
Hong Kong’s Clout as a Global Financial Center Clouded by Uncertainty - JumpCrisscross
https://www.wsj.com/articles/hong-kongs-clout-as-a-global-financial-center-clouded-by-uncertainty-11560504645
======
kodz4
Ya one day they are moving out of London because of Brexit, another day out of
Hong Kong because of China. If these Financial "Centers" are easy to move why
does anyone need a Center in the first place?

~~~
rolltiide
> If these Financial "Centers" are easy to move why does anyone need a Center
> in the first place?

Because at one point you did. And the existence of those places worked on
removing barriers of trade. And now those places are being dismantled while
the barriers of trade are already removed.

So you get the luxury to look at it through the lens of the present, ignoring
how it came to be completely.

At this point financial centers offer different collections of favorable
regulations that you can choose at your own whim.

Separate jurisdictions shift nuances of law around and compete on this still.

For example, many people access the US markets through Delaware "because they
heard" and have no idea what the other 49 states, 1 district, and 5
territories offer despite having complete autonomy to compete over the last 30
years.

Some of those 55 jurisdictions are faster, cheaper, have Chancery courts, have
favorable court rulings completely opposite of Delaware, can lean on Delaware
case law if desired, have newer and more interesting business types you can
create, may be more private and anonymous, may be better for your business.

Thats how centers develop and their utility. Its mostly the ease of getting
the local government to listen to the desires of ephemeral entrepreneurs.

~~~
robocat
> For example, many people access the US markets through Delaware "because
> they heard" and have no idea what the other 49 states

Unless another state has a _very_ compelling benefit, why make things riskier
and difficult?

Usually you want to find a solution that you can see works, that has a good
network effects for professional services, and that has the largest number of
similar businesses for stability (so that the state is not interested in
causing problems directly or by side-effect, and the state has aligned
incentives to help foreign businesses).

The same thing occurs with offshore havens. Network effects matter.

Network effects is given as a major reason for why YC recommends Delaware
C-Corps: [https://www.lawtrades.com/answers/y-combinator-startups-
go-c...](https://www.lawtrades.com/answers/y-combinator-startups-go-c-corp-
route-delaware-vs-s-corp/)

~~~
rolltiide
> Unless another state has a very compelling benefit, why make things riskier
> and difficult?

Because some of those 49 states, 1 district, and 5 territories have very
compelling benefits and are not riskier and are not more difficult. Which
professional service is most useful to you? Incorporation and legal services
are extremely prevalent.

Example:

Wyoming has API based incorporation which takes less than 24 hours and is
cheaper. Faster, cheaper and better: pick all three, its a valid option!

The same top incorporation services for Delaware cater to Wyoming as well.

Lets look at common users on this site or industry:

\- No Stripe Atlas target customer needs or benefits from Delaware over the
above example of Wyoming. IIRC Stripe Atlas itself funnels people to Delaware

\- All VC backed companies with employees have higher compliance requirements
by flocking to Delaware which passed stricter securities transparency laws
giving employees more rights about information

\- No software engineering contractor that's lazily avoided all legalese but
now heard they might want an LLC needs Delaware. They will also gain zero
benefit from its fairly unique court of chancery.

\- No app developer gains more benefits from Delaware than similar states like
Wyoming and never has any need for its fairly unique court of Chancery.
(Wyoming also has a court of chancery)

\- pretty much only multinational conglomerates with complex M&A disagreements
that even can be heard at a state-level court needs Delaware

This isn't to present a false dichotomy of Delaware vs Wyoming. Wyoming has
the same level of benefits as Delaware for these above use cases, except
Wyoming happens to be faster and cheaper to use. If every entrepreneur was
flocking to Wyoming irrationally, I would point out the exact same things. Or
perhaps I would have spent time with the UCC and state legislators to make
even more competitive incorporation statutes somewhere else.

