Riding the wind of rebirth

"After we joined forces with several major property developers on Hong Kong Island to control the number of properties released, and at the same time attracted funds from various sources to enter the stock market, especially the popular 'red chip stocks,' which became a turning point in last year's stock market defense, we have only just managed to bring the Hang Seng Index back to 10,000 points in the past year or so, and the real estate market has also begun to stabilize and rise again."

"But they've recently started new moves that are even harder to deal with."

“First, by changing Hong Kong Island’s original fiscal policy and financial management system, they suddenly caused a ‘sustainability crisis’ that we had maintained for decades with the policy of ‘living within our means and having a slight surplus’.”

"The methods mainly consisted of two aspects. On the one hand, they abolished the linked exchange rate system, which was conducive to financial stability, and promoted high-risk stock and futures trading, which had a great impact on the stability of Hong Kong's financial order."

"We have considerable experience in dealing with this. So-called high-risk stock and futures trading is essentially nothing more than investing in volatile regions, controversial industries, and leveraging."

"Now we have brand-new financial system analysis tools. Although the risks are high, they can be controlled by our new financial analysis models and trading tools. Moreover, the greater the risk, the greater the potential return. It is more likely that they themselves will end up shooting themselves in the foot."

"However, on the other hand, it is difficult to deal with. In order to counter the opposition to fiscal investment, they have made a big deal out of the issue of 'people's hearts' by implementing high-welfare 'retirement pension' programs, which significantly increase pensions for the elderly, unemployment benefits, and civil servants' salaries."

"Such so-called 'welfare' completely ignores the steady development of Hong Kong Island's finances in the future. It is an attempt to disrupt public opinion and win people over by overdrawing the future capacity of the SAR government."

"This move will undoubtedly increase the burden and debt of the SAR government in the future, and will undoubtedly cast a shadow over the future development of Hong Kong's financial sector. However, the people of Hong Kong Island have gained short-term benefits, so such operations are very misleading. At present, we have not found a better solution."

"In addition, there is a huge fiscal trap. The Hong Kong British authorities did not consider the actual financial situation and previously invested in a series of large-scale infrastructure projects such as the new airport, shipping terminal, No. 9 container terminal, and Northwest Railway. These infrastructure projects together amounted to HK$127 billion in fiscal expenditure. In the future, these projects will all be taken over by the Hong Kong SAR government."

"While these infrastructure projects may indeed create favorable conditions for stable economic development in the long run, the fact that they are being implemented so quickly and urgently within a short period of time could easily lead to an unsustainable situation should the economic situation change or Hong Kong's finances become strained."

The old man crossed his arms, his brows furrowed, his eyes as deep as ever, making it difficult to discern his true feelings.

Li Laosan looked at Zhou Zhi, who calmly nodded slightly. This attitude gave Li Laosan some confidence, and he continued, "Given all these circumstances, it's inevitable that everyone is filled with worry about the future of Hong Kong Island, and such worry inevitably undermines investors' confidence."

"Like rowing against the current, one either moves forward or falls behind. Hong Kong Island is therefore threatened and challenged by several competing cities around it. Tokyo, Taipei, Bangkok, Jakarta, and Singapore are all striving to improve themselves to become international financial centers in the Asia-Pacific region, and are catching up in terms of liberalization, the quality of infrastructure, and the completeness of financial institutions."

“Since the 1990s, Taipei has been actively accelerating its pace of financial internationalization and has formulated an ambitious ‘economic revitalization plan’ that clearly states its intention to build Taipei into an international financial center.”

"However, we believe that such a possibility is not high. The geographical environment, social organization, and of course, the most important political factor of Taiwan, make instability its biggest drawback."

"Bangkok is currently the fastest-growing city in Southeast Asia and is striving to become an international banking center. However, it also has very serious problems, just like Mexico. It has not only opened up local banking services to foreign banks, but also allowed some financial businesses that previously had to be conducted overseas to be conducted domestically. Undoubtedly, this shows that it has not learned from Mexico's painful lessons."

"Moreover, according to our preliminary research, the possibility of Bangkok repeating Mexico's mistakes is increasing."

"In addition, there are Kuala Lumpur, Manila, and Seoul. These cities are all quite competitive, especially Kuala Lumpur, which is already showing signs of becoming a regional financial center." "Tokyo is even more advantageous. It is already an important international financial center with a large banking consortium offering a wide range of services. To date, a significant portion of the wealth that has flowed out of Hong Kong Island has been attracted away through Tokyo's mature financial services."

"But of all the cities, we believe that Singapore will be the most competitive."

"The reason for this inference lies first and foremost in the considerable homogeneity between New Port and Hong Kong."

"Both places are urban economies, both are port cities, and their natural geographical advantages are quite similar."

"In terms of the financial environment, both places are adjacent to high-growth economic zones and have the same low-tax policies of free ports."

"In terms of port logistics advantages, the new island is even stronger than Hong Kong Island."

"In addition, Singapore is the center of the US dollar in Asia, with stronger US dollar liquidity than Hong Kong Island. Its foreign exchange market is larger than that of Hong Kong Island, its securities market is not as good as that of Hong Kong Island, but its futures market is more developed than that of Hong Kong Island."

“Among the foundations and other non-bank institutions, AXA is the representative of Hong Kong Island, but Temasek is also on the New Island, so the two are evenly matched.”

"However, the new island has a clear advantage in terms of rent and salaries, and is now committed to tax and management reforms, and has launched a series of preferential policies to attract foreign banks."

"With the absence of political interference, many financial institutions have recently established their Asia-Pacific regional headquarters there. This has undoubtedly greatly increased their competitiveness."

"All of these factors have diminished the attractiveness of New Zealand as an international financial center."

"In addition, the Hong Kong British government's reckless and radical policies led to an inflation rate of around 10% on Hong Kong Island for several consecutive years, which passively increased the operating costs of financial institutions. All these factors combined led to many 'pillar enterprises' based on Hong Kong Island 'leaving Hong Kong Island'."

"After Jardine Matheson moved its registration to Bermuda, other British conglomerates such as HSBC also moved their registrations overseas. These companies are accelerating their 'decoupling' from Hong Kong Island by relocating their primary listing status and increasing overseas investment."

"Related to this is the brain drain. The number of immigrants has remained stable at 50,000 to 60,000 per year in recent years, and the total number of Hong Kong residents holding foreign passports has exceeded 450,000. Many of these people are highly educated and well-trained financial professionals."

"The outflow of talent such as accountants and licensed fortune tellers will inevitably lead to a decrease in Hong Kong's economic efficiency."

"But the most fundamental problem is that Hong Kong's economy is too dependent on external factors, and its financial system is somewhat vulnerable."

"This is because Hong Kong does not actually possess a solid economic foundation commensurate with its highly developed financial strength, especially its industrial base, the highly developed nature of its financial markets, and the excessive reliance of its banks and stock market on the real estate sector." (End of Chapter)