Will Hong Kong Remain a Critical Financial Centre for Law Firms?
Protests and political crisis have cast some uncertainty on the city's future as a financial center in Asia.
August 01, 2019 at 05:21 PM
4 minute read
The original version of this story was published on The American Lawyer
A political crisis that shook Hong Kong to its core has tested the city's valued reputation as Asia's financial hub. For several weeks now, residents have organised regular protests demanding the resignation of the city's leader, and on July 1 a small group of protesters broke into the Legislative Council building by force and occupied the legislature's main chamber for several hours.
The break-in was an escalated response to the police's use of excessive force in an earlier protest, and at the time of writing, more than a dozen people were arrested for storming the chamber. The unrest and the series of clashes between the police and civilians raise questions about Hong Kong's perceived stability.
The protests broke out in early June, first opposing a bill that would allow criminal extraditions with mainland China, and have morphed into a wider movement against the police, the special administrative region government and the central government in Beijing.
Mass protests are not uncommon in Hong Kong, and they are usually peaceful. The city's rule-based society and free-market economy are the reasons that multinationals, including global law firms, choose to base their regional headquarters in Hong Kong. Naturally, when hundreds of police officers armed in full riot gear started unleashing tear gas and firing off rubber bullets in the middle of a workday at the city's central business district, people were shaken.
As troubling as the violence is, it will subside, but the underlying tension between Hong Kong and China is more disturbing, and it's not going away anytime soon. In ignoring public opinion and pushing ahead with the extradition bill, the Hong Kong government triggered deeper fear.
Twenty-two years after the transfer of Hong Kong's sovereignty to China, the trust between regular citizens has somehow deteriorated. Hong Kong, a former British colony, was handed over under the "one country, two systems" doctrine, which allowed the city to keep its political and legal systems and way of life for at least 50 years after 1997.
But the ideological division is increasingly proving difficult to paper over. And Beijing tightening its grip in recent years seems to have pushed people in Hong Kong further away. The Greater Bay Area scheme, a plan to integrate Hong Kong and Macau further into neighbouring communities in Guangdong province, has been met with resistance in Hong Kong for fear that the city's autonomy will be eroded.
It's unfortunate that this is all happening at a time when Hong Kong's economy is becoming more intertwined with China's. The mainland is Hong Kong's top trading partner by a large margin; the city's stock exchange relies on listings of Chinese companies and is also increasingly attracting Chinese capital.
And as challenging as it is, global firms can't stay away from the Hong Kong legal market. Of the 100 highest-grossing law firms in 2017, 63 operated a Hong Kong office, and 44 of the top 50 are in Hong Kong. Similarly, 48 of this year's Am Law 100 are in Hong Kong, mostly concentrated in the top 50 (39 out of 50). Moreover, 25 of the 45 top-grossing Chinese firms are also in Hong Kong.
Most of these firms focus on China-related work in Hong Kong, and it's unlikely they will leave anytime soon. But the divergence between the government and the grassroots should be alarming.
The turbulence this summer makes it even more difficult to see a silver lining in Hong Kong. But there might be one: the extradition bill controversy got the attention of those who are normally too busy muddling through work and life to be aware of regular citizens' grievances. Perhaps now we will all listen, and try to restore that lost trust.
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