Beijing’s recent push to implement a national security law in Hong Kong — a Chinese special administrative region — once again heightened worries that the city’s autonomy is being compromised.
Hong Kong, a former British colony returned to Chinese rule in 1997, is governed under the “one country, two systems” principle. The framework allows the city some freedom that its mainland counterparts don’t enjoy, such as self-governing power, limited election rights, its own currency and a largely independent legal system.
Such autonomy from mainland China underpins Hong Kong’s position as a leading global financial and business center. It’s also a reason why the U.S., by law, treats it differently from other Chinese cities — but that so-called special status is now under threat.
Still, Hong Kong has been an important gateway between China and the rest of the world. That is likely to remain so for some time, even though the territory’s contribution to China’s economic growth has diminished through the years.
“I think that Hong Kong will be difficult to replicate elsewhere in (China) to be honest, and I think that it makes sense to double down on … (the) grand vision of ‘one country, two systems’,” Kurt Tong, former U.S. consul general to Hong Kong and Macau, told CNBC’s “Squawk Box Asia” earlier this month.
Here are some charts that show several reasons why Hong Kong is important to China.
Open capital markets
One of the most obvious traits that separates Hong Kong from the rest of China is its position as a free and open economy. That allows the territory to attract money from different parts of the world more efficiently than other mainland Chinese cities which are subject to capital controls.
As a result, a growing number of Chinese companies are taking advantage of Hong Kong’s access to global investors to raise funds. That has helped Hong Kong become the world’s top market for initial public offerings for seven out of the past 11 years — including in 2019 when the city was engulfed by widespread pro-democracy protests that sometimes turned violent.
Increasingly, the city is also becoming a gateway for Chinese investors to invest in international companies, said Charles Li, chief executive of the Hong Kong stock exchange. That’s especially so if more foreign companies can sell their shares to mainland investors through a listing in Hong Kong, he added.
“When that happens, we will see very, very sustained flows of foreign companies wanting to be listed here because they are able to directly sell into China, which is still a captive capital base,” Li told CNBC’s Emily Tan on Wednesday.
The exchanges of Hong Kong, Shanghai and Shenzhen are linked through a program called the stock connect. It allows investors to trade — through their home…