A tale of three cities

“ANOTHER one!” was how a Singaporean manager of serviced apartments greeted your correspondent, fresh off the plane from Hong Kong. The response tells you which of the two cities is currently enjoying an influx of people and business. The latest impetus has been their contrasting approaches to the pandemic. Singapore began opening up to the rest of the world last year; by comparison, although the quarantine periods for arrivals to China and Hong Kong have been shortened, there is no sign yet of their end.

Hong Kong is widely seen as the third-most-important city for global finance and business, after New York and London, and ahead of Shanghai and Singapore. Most historians trace its rise as a financial centre to the early 1970s, when it became a hub for Asian offshore financing. Its importance increased dramatically after China began to open up under Deng Xiaoping in 1978. Hong Kong was where Western bankers could rub shoulders with Chinese businessmen while private-sector activity in the mainland was still finding its feet. The deals they made were governed by the territory’s reliable regulatory framework and courts that made use of English law.

Yet even before the pandemic, the established order of Asia’s global hubs was being thrown into doubt. Over the quarter-century since Hong Kong was returned to Chinese sovereignty, the mainland has tightened its grip on the territory’s institutions. Under its influence, Hong Kong has introduced a sinister national security law; the city’s independent judiciary, long valued by foreign investors, has been weakened by political intervention. That has tarnished its appeal relative to Singapore, another entrepot with a common law legal system, business-friendly regulation and low taxes. South-East Asia has become an increasingly desirable place for Western companies to do business, which, by virtue of proximity, further burnishes Singapore’s allure. And for firms intending to do business in China, meanwhile, the benefits of setting up in Hong Kong, rather than Shanghai, are diminishing.