Hong Kong finance booms

After 6 traumatic and dramatic years for Hong Kong the city appears to be roaring back.  The past month has seen the Financial Times run a number of stories charting the comeback and boom in the financial sector, often seen as the bellwether for the territory’s economy and fortunes.  The past 6 years have not been easy by any measure, over 6 months of pro-democracy protests swiftly followed by the covid pandemic.  The city closed itself off from China and world and initially enjoyed a covid free bubble yet excessive quarantine procedures, mismanagement of the virus when it eventually swamped the city, all as a government clamped down on pro-democracy figures resulted in an exodus of both local and expats.  It was hardly surprising that many declared the death of Hong Kong and how it would never be the same.

As this column highlighted last month Chinese mainland stocks have been on a roll and Hong Kong is no different.  The Hong Kong market is up 30% for the year and funding raising is the highest in 5 years.  The feared exodus of professionals to Singapore failed to materialize.  While many banks and businesses did move staff to Singapore that was driven by the still highly onerous quarantine restrictions in Hong Kong but also limited by Singapore’s unwillingness to offer long term work visas to many of the new arrivals.  Work visa arrangements were often only for a period of months, and Singapore then and now still is struggling to manage the growing frustration of its domestic population with an ever-growing influx of foreign workers.  Strict quotas are in place across all industries managing the ratio of local to foreign workers.  But leaving that issue aside, Singapore was never going to be a gateway to China proper.  Only Hong Kong is able to do that.

This financial boom though in Hong Kong is noteworthy from previous booms.  While almost all Hong Kong related booms over the past thirty years are been driven by the myths and realities of China and its vast market this China driven boom is different.  Previously Hong Kong has provided an open and legally sound avenue to invest into China, with capital controls still very much in place and no possibility of them ever being removed under one-party rule Hong Kong’s privileged position gives it a unique status for investment looking to invest into the Mainland.  Now the tables are reversed, it is Mainland money and companies which are very much in the driving seat with over 1 trillion HKD of Mainland money coming into the Hong Kong market.  Mainland companies are, as before, needing funds and Hong Kong meets that need.  The initial public offering of battery maker CATL earlier this year was the world’s largest and will provide the company with foreign currency to allow for its international expansion.  But while Chinese companies and financial flows in and out of China have always been the driver behind Hong Kong’s market perhaps the most telling difference between now and previous booms is the mix of people.  According to the Financial Times, based on their calculations on data provided by the Hong Kong government over 241 thousand work related visas have been granted to Mainlanders during the years, 2023, 2024 and the first half of 2025.  That accounts for 74% of all work visas.  In comparison, in 2019 Mainlanders received 24 thousand visas, being only 37% of the total.  This very significant increase in Mainland related visas is very indicative of the change of staff required now even by foreign banks.  The big global firms may be hiring again in Hong Kong, but it is not the international mix of previous decades.  The huge influx of Mainlanders no doubt is partly as replacement hires for Hong Kong middle class professional locals who have left Hong Kong for the UK, Australia or Canada to escape the worsening climate for civil society and education.

The Other Changes

All too often a booming stockmarket and financial sector are used as an easy proxy for the broader economy.  While that is partly true it can often be highly misleading as well.  Hong Kong is a financial centre, an important one for the world but an essential one for the People’s Republic, but according to government statistics the financial sector accounts for just under one quarter of GDP and less than 10% of total employment.  A significant and important sector but most people in Hong Kong are not directly touched by it.  Hong Kong retail which according to the same statistics employs slightly fewer people is really struggling.  While Shanghai has lost the competition to Hong Kong when it comes to which is the leading financial centre Shenzhen is really undermining Hong Kong as a retail destination.  The Mainland city is now accessible on the local MTR network and movement across the border has never been easier.  Shopping and eating in Shenzhen is now the default for many in Hong Kong.

But darker and more ominous trends have happened over the past 6 years.  This month The Committee for Freedom in Hong Kong Foundation released a report detailing systematic abuse inside Hong Kong’s prisons.  The report is truly damning in its assessment and is worth quoting directly.  The executive summary starts:

“…this report reveals a prison system that has normalized abuse and neglect, suppressed dissent, and violated both international and local legal standards.

Hong Kong’s prisons have become a hidden front in the city’s broader assault on civil liberties, where unchecked power and secrecy prevent accountability. More than 1,900 people—among an average prison population of 8,250—have been sent to Hong Kong’s prisons on political charges since 2019, many without trial, and nearly 800 men, women, and youths remain jailed for their democratic activism.  They are routinely held for years on remand (without bail) and singled out for harassment and isolation.”

