‘Hong Kong is over’? Economist Stephen Roach defends article intended as ‘wake-up call’; Xinhua hits out at ‘so-called experts’ trying to ‘contain China’

An American economist has defended an article he wrote that claimed “Hong Kong is over”, saying it was intended as a “wake-up call” given his perception of a “growing undercurrent of angst” about the city’s future.

Chinese state media also weighed into the wider debate over the city’s investment and business environment, saying some Western news outlets and “so-called experts” had spread false claims to “achieve their sinister plot of using Hong Kong to contain China”.

“Their true objective is to shake people’s confidence, disrupt the economic development and social stability of Hong Kong, as well as hinder the implementation of Article 23 and Hong Kong’s progress from stability to prosperity,” Xinhua said, referring to home-grown security legislation the city must pass under the Basic Law, its mini-constitution.

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Yale University faculty member Stephen Roach says he hopes the serious questions about the city’s future could be a form of “good trouble”. Photo: Xiaomei Chen

In a fresh opinion piece published on Tuesday by the Post, Stephen Roach, faculty member at Yale University and former Hong Kong-based chair of Morgan Stanley Asia, responded to controversy over his original commentary in the Financial Times, this time offering a more open-ended line of inquiry over the city’s prospects.

“Time and again, Hong Kong has defied the calls for its demise, with a series of Phoenix-like resurrections. Why shouldn’t we expect the same this time?” he wrote.

But Roach maintained that serious doubts existed over the future.

“Resilience this time will require a new-found political and economic policy autonomy that seems highly unlikely,” he said.

His original piece, titled “It pains me to say Hong Kong is over”, drew strongly worded rebuttals by political and business heavyweights such as Regina Ip Lau Suk-yee, convenor of the key decision-making Executive Council, and Laura Cha Shih May-lung, chair of Hong Kong Exchanges and Clearing.

He argued in the February 12 commentary that Hong Kong’s economic glory could come to an end because of what he saw as a distinct loss of political autonomy after the months-long anti-government protests in 2019, impacts from mainland China’s protracted economic malaise and the city’s place in the middle of the crossfire of Sino-US tensions.

Writing in the Post, Roach said the title of his original piece overstated his views and the commentary should be viewed as more of a “wake-up call”.

Still, clouds remained on the horizon given the low probability of a sharp rebound in the mainland’s economy, Hong Kong’s prospect of becoming just another Chinese city and the real risk of a talent exodus.

The scholar explained that his conclusions were drawn following recent interactions he had with the city, including three visits made last year, pushing back against Exco convenor Ip, who said his views were outdated.

Why I am making ‘good trouble’ for Hong Kong, the city I love

“To be perfectly honest, there is a part of me – reflecting my love of Hong Kong – that hopes I am wrong,” he wrote, saying he hoped the serious questions about the city’s future could be a form of “good trouble”.

Hong Kong is expected to record its fourth budget deficit in five years on Wednesday, with the exception being 2021-22. The shortfall is predicted to balloon to more than HK$100 billion (US$12.8 billion) in 2023-24, far more than the initial estimate of HK$54 billion.

But state media Xinhua on Monday cited Hong Kong government data showing that 9,039 overseas and mainland companies were stationed in the city last year, reaching a high level comparable with pre-pandemic times.

“The investment promotion efforts of the Hong Kong government have also received enthusiastic responses. In 2023, it successfully attracted 382 companies to open or expand their businesses in Hong Kong,” the news agency wrote in its commentary.

It said the establishment of international headquarters or research and development (R&D) centres by globally renowned companies would attract other industry players to set up in the city.

Anglo-Swedish drug giant AstraZeneca and mainland firm Contemporary Amperex Technology, the world’s largest maker of batteries for electric vehicles, both announced last year that they would set up R&D centres in Hong Kong.

“What basis do certain Western media and self-proclaimed experts have to support their claims that companies are leaving Hong Kong en masse,” Xinhua asked.

On the investment front, Xinhua cited a report by major accounting firm PwC that said the decrease in funds raised through initial public offerings (IPOs) on Hong Kong’s stock exchange last year was primarily attributed to global market uncertainty, which led to companies and investors to be cautious.

“Hong Kong still maintained its position as the sixth-largest global IPO market, surpassing financial centres such as London, Tokyo and Singapore. It is anticipated that the Hong Kong market will experience a recovery in 2024 and regain its position among the top five global IPO destinations,” Xinhua said.

Hong Kong governing principle to be permanent feature, top Beijing official says

The article also said the city’s various talent drives had received over 200,000 applications, with more than 120,000 of them approved, and over 81,000 individuals had already arrived in Hong Kong.

It added the concrete facts regarding businesses, funds and talent clearly showed that the city’s superior investment and business environment had not only remained intact but had also improved.

“Hong Kong continues to be a hotspot for corporate investment, a preferred destination for capital and a hub for talent accumulation. Those who spread falsehoods choose to ignore these facts and are deliberately turning a blind eye to the truth.”

Xinhua said certain Western media and “so-called experts” had clearly and deliberately disregarded facts and spread negative information about the investment and business environment.

Exco convenor Ip on Tuesday said Roach’s latest piece tried to give more in-depth analysis about his pessimism, and she believed he had realised his first article was excessive.

“He tried to rationalise his first piece by arguing that he tried to stir up ‘good trouble’, a critical outside look that might be of help to Hong Kong. But he had made the same mistake as others before him who pronounced the death of Hong Kong,” Ip said.

“A city’s fortune might rise and ebb in line with historic, geopolitical change like Rome. Rome is no longer the heart of the mighty Roman Empire, but can you declare Rome a ‘dead cat’? The eternal city lives on, so will Hong Kong,” she said.

Ip said her mistake about Roach’s absence from the city should not detract from her argument that the key factor behind the Hong Kong stock market’s decline was the “capital embargo” imposed by the United States.

“It is a fact that federal pension funds are not investing in Hong Kong, and many private funds are following suit.”

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