China’s largest e-commerce firm, Alibaba Group, is reported to be planning a second listing in Hong Kong in the second half of this year. The news provides some cheer for Hongkongers against the backdrop of the US-China trade and tech war.
There is a view that Hong Kong can play a unique role as a “window” for business between the world’s two largest economies. For New York-listed Alibaba, the Hong Kong stock market is sort of a backup plan.
Alibaba plans to raise US$20 billion in the second listing in Hong Kong, according to a media report. Other than raising fresh capital to fuel an acquisition spree in overseas markets, the major reason for revisiting the idea of a Hong Kong listing could be because the mainland firm is concerned about finding itself in an awkward position in a worsening trade war scenario, as it fears it could be targeted by US politicians, becoming another victim like Huawei or ZTE (00763.HK).
The US government and the public have been stepping up pressure on Alibaba in recent years for fake products found on its online shopping platforms. Meanwhile, as Alibaba has actively boosted its capabilities in technologies like big data analytics, artificial intelligence and financial technologies, it leaves the firm vulnerable to charges in the US of being perceived as a national security threat. Finally, the arrest of Huawei’s CFO Meng Wanzhou certainly made many senior executives of US-listed Chinese tech firms, including those at Alibaba, keep awake at night.
Alibaba is keen to open up a new financing channel in Hong Kong so that it will have an escape route in case the group gets targeted, punished, or even forced to suspend trading on the New York Stock Exchange one day.
Also, the second listing in Hong Kong can bolster market confidence about the group, with backing from Hong Kong regulators. If the US-China tech and trade dispute worsens, the Hong Kong listing would put Alibaba in a position to perhaps even consider a voluntary delisting from the US market.
If that is indeed the plan of Alibaba, it reflects Hong Kong’s unique position and value as the US-China tension heats up. But this is not a time for celebration. The escalation in the trade war between the United States and China means more bad news for Hong Kong’s economy, given the likely cooling in global economic growth momentum. I don’t have to remind you of the close economic relationship between Hong Kong and mainland China.
But there may be a slight silver lining amid the trade war. In the past, top Chinese talents would consider the US as their best destination for top jobs. If the US now shuts its door to Chinese citizens from entering US universities and research institutes, Hong Kong can extend a welcoming arm to them.
For an economy to thrive, talents are more valuable than capital. As the US tightens curbs on Chinese talents, some US-based semiconductor companies have already halted hiring Chinese scientists, and Chinese students are facing more and more restrictions in their US visa applications.
Amid this situation, Hong Kong should join other countries, such as Britain, Canada, and Australia, in competing for this group of top Chinese talents and encourage them to come here. This would help the city beef up its competitiveness in the long run.
Under the one-way permit scheme, 150 people can move to Hong Kong from the mainland each day. The Hong Kong government should perhaps now consider allocating half of the one-way permit quotas to specifically absorb those Chinese talents who are getting their study or work visa bids rejected by the US.
This article appeared in the Hong Kong Economic Journal on May 29
Translation by Julie Zhu
[Chinese version 中文版]
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