On 21 May 2020, this would become the memorable day for China as the Beijing Government announced a draft national security law to be imposed on Hong Kong. On 28 May, this draft was approved and will be implemented before year-end. The law is aimed at prohibiting secession, subversion of state power, terrorism activities and foreign interference.
Obviously, the U.S. officials and Congress reacted in anger and criticized the move by Chinese Government. On 27 May, Secretary of State Pompeo has declared Hong Kong to lose its autonomous status form China and new sanction will be imposed against the island.
Hong Kong has been a British colony for 99 years and was returned to China in 1997. Since then, China has promised to let Hong Kong be a self-regulating administrative state under the "One country; Two system" policy for 50 years. In other words, Hong Kong is permitted to have its legal and financial structure on its own that is totally different from China.
Many European and American institutions have been grounded on Hong Kong since the autonomous ruling system and benefiting in many ways when they dealt with the Chinese monies. Practically, Hong Kong is the gateway for the super rich families and high net worth individuals to move their humongous funds to-and-fro the banks setting onshore Hong Kong.
Besides the fact that the highest court in Hong Kong is sat mainly by foreign judges, literally 15 foreigners out of 23 other judges, Hong Kong is also the notorious "Casablanca" of the East with at least 5 intelligence agencies operated by the Western forces. Ironically, China has no mainland security and intelligence agencies in Hong Kong; furthermore with no enforcement power in the city!
It is believed the Hong Kong Central protest erupted in 2014 and the recent student protest in 2019 were implicated by foreign intelligence forces. Supply of funds, militia explosives, resources are all sustained by foreign forces when Hong Kong itself has not military departments for such instruments.
As the China is imposing the new security law before year-end and taking back Hong Kong into full ruling order, what we could expect next is the flee of foreign funds and high net worth monies from the island. However, the country might attain peace and orderly growth in long-term economic growth.
Despite the sanction and marginalization of Hong Kong by U.S. Congress, it is still questionable by many men in the streets on why American Government has to bother about Hong Kong status when the Parent nation takes charge of their own administrative land. Anyway, to keep the story short, we foresee the global and western funds will return to Hong Kong in less than 3 years since the capital market has always yield high returns in investment opportunities!
With RMB and HKD both in strong growth and positive interest rates, it won't be too long for investors to realize that monies from negative interest rate countries always flee to the fast growing nations with positive yields in banks!
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