The gamble has always been clear: The Chinese Communist Party bets greed. With copious evidence to back its standpoint and its own rapaciousness to draw upon for experience, it believes that companies and investors will turn a blind eye to its abductions, torture and incarcerations of the innocent provided that they can get rich along the way. Hell, they can even be relied upon to cheerlead brutality when duty calls.
Few would doubt the soundness of the logic, but one thing holds it all together: money. Without the cash to justify selling other people’s children into prison, tacit complicity in such policies becomes precisely as undesirable as it sounds.
Yet Hong Kong now expects investors to guess whether they can get any bang for their buck or not, because the Hong Kong stock exchange will no longer require listings to disclose risks related to China’s policies or its business and legal environments. So to speak, it is preparing investors for a lucky dip more akin to the city’s famous racecourse than one of the world’s most vaunted bourses. Will you be buying into sanctionable slavery in East Turkestan (Xinjiang) or will you not? Roll up! Roll up! Chance your arm!
Hong Kong’s powers-that-be are emulating mainland China, which has leaned on lawyers to beautify or drop investment risks from documents that accompany offshore listings. Since all overseas stock offerings of the kind have to first be vetted by the Chinese Security Regulation Commission, among others, non-compliance is not an option. At the same time, new espionage laws recast telling economic truth into a potential crime against the state, and analysts are being reminded to avoid uttering omens like “deflation,” which can apparently never exist in China in any case.
Following the lead of such policy is a strange direction for a city whose reputation is finance and whose business is built upon being a reliable gateway to China. Even the most basic of economics textbooks asserts the intrinsicality of honest information flow to market efficiency. Perfect knowledge may be unachievable, but at least it is a dependable compass point to make for. Perfect ignorance, by contrast, means walking in circles and dropping your wallet along the way.
True, Beijing’s army of online trolls will be defending the changes on the grounds that stock issuers incorporated in China will merely have to adhere to the same disclosure rules as those from elsewhere in the world. What this ignores is that the basics of practical reality are relatively assured for the citizens of most countries.
For example, they can predominantly trust that the animals in their zoos are genuinely what they say they are, having had no contrary experience, and can research something as trivial as a band name without expecting the information they discover to have been through a government mangle beforehand. They can also complete day-to-day financial activities, like withdrawing money, without taking an implicit vow of silence along the way.
Inviting people to accept conditions of fakery, deceit and forced labor on behalf of others is one thing. Tying their financial health to it is quite another, and Hong Kong’s decision to align its disclosure policy with that of China does not look auspicious for the future of the Hang Seng. Unlike with the city’s embattled tourism industry, where international visitors can be offset with mainland sightseers for as long as Hong Kong still has some shred of unique identity, there will be fewer takers for stock-offerings that may or may not be stillborn.
Truth and nonsense aside, it is far from a ringing endorsement of investment prospects that risks about them will no longer be disclosed. Just how bad is the business environment that China does not want to talk about it? Which sector of the economy will Xi Jinping hammer with a crackdown next? How do “wolf warriors” plan to alienate the major markets for Chinese companies even further? When will the next gargantuan property developer collapse into an economic black hole? Place your bets now.
The strategic strength of Hong Kong to Beijing since 1997 has always been its framing as China not China. For decades, it acted as a veil and an enticement: The facade of freedom facilitated money flow, while international visitors basked in the glow of skyscraper lights on the harbor, forgetting that literal murderers were pulling the strings in the shadows. The trick worked. The world embraced amnesia. Hong Kong became iconic in a manner that never would have been possible for Shanghai or Beijing.
Yet now the veil itself is being veiled with nothing new to cover it except a curtain of darkness. Slide your money underneath if you wish. Just don’t expect to get it back again.
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