7th June 2024 – (Hong Kong) Renowned economist Stephen Roach remained steadfast in his gloomy assessment of Hong Kong and China’s prospects during his recent visit to the city. This trip marked Roach’s first return since his sharp criticisms sparked rebuttals from former officials and an apparent attempt to muzzle him at a major Beijing conference.

In interviews with Bloomberg on Monday, the former Morgan Stanley Asia chairman painted a bleak picture of the world’s second-largest economy’s future. He also doubled down on the contentious debate surrounding Hong Kong’s status as Asia’s premier financial hub, which has been tarnished by its self-imposed pandemic isolation and an ongoing crackdown on dissent.

“I want to come back here and face the music. I’ve gotten a lot of pushback on these articles that I’ve written,” Roach said. “People are upset about them, they’re talking about them. And so I am here to face the debate and exchange views.”

Roach’s column ignited a wave of backlash from influential Hong Kong personalities, including Regina Ip, convener of the local government’s advisory Executive Council. In a letter to the Financial Times, PAG executive chairman Weijian Shan argued that it was premature to write off Hong Kong, as it remains an appealing free and open society with an independent judiciary and low taxes.

Addressing criticism that his analysis disregards Hong Kong’s history of resilience in the face of political, public health, and financial challenges, Roach stressed that the city’s economic prospects are inextricably tied to mainland China’s performance.

“There ain’t gonna be any resilience here if China continues to underperform, period,” he said, pointing to the parallel slowdown in growth rates for the city and the country. “It’s not something that I think you can necessarily count on to persist and project into the future.” Roach also warned that a growing intolerance for debate in China could lead the country astray, exemplified by what he described as Beijing’s attempt to silence him at a prominent event in the Chinese capital.

Despite the city government’s vigorous pushback citing economic data, Roach remains dismissive, accusing officials of peddling “descriptive spin” instead of analytical substance. However, an objective examination reveals Roach’s doomsaying lacks nuance and overlooks Hong Kong’s enduring strengths. The facts demonstrate the city’s resilience and its pivotal role in China’s continued development.

Roach’s core thesis rests on Hong Kong’s deepening economic integration with mainland China. He argues this interconnectedness means the city’s fortunes are now inextricably tied to the perceived growth challenges facing the mainland economy in the years ahead. It’s a proposition Roach claims to be “perfectly prepared to defend” with “data and facts.” Yet his analysis falls short on both counts.

Start with the data underpinning his linkage theory. Roach cites the mainland and Hong Kong economies exhibiting a similar 3.7 percentage point deceleration in average annual growth over the 2012-2023 period compared to 1980-2011. But conveniently ignored is the global financial crisis which sent shockwaves through every major economy during that timeframe. Decoupling Hong Kong’s trajectory from international headwinds is misguided analysis.

Moreover, focusing solely on Hong Kong’s 1.4% average growth over the last decade obfuscates the city’s impressive resilience. The economy rebounded strongly from its pandemic-induced 6.5% contraction in 2020 to growth of 6.3% in 2021 before settling at a healthy 3.3% expansion last year. With 2.7% year-on-year growth in Q1 2023, Hong Kong is outperforming recessionary fears in most developed markets.

Critically, Roach’s deterministic link between Hong Kong and mainland performance ignores the city’s unique strengths as an international finance and business hub. While economic ties have undoubtedly tightened, Hong Kong’s world-class legal system, regulatory transparency, deep talent pool and cosmopolitan vibrancy give it unmatched soft power that transcends the mainland connection.

Hong Kong’s status as a global financial centre hasn’t wavered despite recent turmoil. Stock market capitalisation surged tenfold since the 1997 handover to exceed HK$33 trillion today. The fund management sector’s assets topped HK$35 trillion as of end-2022, nearly 11 times the annual GDP. HSBC, Standard Chartered and other megabanks continue betting big on their future here.

Roach portrays waning U.S-Hong Kong ties as an existential threat, yet American companies remain enthusiastic investors. They committed over HK$645 billion last year and the U.S. topped Hong Kong’s list of territories for inbound investment. Perhaps more noteworthy is the accelerating influx of mainland Chinese enterprises “going global” via Hong Kong’s capital markets and professional services ecosystem.