These words seem incredible to anyone who knew the city before 2019 yet political repression is now the order of the day and everything the government now undertakes is seen through the lens of national security.

Also incredible is the Hong Kong police website page of those Hongkongers wanted under the National Security Law.  Under vague legal terms of “collusion with a foreign country to endanger national security” or “subversion” or “incitement to secession” 19 Hongkongers have bounties of 1 million HKD and another 15 have bounties of “only” 200,000 HKD if they are caught.  All are living abroad at present and all live in fear.

While Hong Kong’s financial sector is buoyed by new technology listings and companies a thought might be spared for Chinese banker Bao Fan, founder and CEO of China Renaissance, China’s leading investment bank and the banker to China’s biggest internet companies.  He was only released recently after being disappeared for over two years while he “helped” with investigations.  He wasn’t the first banker or CEO to be detained, and he won’t be the last.

Those looking for good financial reporting on Chinese companies should note was well another journalist work visa refusal this time for Bloomberg reporter Rebecca Choong Wilkins.  She joins a growing list of journalists who have seen their visa renewals denied with explanation.  In 2019 Hong Kong ranked 73 on the Reporters without Borders Press Freedom Index.  In 2025 it had fallen to 140 sitting between Sri Lanka and Kazakhstan, China was down at 178 with only two countries below it.  This writer has always considered the foundations of a global financial center to be dependent on the free flow of people, information and capital.  Hong Kong is going backwards when it comes to the first two but the third can cover over the weakness for a time.

Not pre-2019 Hong Kong

Hong Kong is not dead, the city of 7 million people didn’t just stop or disappear from the world map.  The traumas and changes are very real though.  Hong Kong does retain a unique position for China because it still operates on a different set of rules from the Mainland, especially and importantly when it comes to financial flows.  As China’s domestic economy boomed plenty of stories were written about Shanghai overtaking Hong Kong as China main financial center but the major stumbling block was always capital controls.  Hong Kong’s unique position has ensured it remains useful to both corporate China and the state more broadly.  The current financial boom is maximizing those advantages but the post-protest, post-covid Hong Kong is a different place from before.  As part of the sanctions on Hong Kong because of the protests Hong Kong has lost its distinct customs status for trade with the US.  The US now views Hong Kong and China as a common entity and that has geopolitical ramifications.  Some business still operate in Hong Kong but have moved their registered base outside of the territory to present a more acceptable face to US investors.  Trump may not have turned his full fury towards China as yet but China remains perhaps the only issue which receives bipartisan support and no distinction is now made between Hong Kong and China.  US investors have been curtained by their government in some China related investments but there is still plenty of room for an increase in restrictions and Hong Kong will be in the crosshairs if that time comes.

Hong Kong had provided a haven for many Mainland professionals who wanted freedoms they could not obtain in Xi’s China.  As Hong Kong grows closer to the Mainland as “just another Chinese city” successful Chinese are looking further afield, especially to Japan, as an offshore base within Asia.  This trend is likely to continue.  The Hong Kong government views everything through their national security lens and their primary policy is greater integration into the Greater Bay Area.  Who is attracted to Hong Kong going forward to going to be a very different mix from the past.

Over the decades Hong Kong has reinvented itself numerous times and this is just another reinvention, but the political and civic changes cannot be downplayed.  The introduction of the National Security Law provides the government with tremendous power to exercise control in individuals’ lives and business operations.  The ongoing political crackdown against any criticism of the government is highly worrying or should be to all businesses and the closure of independent media outlets and restrictions on journalists only adds to those concerns.

Hong Kong has always ridden on the back of China’s economic fortunes, and for the moment there are certainly sectors and companies from the Mainland that are booming but Hong Kong can’t escape from the downturn within China.  China’s broad economy is struggling.  China is the world’s biggest producer of EVs but few of the companies make money and consolidation and failure will affect many of them.  CATL is the standout listing from this year but only a few weeks ago Evergrande eventually was delisted from the Hong Kong exchange after years of suspension.  Evergrande was once the biggest real estate firm in China but now its legacy is 300 billion USD of debts.  Such are the booms and busts of China.

Hong Kong finance can still boom for the moment, deals will be done and stocks will rise, but the place is now on a very different path from a decade or two decades ago.  It is hard to imagine that political reform will ever be the rallying cry it once was in the city but the warning signs for businesses should be clear.  The sole focus on national security and the collapse of press freedom cannot be ignored and should temper any business-as-usual predictions for the city.  Hong Kong isn’t dead, nor is it dying as a city, but it won’t be as dynamic a place as it once was, and Beijing leaders will be delighted by that.