~~~
andrewflnr
You've convinced my to consider Wyoming. Where should I look for other
compelling options? It still doesn't seem worth it to examine the laws of all
56 jurisdictions in the US ...

~~~
rolltiide
> You've convinced my to consider Wyoming.

Great, definitely compare and contrast.

> It still doesn't seem worth it to examine the laws of all 56 jurisdictions
> in the US ...

Not sure and you're right that it isn't worth it to do that, but the simple
reality is that legislatures didn't just ignore their incorporation statutes
for 30 straight years while Delaware was winning the marketing game. Their
fairly unique Court of Chancery isn't really useful in today's world for most
organizations. There is a simple benefit in reading comprehension.

There are common attributes that jurisdictions offer for legal persons. Namely
related to the privacy and protection of the natural persons that created the
legal person. You make a list of the things that are important for you, and
then there may be charts that show how well a jurisdiction offers a certain
perk.

The next aspect comes down to competency, and this isn't easy to gauge from a
chart. Most jurisdictions aren't attracting lots of foreign business and
simply don't have a group of public servants that know how to do what the
state legislature said was legal. So popular streamlined states like Wyoming
and Delaware cut through that process of deduction really quickly. But if you
do have patience then you can really leverage obscure jurisdictions.

The third aspect comes down to state priorities and psychology. Again,
incorporation laws are usually made to be competitive, but states and outside
jurisdictions usually aren't focused on the "incorporation industry" like
Delaware and some United and micro states are. Most jurisdictions exist
because someone was EXTREMELY PASSIONATE about succession/partitioning for an
ideology and then maintaining stability. And then some foreigners see the
power vacuum and are like "hey nice new state you have, while you're at it how
about passing this LLC statute, yes its the same as Colorado's but all the
directors and beneficial owners are unknown and the state doesn't levy any
taxes or really ask any information at all, you'll make money from the annual
incorporation fees alone." and the governor and legislature is like "uhm what
yeah okay back to our extremist ideology and sugar plantation regulations",
but you'll potentially be able to leverage a sovereign brand and sovereign
protection for centuries before anyone really revisits the incorporation laws.

When you're ready to really get to the next level, there is a lot you can do
with creating legal persons in one jurisdiction under one set of laws that own
legal persons in other jurisdictions under different sets of laws. Mix and
match. Lots of structures, infinite permutations possible. Many perks.

------
maphar
[http://archive.is/1TeqY](http://archive.is/1TeqY)

------
theslurmmustflo
Can the elites build Freeside already?

[https://en.wikipedia.org/wiki/Tessier-
Ashpool](https://en.wikipedia.org/wiki/Tessier-Ashpool)

------
majia
Freedom and democracy are never requirements for being a global financial
center. What capitalists want are stable government, low tax and few
regulations. They don’t care if some political dissents are sent to Beijing.

~~~
JumpCrisscross
> _What capitalists want are stable government_

Yes.

> _They don’t care if some political dissents are sent to Beijing_

Yes, companies and investors care if a Hong Kong dispute can be spirited to a
Chinese court if one of the litigants is well-connected in Beijing.

~~~
noobermin
Nope, then said capitalists lead to grease those gears just like they do in
America with donating to both political parties.

------
m23khan
more and more, among upcoming global cities, Toronto and Dubai make the most
sense for the next big financial centers.

~~~
mensetmanusman
Canada is blacklisted by China now because they stand up to China more
often...

~~~
majia
because they stand up to the US less often...

~~~
mcrae
I'm not sure what you would've liked to have happen here?

Canada has a valid extradition treaty with the US. It was a lawful arrest of a
person who violated American law.

Should Canada not follow it's own international agreements so that it can meet
your standard of "standing up the the US"? Don't be ridiculous.

~~~
majia
Canada law doesn’t allow extradition if the prosecution is politically
motivated. When trump said Meng’s case could be part of a trade deal, it shows
the political nature. Yet canada chose not to reject the request because of US
pressure.

------
theredbox
I am wondering if all of the people commenting here about HK and SG have any
idea about both of those cities.

They are competitors but not really competitors.

You go to HK when you want to be in China but not really. You go to SG when
you want to deal with China but not really.

~~~
bagacrap
Not sure if I really know about these countries but I don't think this comment
enlightened me.

------
thecleaner
What kind of insensitive coverage is this ? The people of a country have come
together to fight an oppressive regime and wsj is busy telling people Hong
Kong cannot be trusted as a global finance center. This is so wrong.

~~~
zizee
I understand and sympathize with your point of view.

However the risk of the international economy losing trust in Hong Kong and
leaving is probably the biggest lever people calling for the continued
independence of Hong Kong have available.

By highlighting this risk the WSJ is helping the cause of Hong Kong
independence in one of the best ways it can.

------
twic
Throwing away a valuable reputation for stability, and an economically crucial
financial industry with it, because a hardline government won't compromise on
chasing a deranged dream? I'm glad to see British traditions are still upheld
in Hong Kong!

