in 2022, while mainland Chinese companies increased by 17.5% in Hong Kong. Hong Kong government data also shows that between 2019 and 2022, the total number of foreign companies with regional headquarters in Hong Kong has steadily declined, while the number of employees of foreign companies in Hong Kong has dropped by 25,000 to 468,000, including Goldman Sachs and Morgan Stanley. Domestic financial giants have reduced the number of positions in Hong Kong.

Caton Technology, a broadcast technology company with business dealings with Europe, the United States, Japan, and Taiwan, moved its headquarters from Hong Kong to Singapore last year; American circuit board manufacturer TTM Technologies withdrew from Hong Kong this year and is currently opening a factory in Malaysia. .

Some foreign company executives say the lines between Hong Kong and mainland China have become blurred. Rob Jesudason, founder of Serendipity Capital, said: “Hong Kong is now seen as an extension of China.” Many multinational companies now no longer choose to stay in Hong Kong. Australia’s Westpac has closed its Hong Kong operations, and National Australia Bank will close its Hong Kong office as soon as early 2025.

Recently, UBS Group’s global banking division laid off about 7% of its employees in Asia, mainly involving employees in Hong Kong in its China business. In June, JPMorgan Chase also laid off about 30 positions in its Asia division, with employees in Hong Kong and mainland China being the most affected. Pay packages for investment bankers in Asia have fallen to their worst levels since the financial crisis more than a decade ago.

On the other hand, a large amount of foreign capital has also begun to withdraw from mainland China. The balance of payments from July to September released by the State Administration of Foreign Exchange of the Communist Party of China on November 3 showed that foreign direct investment in setting up companies and building factories in China was negative 11.8 billion U.S. dollars, indicating that disinvestment was greater than new investment. This is the first negative growth since the CCP’s reform and opening up in 1998, reversing the trend of foreign capital actively investing in China.

How do international financial leaders view this reversal? It seems that some answers can be found at this International Financial Leaders Investment Summit. Some analysts pointed out that financial tycoons and foreign companies adopt a “cautious” wait-and-see attitude towards China’s economy. In the confrontation between the United States and China, they want to avoid angering either party, but it is increasingly difficult to control the relationship between Beijing and Europe and the United States.

Mike Sun, an investment consultant who is familiar with China’s political economy, told The Epoch Times that Wall Street financial leaders and senior executives of international financial investment institutions gathered in Hong Kong and expressed a cautious wait-and-see attitude because “international financial executives discovered that the current situation in China and the operating environment are different from before. Big changes have taken place, and they are eager to know the CCP’s intentions and plans.”

Editor in charge: Lian Shuhua#