Beijing’s imposition of the national security law for Hong Kong has elicited a torrent of impassioned Western condemnation. Pundits decry the supposed end of Hong Kong’s unique “two systems” and predict the decline of Hong Kong as an international centre of finance and commerce.

It appears to me – a sometime resident and long-time observer of both Hong Kong and mainland China – that the present near-hysteria over Hong Kong’s future may be as far off the mark as most dire forecasts by China bear prophets have been over the past 30 years.

Will the security law spell the demise of the special administrative region as a finance and commerce hub? Some IT companies may indeed relocate out of Hong Kong, journalists may decamp as their visas are not approved, and some other businesses may feel sufficiently discomfited by the security law to leave Hong Kong.

Most multinational firms, however, will remain in Hong Kong because of its unequalled advantages. Situated on the edge of mainland China and at the crossroads of northeast and southeast Asia, Hong Kong has a cosmopolitan, hybrid society that accommodates expatriates easily.

It offers low taxes, an educated English-speaking workforce, and the highly developed infrastructure of lawyers, accountants, analysts and other support required for an international finance centre. The CEO of Citibank has affirmed that the bank will stay in Hong Kong, and both HSBC and Standard Chartered Bank have announced that they support China’s laws and regulations that contribute to the stability of Hong Kong.

As a percentage of Chinese gross domestic product, Hong Kong’s economy has declined since 1997, but this statistical decline does not reduce Hong Kong’s irreplaceable advantages to the mainland. China excels at long-term, holistic strategy. In China’s economic development plans, Hong Kong will continue to play an important role. It will not be “just another large Chinese city”.

Mainland China will value Hong Kong as a favoured place for foreign currency funding. As New York becomes inhospitable to mainland companies, Hong Kong will attract offshore listings of Chinese companies. During the past year of protests, and since the promulgation of the security law, Hong Kong’s financial life has scarcely missed a beat.

A few years ago, China launched its Greater Bay Area vision, linking nine contiguous cities plus Hong Kong and Macau. Over time, Hong Kong will become the financial services centre and the point of interchange with international business for the Greater Bay Area.
Thorny issues of harmonising laws and regulations must be worked out before capital and labour can freely move across the border. Nonetheless, the Greater Bay Area will expand the horizons of Hong Kong as a financial centre.

Hong Kong’s attractiveness to Western and Chinese businesses has relied considerably on its Western legal system and the independence of its courts. Will this not be compromised by the security law’s limitations on freedom of speech and authorisation for mainland courts to try Hong Kong national security cases?

No one can dismiss that concern, but it is likely that the threat to Hong Kong’s British-based rule of law is exaggerated. In any jurisdiction, national security and human rights form only a tiny portion of the totality of the rule of law.

Most court cases relate to ordinary civil and criminal matters – enforcement of commercial contracts, environmental codes, property rights, corporate governance codes, etc – that underlie efficient conduct of business. For the financial services institutions of Hong Kong, the transparent application of these aspects of rule of law by impartial courts is essential to their continued presence in Hong Kong. Freedom of expression in political matters is not essential for multinational financial institutions.

Singapore is a thriving Asian financial and commercial centre in which dependable rule of law coexists with a relatively authoritarian political system.

China knows that Hong Kong’s value lies in its different system, especially its legal system. After dealing with threats to order and security involving national sovereignty, China has good reason to ensure that Hong Kong’s separate legal system remains intact.

It would be embarrassing for China if Hong Kong were to fail due to an exodus of foreign and local businesses. China will go to great lengths to prevent that from happening.

Three developments could threaten Hong Kong. First, US sanctions on companies doing business in Hong Kong could force Western companies to exit. Such sanctions would amount to killing the patient to save the patient, but for the present US administration, Hong Kong is a pawn in America’s conflict with China.

The US is precipitating a rupture in US-China relations; to what end is not clear. If the welfare of Hong Kong is sacrificed in the struggle between the two giants, that is unlikely to faze the Donald Trump government.

Second, ill-considered encroachments by Beijing on the commercial and civil law systems of Hong Kong, or attempts to impose the same cyber firewall on Hong Kong that prevails on the mainland, would induce at least a partial foreign corporate exodus.

Third, continued fomentation of unrest in Hong Kong by overseas-based protesters, resumption of local protests, or intransigent unwillingness of the Hong Kong opposition to find reasonable compromise solutions, would be intolerable to Beijing.

If none of these contingencies comes to pass, then with the passage of time, some Hong Kong people will have emigrated abroad; those remaining will adapt and get on with their lives.

Critics have a point. Change has now come to Hong Kong; it will never be the same again. Unquestionably, something of value has been lost – some degree of freedom of political expression.

But much is likely to remain the same, and much may improve due to restoration of order and increased government attention to issues of social equality, affordable housing and expanded economic opportunity for Hong Kong people.

Hong Kong people are practical and resilient. Hong Kong as a dynamic global city has a future under “one country, two systems”, even with the national security law.

James Stent, the author of China’s Banking Transformation, has pursued a career in financial services in many parts of Asia including Hong Kong and mainland China.

Originally published in the South China Morning Post.