~~~
hangonhn
The British traditions of colonialism where by the governed had no voice in
who governed them? The governor of Hong Kong was NEVER voted by the residents
of HK but was selected by the government in UK. This was the exact arrangement
that the Chinese kept in place. I don't love what China is doing to HK but
let's not romanticize the British control of HK.

Edit: I don't want to give the impression that the British didn't do good
things in HK but as far as governing goes, the UK maintained a very tight grip
on HK until the very end. HK didn't elect its own legislature, IIRC, until 2
years before the handover.

~~~
jbay808
It's worth recognizing that that was the case because China told the British
that they would invade HK if the British gave them full self-determination.

~~~
DiogenesKynikos
That's not true. Britain ruled Hong Kong for over a century without
introducing democracy. The governor was appointed by the UK Foreign Minister,
the legislature was appointed by the governor, and most of the high
administrative posts were held by Brits. Chinese people were treated as
second-class citizens, and of course had no say in government. The UK only
began introducing any democratic elements once it became clear that they were
going to hand over the city to China.

------
duxup
I can't read the article due to a paywall and I'm sure folks will move money
around ... but I'm not sure anything else happens.

Companies had no problems paying the price of tech transfer and etc in China,
hard to imagine "China light" in Hong Knong would make an impact now.

~~~
pcr0
Companies may start moving their Asia HQs to Singapore en masse.

~~~
sho
It's a pity most of the obvious regional alternatives are either too
unwelcoming to foreigners or haven't gotten their shit together enough to be
in the game. One would hope that Tokyo or Seoul could soak up the refugees but
they're just too difficult to live in for English speakers - not to mention
their hostile visa regimes. And the large South East Asia countries like
Thailand, Malaysia and Indonesia all have horrendous infrastructure deficits,
internal stability issues, archaic financial systems and endemic corruption.
And Australia's just too damn far.

Singapore wins just by being open, competent, non-corrupt and _there_.

~~~
pkaye
What about South Korea?

~~~
sho
Well I did mention Seoul - but the language and cultural barriers there are
just too insurmountable for international staff to want to live there, IMO.
Don't get me wrong, it's a fantastic city, but it's hard to imagine an
english-speaking family relocating there for work with anything like the ease
of somewhere like Singapore or, previously, HK. It is a LOT more foreign.

Having North Korea a stone's throw away doesn't exactly help either.

~~~
pkaye
One of my thoughts is that China is trying to be more like Singapore with
their social credit system. Remember at one time you could get caned in
Singapore by bubble gum.

~~~
sho
I don't know why you would think that - with the exception perhaps of a
national preoccupation with maintaining order, the two countries could hardly
be more different. For all its faults, and there are many, Singapore basically
delivers on its promise - a fair and equitable legal system, a transparent and
accountable executive, and an excellent business and financial environment.

Singapore's laws can be strict, to a fault, but caning has never been a
punishment for chewing gum. Regardless - they are a known quantity and more or
less fairly applied, and if the citizens really didn't like them there's a
mechanism to have them changed. If China was anything close to having a system
like that, we wouldn't be having this discussion!

------
kyledrake
China has been kidnapping people from Hong Kong for some time now
([https://en.wikipedia.org/wiki/Causeway_Bay_Books_disappearan...](https://en.wikipedia.org/wiki/Causeway_Bay_Books_disappearances))
so I'm kind of surprised we're even having this debate. It's already too late
to fix this perception for me, HK is dead as an autonomous, law-oriented
region for my requirements. I pulled production servers out of HK in 2015.

Singapore is awesome and close enough that it fills the role that HK
previously did before China started ruining it, and it's where I now run my
Asia CDN edge. I'd rather run them in HK and get close hookups to China, but
what can I tell you, I don't want dumbshit kommissars rummaging through my
servers because someone put up a web site about how they murdered innocent
people in Tiananmen square and are still trying to pretend it didn't happen.

~~~
radicaldreamer
Singapore is more of an autocracy than Hong Kong... at least when it comes to
freedom of expression, freedom of assembly etc.