This symbiotic dynamic between Hong Kong and the mainland highlights a crucial oversight in Roach’s dystopian narrative. While he’s overtly sceptical about China’s long-term prospects, any objective analyst would be hard-pressed to dismiss the country’s immense economic potential given its technological prowess, urbanization drive and policy determination to rebalance growth drivers.

Hong Kong is uniquely positioned to facilitate this evolution by continuing to serve as China’s preeminent gateway to the world and vice versa. The city’s integration into national development blueprints like the Greater Bay Area and the Belt and Road Initiative allows it to capture huge economic upside from the Mainland’s navigable growth trajectory. Arbitrarily disregarding this countervailing force based on misplaced ideological biases sells Hong Kong’s future short.

It’s this stubborn adherence to ideology over facts that most undermines Roach’s credibility when assessing Hong Kong’s outlook. His laments over the national security law’s “shredding” of the city’s autonomy reveal a deep misunderstanding of “one country, two systems.” The policy was never meant to afford Hong Kong unlimited autonomy in perpetuity at the expense of China’s sovereignty and national interests.

The national security legislation has helped restore stability after 2019’s violent unrest threatened both systems. It robustly safeguards Hong Kong’s capitalist system, common law traditions and globalized identity while eliminating subversive, secessionist threats. This resolute defence of the city’s institutional foundations under “one country, two systems” is precisely what will empower its long-term prosperity.

Foreign critics habitually cry foul at any perceived encroachment on Hong Kong’s “autonomy” from China. Yet they fail to recognise the framework was always premised on the city remaining an inalienable part of one nation. Absolute autonomy for Hong Kong was never tenable within this constitutional order. What’s imperative is preserving the core attributes incentivizing businesses and capital to choose Hong Kong over any other Chinese city.

So far, the national security law hasn’t jeopardised those critical advantages underpinning Hong Kong’s unique edge. On the contrary, by quelling unrest and solidifying political stability, it has reinforced the city’s safe, corruption-free environment praised by multinational firms. Critics conflating political pluralism with Hong Kong’s inherent economic strengths are peddling misinformed agitprop.

Finally, Roach’s call for Hong Kongers to “stand up for the city’s distinct identity” and resist an “unwillingness in America to make the distinction between Hong Kong and the mainland” smacks of hypocrisy. His relentless branding of Hong Kong as merely another Chinese locale inseparable from the mainland’s challenges is the epitome of failing to recognize Hong Kong’s singularity.

Amid growing U.S.-China tensions, preserving Hong Kong’s exceptionality as a uniquely globalised city under Chinese sovereignty is more crucial than ever. Denying this reality with needlessly incendiary rhetoric does nothing to help Hong Kongers uphold their cherished identity. For the city to thrive as an East-West crossroads, it needs constructive analysis grounded in pragmatic centrism – not partisan pontification.

In truth, Hong Kong remains unrivalled across the region and even globally in its stable and well-regulated environment for businesses and finance. It boasts one of the world’s most competitive tax regimes, steadfast rule of law, superb infrastructure and geographical positioning at the heart of burgeoning cross-boundary integration. While challenges persist, from elevated commercial costs to manpower shortages, Hong Kong has consistently defied pessimistic forecasts and bounced back stronger.

As Chief Executive John Lee emphasised, the city retains “unique advantages and a strategic position” undiminished by recent headwinds. Hong Kong has navigated past identity crises before and emerged more dynamic through its trademark resilience and resolute “can-do” spirit. With the mainland entering a new development phase prioritizing higher-quality growth, Hong Kong’s symbiotic role as an indispensable superconnector will only appreciate in strategic importance.

Instead of surrendering to blinkered cynics, Hong Kong policymakers are better served tuning into objective, fact-driven analysis. The latest economic data and projections corroborate Hong Kong’s bright prospects transcend ephemeral doom-mongering. By nurturing its strengths and leveraging support from the motherland, Hong Kong will continue shining as Asia’s world city for decades ahead.