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Uncertainty clouds Hong Kong’s business future

Experts divided on whether B.C. companies should stay or leave as unrest continues
Left to right, Ian Young, Yves Tiberghien, Ken Su and Craig Lindsay speak at the Business in Vancouver event Hong Kong and the Risks to Your Business on November 26 | Chuck Chiang

The unrest in Hong Kong has already caused at least one Canadian company to change its decision to set up operations in the Chinese special administration region – and other Canadian businesses may be wise to steer clear also.

That is the view of one senior-level consultant with PwC Canada who has spent 12 years in China’s investment sector. Ken Su, national leader of PwC Canada’s China Business Network, spoke with three other panellists at Business in Vancouver’s Hong Kong and the Risks to Your Business event on November 26. Su said Hong Kong’s uncertain future adds a level of risk that simply isn’t good for business.

“I think while it is absolutely true that Hong Kong still has a lot of momentum, even if the foundation is grand and the history is there, I don’t know if that’s going to be enough if things go wrong,” Su said.

Though he agreed the city is still one of the world’s premier destinations for expat businesses and regional trade exhibitions, “even without any further escalation, the migration of head offices or capital towards Shanghai or Beijing is already happening,” he said. 

Su also noted other Asian centres are more aggressively competing for foreign company investment – Vietnam, Malaysia and Thailand, for example – which further muddies Hong Kong’s economic future.

Large-scale protests have gripped Hong Kong since March, when the special administrative region (SAR) government announced plans to pass a controversial extradition bill that would allow Hong Kong to transfer criminals wanted in mainland China to Chinese police custody.

Not all Canadian business officials are pessimistic. Craig Lindsay, managing director of Arbutus Grove Capital Corp. and a former president of the Vancouver section of the Hong Kong-Canada Business Association, said it would be a mistake for Canadian companies to uproot themselves from the city that still has long-term potential.
“You look at the medium and long term, Hong Kong remains an amazing platform to do business in Southeast Asia. You have the rule of law. You have the protection of intellectual property. You have sources of finance, and the logistics – it’s still one of the best places to live in Asia for foreign companies. So business hasn’t changed."

Su, however, said he is seeing “a lot more caution” from western businesses when it comes to Hong Kong. He noted that there is still a high volume of business activity linked to the city, but the pace is definitely not at the usual pace seen in the last few decades. He also added that Hong Kong’s proximity to and dependence on the Chinese market is a double-edged sword for the SAR that will be increasingly difficult to manage if the ongoing unrest isn’t fundamentally resolved.

University of British Columbia professor Yves Tiberghien, director emeritus of the school’s Institute of Asian Research, said the conflict has evolved into a debate on identity, with many young Hong Kong protesters increasingly turning away from self-identifying as Chinese. This, however, is happening at a time when Hong Kong is becoming more economically reliant on China, which puts the city in an awkward position.

Ian Young, the South China Morning Post’s Vancouver correspondent, noted a University of Hong Kong survey released in June that showed the number of people who self-identify as “Hong Konger” hitting its highest point since 1997 (53%) while those identifying as Chinese or “Chinese in Hong Kong” fell to 23%. The poll also found 71% of respondents, including 90% of those aged between 18 and 29, saying “no” when asked if they are proud to be a Chinese citizen.

“I keep coming back to Hong Kong identity,” Young said. “We talk about sovereignty being the red line for China, absolutely. But how do you reconcile that with 90% of 18-to-29-year-olds saying they are not proud to be Chinese? That’s a massive challenge…. Are the teenagers on the streets now – are they even able to be persuaded to feel Chinese? From what we hear and interactions with people in that age group, I don’t see it. And we talk about business challenges … but the biggest challenge is going to be convincing young people it is a worthwhile exercise to feel differently.”