~~~
arcticfox
Singapore, not being tied at the hip to a superpower w/ enormous and diverse
geopolitical interests, is less likely to use that iron fist unfairly to the
detriment of foreign commerce.

~~~
baybal2
> Singapore, not being tied at the hip to a superpower w/ enormous and diverse
> geopolitical interests

I lived in Singapore for 2.5 years as an exchange student. Singapore almost
made me to believe it being the "Chinese Dream" come true.

I was fortunate to meet two former TSMC engineers closing on their mid fifties
who pretty much took patronage of me back then and corrected my attitudes. I
thank them for pulling out that "Singapore dream" porridge out of my brain.

I was of very high opinion of LKY as a leader, but later I realised that he
was a very cheap man, just with a lot of charisma and verbal skills he got
from British education.

First, he was the most ardent anti-colonialist, but the moment Malaysia got
independence, he was first to cling to "mama Britania"

He was oratorising on inter-ethnic unity through early independence years, but
was first to jump the moment talks of separation started

He was an ardent democrat in his talks, but used red scare to purge all
credible opponents, _including ones from his own camp_

He claimed to firmly be on side of capitalism, but spent 30 years running Sing
as a borderline statist/socialist state (the notion of Sing as a freewheeling
capital hub is relatively new thing, and would've been completely contrary to
country's self image in Seventies)

He said, on the record, many times, promising to keep his family out of power,
but you see yourself how it went.

He promised to go when it will be the time for it, yet he spent his last
decade in power in semi-demented state, and ill health.

And finally, despite him almost screaming all those 50 years of Singapore
being a neutral country, the story of him doing "special relationship"
("selling out", in plain language) with the USA and American business is what
every Sing citizen knows too well

I bet, would US government get interest in your servers, they would not need
even to go through formal diplomatic channels, a single call to Istana would
do that.

~~~
barry-cotter
Lee Kuan Yew was no saint but this is at best overwrought.

Once you’re independent _you’ve won_ , there’s no harm and a great deal of
benefit in keeping relations with the former colonial power good.

What you said about Yew during the expulsion of Singapore from Malaysia is at
best completely irrelevant. The Malays wanted Singapore out so they could run
Malaysia for the benefit of the Malays and the vote for expelling Singapore
was 126-0 with Singaporean delegates not present. Also, let’s be frank, Lee
Kuan Yew would have preferred to be PM of an undivided Malaysia than a city-
state.

Lee’s record on inter ethnic unity is actually pretty great. The quota system
in allocation of public housing and in politics means Singapore has Indian and
Malay parliamentarians in proportion with their population.

~~~
baybal2
> Also, let’s be frank, Lee Kuan Yew would have preferred to be PM of an
> undivided Malaysia than a city-state.

He would've certainly preferred to, but certainly had no capability to become
one, nor capacity to act as one if he would've ever been elected as one.

It is said he had hard time not showing his jubilation when he heard of Malays
effectively giving him his own state on a golden platter, and an opportunity
to write his name into history books — more than what a man like him could've
ever dreamt of.

~~~
barry-cotter
In the comment above you talk about Lee’s successful marginalisation of all
effective opposition in Singapore. In this one you’re saying Lee could never
have become PM of Malaysia. The idea he couldn’t have acted as PM if elected
is just nuts. He did a fantastic job for decades in Singapore, he could have
been at least an adequate job in a unified Malaysia.

Lee may have been more a tall man in a sea of pygmies than a giant among men
but the idea he was anything less than very successful as a politician and
statesman is... odd.

~~~
baybal2
> fantastic job for decades

For 3 decades, Sing was a nothing special, "socialism-lite" place with slow
life and panelbaus, of which locals thought of as their biggest achievement.

> could never have become PM of Malaysia

Yes, because British schooled, high mannered, and high flying, if not
snobbish, Lee would've never made a rapport with a typical Malaysian national
_(emphasis: not ethnic Malays per se)_. Even Malaysian Chinese at that point
looked at him as if he was a some kind of space alien.

Second, Singapore was already better off at the starting point in relation to
rural Malaysia.

He would've had to do way more things than just building panelbaus and sitting
still for 3 decades. He wouldn't have survived his first term if he were to
exercise his "vision" of nation building as a Malaysian premier.

If you think that a measure of worth for an Asian leader is just his ability
to not to ruin his own country, and being able to build some social housing,
that feels to me rather demeaning.

------
vore
As an aside from the content of the article, I always feel a little off-put by
this framing of major political issues as "how does this negatively affect the
financial sector?" (I realize "Wall Street Journal" literally has "Wall
Street" in the name)

Viewing this through a "how hard will it be to do business here" lens seems
very clinical and dehumanizing, and I don't think the market would ever be
able to capture the true consequences.

~~~
292355744930110
If this sort of language is more effective affecting change for the better,
then would you agree that it is good to use regardless of the "clinical"
nature of the framing?

