Over the weekend, major unrest and student protests in the city of Hong Kong have left investors wondering if the former autonomous financial center will remain the primary gateway to global trade in Asia. In fact, on Sept. 29 a Chief Economist for Deutsche Bank echoed this sentiment suggesting that not only could continued unrest in Hong Kong lead to conflicts with Western financial centers, but a breakdown of openness in the former British colony could also risk Hong Kong losing its role as the primary financial hub to Asia, and perhaps allow Shanghai to wrest this position and bring Asian finance and trade under a stronger umbrella of Chinese control.
In 2009 a study was done showing that China intends to build up Shanghai as a new global financial center no later than the year 2020. However, with this month’s opening of the Shanghai Gold Exchange, the Chinese province launched itself into the realm of global equality in the precious metals market and is no longer second fiddle to places like the City of London or the U.S. Comex for trade in gold and silver.
“Hong Kong clearly has its work cut out holding on to its role as the entry way to [investing in] mainland China,” warns Deutsche Bank’s Chief Economist Taimur Baig as he reflects on the civil disobedience this weekend. Even before this weekend’s riots, Baig believes “Hong Kong will have to shape up,” and while his base case suggests the unrest will not have a major detrimental effect on the economy per se, he fears it will add to investor angst – and along with macro uncertainty – leaves Hong Kong more precariously positioned than Singapore as Asia’s major financial capital.
“Hong Kong risks losing its role as a financial capital.” – Zerohedge
The independent city of Hong Kong was given back to the Chinese in 1997 after a 100 year agreement expired between the Asian power and Great Britain, and over the past 15 years the financial center has remained fairly autonomous to political controls. However, with the fate of Hong Kong’s current elections sparking a student revolt and demand for Democratic rule on the island province, Chinese officials have already stated publicly that their control over Hong Kong will not change, and that these protests are nothing more than a pseudo ‘Occupy Movement’ that has no bearing or voice on the outcome of China’s political rule.
Besides the ongoing economic war for supremacy over the next global financial system, short term battles are taking place in regions such as Hong Kong, Shanghai, Ukraine, and even Syria as the partnerships of Russia and China work to undermine the 20th century dominance of America and the Europe. And even as many successful investors like Jim Rogers and Marc Faber see the future residing in places like Shanghai, Singapore, and even Hong Kong, change is never easy, and the dying financial hubs of the old system appear not to be going quietly into that good night.