Commentary on Political Economy

Wednesday 7 April 2021


Hong Kong’s economic transparency looks to be the next victim of Chinese authoritarianism

A pro-democracy supporter holds placards outside a court in Hong Kong on April 1.
A pro-democracy supporter holds placards outside a court in Hong Kong on April 1. (Vincent Yu/AP)
Opinion by the Editorial Board
April 6, 2021 at 5:11 a.m. GMT+8

CHINA’S LEADERS believe they can crush the democracy movement in Hong Kong while preserving its glittery reputation as a bastion of Asian capitalism. But can they? In recent days, China’s puppet regime in Hong Kong has decided to curb access to a government registry that journalists, banks and others use to identify the true owners of companies and property. This is another step backward from Hong Kong’s storied transparency and a sign that authoritarianism is creeping into economic life as well.

Currently, the registry permits a search for residential addresses and full identification numbers of directors of Hong Kong companies. Under changes proposed March 30 by Hong Kong Chief Executive Carrie Lam, who reports to Beijing, the government plans to show only partial identification numbers and correspondence addresses, and in a later phase, companies will be able to keep all the information private.

This will destroy an accountability tool that has frequently been used to penetrate labyrinthine ownership structures. Ms. Lam said it was necessary to protect against the practice of “doxing” or disclosing the information online. But a more likely explanation is to provide cover for China’s elite, who want to hide their illicit financial gains under layers of meaningless names and post office boxes.

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The proposal is a setback for media freedom; journalists often have relied on the registry to investigate business dealings involving China. Such neutering of independent journalism is in keeping with China’s broad crackdown on freedoms in Hong Kong, including the imposition of a restrictive national security law and arbitrary prosecution of pro-democracy forces.

But the registry also is a pillar of Hong Kong’s appeal as a financial center, allowing banks and others to carry out due diligence. Such verification has long offered confidence to those doing business in Hong Kong. China’s leaders accepted the handover of Hong Kong from Britain in 1997 promising “one country, two systems,” keeping Hong Kong as a beacon of rule of law and political liberty. But Beijing is dousing the beacon.

China’s leaders are probably still fuming over public disclosures of their family members’ secret wealth. In 2012, the New York Times revealed that relatives of then-prime minister Wen Jiabao had become rich but their identity was “hidden behind layers of partnerships and investment vehicles involving friends, work colleagues and business partners” and “veiled by an intricate web of holdings as many as five steps removed from the operating companies.” In the end, their identity was established in corporate and regulatory documents, the Times said. That year, Bloomberg News revealed that relatives of Xi Jinping, then vice president, had also become very wealthy, the investments “obscured from public view by multiple holding companies” but discovered in thousands of pages of regulatory filings.

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Mr. Xi, now China’s president as it forces Hong Kong to heel, may want to block any further embarrassing revelations by snooping reporters. In closing this door, he also is exposing as fiction the promise that economic freedom can survive as other freedoms are stifled.

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