The current ongoing unrest in Hong Kong has already caused at least one Canadian company to change its decision to set up operations in the Chinese Special Administration Region, and other Canadian businesses may be wise - even given B.C.’s deep ties with the city - to steer clear also.
That is the view of one senior-level consultant with PwC Canada who has spent 12 years in China’s investment sector. Ken Su, who is currently the national leader of PwC Canada’s China Business Network, spoke with three other panelists at Business in Vancouver’s “Hong Kong and the Risks to Your Business” event on Nov. 26 - and was frank in describing the city’s uncertain future adding a level of risk that simply isn’t good for business.
“I think while it is absolutely true that Hong Kong still has a lot of momentum, even if the foundation is grand and the history is there, I don’t know if that’s going to be enough if things go wrong,” Su said when responding to Hong Kong currently still being one of the world’s premier destinations fro expat businesses and regional trade exhibitions.
“Even without any further escalation, the migration of head offices or capital towards Shanghai or Beijing is already happening,” he added. “There are lot of competitors in the region, be it Singapore or Seoul, so businesses may say to themselves that they don’t need to be in [Hong Kong]… I can tell you that this has already tipped some decisions. A multi-billion US-dollar market-cap company that was going to move their headquarters to Hong Kong, and now they’ve decided they won’t. Another company, Vancouver-based, also decided not to set up shop there - and that’s despite them having major volume in Hong Kong.”
Su also noted other Asian centres more aggressively competing for foreign company investment - places like Vietnam, Malaysia and Thailand in Southeast Asia, for example - that further muddies the proportion for Hong Kong’s economic future.
Large-scale protests have gripped Hong Kong since March, when the SAR government said it plans to pass a controversial extradition bill that would allow Hong Kong to transfer criminals wanted in mainland China to Chinese police custody. The bill raised concerns over China’s legal system essentially extending into Hong Kong, which is technically governed under a Rule-of-Law system (guaranteed by a de-facto constitution called the Basic Law after the 1997 handover to Beijing) left over from the city’s days as a British colony.
An election of local council members on November 24 saw a landslide victory by pro-democracy parties as they gained control of 17 out of 18 District Councils (in a vote widely seen as a referendum on Hong Kong’s current government and, by proxy, Beijing’s involvement).
Despite these issues, not all Canadian business officials are pessimistic. Craig Lindsay, managing director of the Arbutus Grove Capital Corp. and a former president of the Vancouver section of the Hong Kong - Canada Business Association, said it would be a mistake for Canadian companies to uproot themselves from the city that still has long-term potential.
“Not to diminish what’s going on for the last couple of months and what happened in the council elections,” Lindsay said. “When you take step back and look at what’s been impacted from a business perspective, it has been entertainment, retail, leisure and hotels. And we have seen Canadian companies whose sales have been impacted in places like Hong Kong… But you look at the medium and long-term, Hong Kong remains an amazing platform to do business in Southeast Asia. You have the Rule-of-Law. You have the protection of intellectual property. You have sources of finance, and the logistics - it’s still one of the best places to live in Asia for foreign companies. So business hasn’t changed.”
Lindsay added that Hong Kong being closer integrated with China isn’t necessarily a bad thing for business, as the “Greater Bay Area” - a megapolis that includes Guangzhou, Shenzhen, Hong Kong and Macau - has 70 million consumers and make up 12% of the Chinese GDP, which presents new opportunities for Canadians who are willing to wait out the storm.
“There is cause to step back, get perspective and review your strategy when it comes to Asia, but I think it’s a huge misstep to take what’s going on in the past five months and say, ‘We’re going to Singapore.’ That’s going to be a huge mistake for Canadian businesses.”
Su, however, said he is seeing “a lot more caution” from western businesses when it comes to Hong Kong. He noted that there is still a high volume of business activity linked to the city, but the pace is definitely not at the usual pace seen in the last few decades. He also added that Hong Kong’s proximity to (and dependence on) the Chinese market is becoming a double-edged sword that will be increasingly difficult to manage if the ongoing unrest isn’t fundamentally resolved.