SINGAPORE (June 17): What is it about the rivalry between Singapore and Hong Kong? On the face of it, the two cities have much in common: former British colonial outposts turned cosmopolitan centres for international business and finance. Underpinning their success have been their open, trade-friendly economies and a legal system based on English common law.
That rule of law, and the certainty and comfort that Western-based businesses take from it, is under threat in Hong Kong. The overarching worry is that the Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill will compromise the city’s rule of law and jeopardise human rights. The bill allows China to extradite anyone resident in or travelling through Hong Kong, who has been detained in the territory, to the mainland to face criminal charges. The worry is that it will give Beijing influence over Hong Kong’s independent judiciary and expose the international community to the opaque vagaries of the Chinese justice system.
Already, businessmen and consultants who have interests in Hong Kong and China have been reluctant to comment for this week’s article. Those who have been willing to go on the record, however, point out that this piece of legislation is only the latest development in what has been a gradual encroachment by the Chinese government into Hong Kong. Indeed, it has been naive of people to think that nothing will change after the handover of the territory from the UK to Beijing in 1997.
The demonstrations against the bill may disrupt regular business, but the legislation’s broader risks to Hong Kong’s economy are tangible and detrimental.
Currently Hong Kong, as a Special Administrative Region of the People’s Republic of China, operates as a separate customs territory, with autonomy in economic, trade, financial and monetary matters. That affords it special treatment from its trade partners such as the US, which allows it access, such as to high-tech electronics and software.
If the bill is passed, the territory is likely to be no longer seen as a legal entity separate from China, and along with that, there will be an end to those trade concessions. It would not be a stretch to conclude, for instance, that goods that are imported into Hong Kong end up in China. It would also change how companies manage their data security and storage, for instance, or how legal agreements are structured.
Indeed, already the US seems poised to take action. In a June 11 statement, the Speaker of the House of Representatives, Nancy Pelosi, warned that the bill “imperils the strong US-Hong Kong relationship that has flourished for two decades”. She added: “If it passes, Congress has no choice but to reassess whether Hong Kong is ‘sufficiently autonomous’ under the ‘one country, two systems’ framework.”
Should the US decide to pull its support, the effect would be drastic. The US is Hong Kong’s second-largest trading partner, and goods and services traded between them totalled an estimated US$67.3 billion ($91.9 billion) in 2018.
“We look forward to the introduction of a new bipartisan Hong Kong Human Rights and Democracy Act in the coming days by Senator [Marco] Rubio, chairman Jim McGovern and Congressman Chris Smith,” Pelosi said, referring to a proposed bill that will penalise officials in Hong Kong or China for infringing human rights by freezing their US-based assets and denying them entry into the US.
To be sure, the developments have set off the anticipation of a flight of business and assets from Hong Kong, and many are expecting Singapore, as a comparable financial centre in the region, to gain. Yet, this may not be true, nor would it necessarily be a good thing, as analysts have told our reporters.
For one, there are many who are under no illusion about their exposure to China by being in Hong Kong. Those with no appetite for risk would have shipped out long ago. The ones who remain are clear-eyed about the chances they are taking.
An influx of assets and businesses from Hong Kong could come with its own set of problems. Singapore does not have an extradition treaty with China, but risks being in a tough spot, should Beijing request for the transfer of individuals from Singapore, for instance. In the face of myriad challenges, Singapore can do without such complications.
Besides, the city state’s fortunes have rather diverged from Hong Kong’s. In fact, the territory has capitalised on its Pearl River Delta connections to become the market for China-focused funds and business. But the hinterland that has been an advantage may now be to its detriment. On the other hand, Singapore is unencumbered and should continue to grow as the centre for international business and finance.
This story appears in The Edge Singapore (Issue 886, week of June 17) which is on sale now. Subscribe here
