Commentary on Political Economy

Wednesday 27 January 2021



Hong Kong questions departing finance executives on reasons for leaving

There are growing concerns that Beijing’s national security law could cause departures from the Asia financial hub to multiply © Reuters

Fund managers and bankers leaving Hong Kong for alternative financial centres have been asked to explain their decision to a range of government agencies amid concerns that Beijing’s national security law could cause departures from the Asia finance hub to multiply.

Government agencies including the Securities and Futures Commission of Hong Kong, the Hong Kong Monetary Authority, the Hong Kong Financial Services and the Treasury Bureau and the Financial Services Development Council have phoned banking and asset management executives who have relocated to rival cities including Singapore and Tokyo, according to three people with direct knowledge of the calls. 

The calls, which hedge fund managers described as new and unusual, asked for a full picture of the decision-making process behind the moves and the significance of the timing. 

Both the SFC and HKMA played down suggestions of any official campaign or survey of financial institutions relocating out of Hong Kong.

The SFC said notifications by licensed corporations or individuals about a change of residence could trigger an inquiry to check if they still required a licence. The HKMA said it kept regular tabs on industry practitioners and market developments, a common practice in key financial centres.

The HKFSTB said it had “not conducted any exercise on surveying the relocation/movement of financial institutions”. The FSDC denied making the calls.

While many remain committed to staying, a number of individual financial professionals or small teams have moved out of Hong Kong since Beijing imposed a national security law in June — an unprecedented legal incursion that some felt raised the risk of doing business in the Chinese territory.

Several senior executives told the Financial Times that the level of departures would likely be higher were it not for the disruption of the Covid-19 pandemic.

Efforts by Hong Kong authorities to ascertain the reasons for relocation come as rival financial centres have stepped up their own campaigns to attract talent and capital from the former British colony. Singapore has been deliberately low-key but has touted new legal structures to encourage managed capital to redomicile, while Tokyo is quietly wooing hedge funds and weighing a range of other incentives including tax waivers to lure financial groups.

Fund managers said that while it was not uncommon for the SFC to contact funds leaving Hong Kong to ask about a change in licensing status, the calls from the other agencies and the tone of the questioning were unusual. 

“It didn’t happen in the past,” said one of the people, who asked to remain anonymous because they still have employees in Hong Kong. 

Others said that while agencies may have made courtesy calls in past, the nature of the phone calls had changed. “No big names were really leaving Hong Kong [back] then,” said a veteran of the Asian hedge fund industry.

Beijing’s sweeping national security law and subsequent crackdown on dissent in Hong Kong has spooked some employees of international law firms, asset managers and banks.

Combined with the high cost of operating in the city, the situation has prompted some financial groups to downsize their operations in Hong Kong. However, few big companies have pulled out completely given the territory’s importance as a gateway to the mainland Chinese market.

Instead, international investment banks including Citigroup and Goldman Sachs have stepped up hiring in Singapore, while asset managers have opened offices or quietly shifted Hong Kong roles over to the south-east Asian city.

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