Mounting political risks driving foreign businesses to leave Hong Kong

SNAPSHOT: Mounting political risks driving foreign businesses to leave Hong Kong


  • The number of foreign companies, including those head-quartered in mainland China, with offices in Hong Kong fell 0.2 per cent from 2019 to 9,025 as of June 2020, according to a recently released yearly survey by the Hong Kong government. The reduction grows to 2.8 per cent if mainland firms are excluded.
  • This marks the first time in 11 years that the number of foreign businesses with offices in Hong Kong has decreased. There has been a significant drop in financial companies amid relocation to other Asian hubs over concerns around social unrest and the territory’s political autonomy. Fifty-two banks and financial businesses and 24 insurers have left Hong Kong.
  • US investment management firm Barings on Thursday (3 December) said it will base its Southeast Asia operations in Singapore, while German multinational investment bank and financial services firm Deutsche Bank in August relocated its chief executive officer for its Asia operations from Hong Kong to Singapore.
  • Confidence in Hong Kong judicial independence and political stability was lowered compared to a previous survey.



  • There are mounting concerns around changes to the legal system in Hong Kong. A number of British and Canadian judges remain in Hong Kong’s court system, although it has been questioned whether they should support the apparent formation of a hybrid legal system incorporating elements of the territory’s Common Law-based legal system and China’s administrative law.
  • Former pro-democracy lawmaker and activist Ted Hui, who is in self-imposed exile in the UK, recently said that several of his bank accounts had been unfrozen and he had quickly transferred funds from his HSBC accounts. Hui’s family members also had their accounts frozen, presumably by Hong Kong authorities.
  • HSBC refroze bank accounts of exiled former democratic lawmaker Ted Hui and his family members at the behest of police after unfreezing them on Sunday (6 December). Police on Monday confirmed that the freeze was carried out as part of a probe into alleged embezzlement via Hui’s and his family members’ accounts. Police on Sunday had accused Hui of embezzling money from a crowd-funding campaign and colluding with foreign forces, considered a violation of the national security law (NSL). Chief Executive Carrie Lam on Tuesday denied allegations that the freezing of the accounts was guided by political retaliation.
  • Ted Hui’s situation is being closely followed by UK authorities out of concern that such punitive measures may affect other political dissidents, non-activist Hong Kongers and UK-linked firms. Hong Kong banks have already faced significant criticism in the UK over their support for the NSL. Labour Party politicians in the UK have been especially outspoken about threatening boycotts of UK-based banks in Hong Kong, similar to boycotts during South Africa’s Apartheid era, if the banks do not support democratic values. UK secretary of state Dominic Raab has been under pressure to target HSBC and Standard Chartered over concerns arising from the banks’ approval of the NSL.
  • The Good Neighbour North District Church, a Hong Kong church whose volunteers have given humanitarian assistance to pro-democracy demonstrators, on Tuesday (8 December) said that HSBC accounts of the church and the pastor and his wife were frozen on Monday without explanation. The church called the move a political reprisal and urged HSBC to unfreeze the accounts.
  • The developments relating to HSBC’s freezing of bank accounts are certain to elevate concerns that the UK-based bank is being used by Hong Kong authorities to enact politically motivated retaliation, while undermining international confidence in the territory’s legal and financial system. Such concerns will add further impetus to the UK to implement boycotts and potentially harm the image of Hong Kong’s once thriving finance sector. The trend of international firms exiting the territory, particularly tech SMEs and larger financial firms, is likely to accelerate over the coming months.
  • China has been concerned that the US could block Hong Kong and China from the SWIFT transaction system. These threats have been made before, prompting Chinese organisations to change, or consider changing, to a domestic financial messaging system for transactions. A wholesale shut-off would necessitate a series of primary and secondary sanctions combined with the EU enacting similar measures, and this is a complex and protracted process that is unlikely to occur in the foreseeable future.​
  • Western governments have called for the formation of a united international response against China over issues including the situation in Hong Kong. Such a response is likely to gain momentum once president-elect Joe Biden is sworn into office in January 2021. An organised Western response is certain to complicate trade ties, with significant implications for Hong Kong-based international companies.



  • Commercial interests in the territory should assess the implications of concerns around changes to Hong Kong’s legal system for operations, as well as the impact of a likely erosion of the territory’s high-end workforce. Increased relocation of skilled residents is probable given restrictions on freedom of speech and expression, including in education and journalism.
  • Businesses in Hong Kong should prepare for months of uncertainty and possible commercial disruption given increasing pressure by Western governments against China. Such pressure is likely to intensify as of January 2021 onwards.​
  • Financial firms should anticipate heightened political risks in view of increased pressure on the British government to boycott UK-based banks in Hong Kong that are viewed as failing to uphold democratic principles.