Why HK needs to be careful amid China SOE mobilization talk

September 17, 2019 11:17
Hong Kong will pay a price if it allows Chinese state firms to make significant inroads into industries like finance, public transportation, telecoms and aviation, an observer warns. Photo: Bloomberg

Senior officials from nearly a hundred large Chinese state-run companies were said to have gathered in Shenzhen over the weekend for a meeting during which they were urged to step up investments in, or assert more control of, companies in Hong Kong.

The meeting was organized by the State-owned Assets Supervision and Administration Commission (SASAC), the top regulator of China’s sprawling state sector, according to Reuters.

At the meeting, the SOEs pledged to invest more in key Hong Kong industries including real estate and tourism in a bid to create jobs for local citizens and stabilize financial markets.

Even if the reports are correct, we must bear in mind that there are several dozen such meetings held in China every month, and most of these events end up being just talk-shops with no follow-up action.

Given that, it's a bit premature to say at this time if they are serious or not.

But let's assume, for now, that they are indeed serious. Will that be good or bad for Hong Kong?

On the positive side, more investments mean more jobs and higher asset prices. That is good news as long as everything is done via a free market and a level-playing field is being kept.

But if state-owned firms are given favors by the government, such as in regulated industries like finance, public transportation, telecommunications and aviation for example, that could undermine local businesses.

If SOEs march into Hong Kong and replace private sector players here, Hong Kong's world city image will be tarnished badly.

The full article appeared in the Hong Kong Economic Journal on Sept 16

Translation by Julie Zhu

[Chinese version 中文版

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Hong Kong Economic Journal columnist