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Wednesday, Sep 03, 2025

Wealthy Chinese fret about city’s status as safe haven for investment

Wealthy mainlanders have long invested in Hong Kong, taking advantage of the the city’s unique privileges within China to buy real estate, shares and insurance. But Beijing’s plan to impose a national security law on Hong Kong has left some fretting about the future of the financial hub and their investments there

Wealthy investors from mainland China are watching developments in Hong Kong with growing concern, as tensions between Beijing and Washington over a new national security law raise questions about the future of the city.

While anti-government protests have hurt Hong Kong’s reputation in recent years, well-off mainlanders are still attracted to the city’s unique privileges within China, including unrestricted capital flows, an uncensored internet and rule of law upheld by an independent judiciary. The freedoms have allowed them to park money in the city and access the outside world.

But China’s decision to move ahead with a national security law, which has raised the threat of sanctions from Washington, has some mainland investors unsure about the city’s fate as a commercial hub - and how this may affect their assets.

“I am very worried about developments in Hong Kong because I work for a Hong Kong-funded enterprise in Shenzhen and the company pays my income in Hong Kong dollars,” said Sam Tao, a senior sales manager in Shenzhen, which sits just across the border from Hong Kong.

“I think the current conflict between China and the US is a head-on collision that cannot be resolved in the short-term. Hong Kong is sitting at the centre of the vortex and so are capital and investments in the city.”

China enforces strict capital controls on mainland residents, banning direct investment in overseas stocks, financial products or property.

But it is an open secret that a large number of mainland Chinese have deep financial connections with Hong Kong, opening bank accounts there, purchasing Hong Kong insurance policies, and buying or renting property in the city. Many use these connections as a springboard to invest in foreign markets.

Last year, a quarter of new insurance policies in Hong Kong were sold to mainland visitors, according to the Insurance Authority of Hong Kong.

Wealthy families and individuals also invest heavily in Hong Kong real estate and shares through the Stock Connect scheme, which allows cross-border investments.

Mainlanders surpassed British citizens in 2018 to become the largest non-resident group of investors in Hong Kong stocks, according to the Hong Kong stock exchange.

The fate of the city has been a hot topic of discussion for Liu Anliang and his friends, who are all investors and exporters in Guangdong province, southern China’s manufacturing hub just north of Hong Kong.

“We all have the same question: how long will our investments and money be safe in Hong Kong if the city loses its special trading status?” said Liu, who lives across the border in Shenzhen.

“In the past, we thought it would be safe to invest our wealth in Hong Kong properties and to deposit it in Hong Kong banks no matter how the domestic market and policies changed for private businesses like ours … now we are starting to have doubts.”

US President Donald Trump has announced that he will begin stripping Hong Kong of its special trade status as a separate customs and travel territory from the rest of China.

Though Trump’s plan is light on specific details, it has prompted investors like Liu to start making contingency plans.

“After discussing it among ourselves, we think we need to prepare, like exchanging a large part of our Hong Kong dollars into US dollars as soon as possible, and then investing most of them in US stocks or US bonds,” he said. “Some are considering selling their Hong Kong properties.”

Beijing has brushed aside criticism that the new security law will erode Hong Kong's freedoms, saying instead it is aimed at very small group of people committing the four crimes of secession, subversion, terrorism and foreign intervention.

According to top Beijing officials, the law would not undermine the “one country, two systems” principle, but protect the city's core interests, including maintaining business stability and prosperity.

Mainland Chinese companies and students have a large presence in the city.

Some 26,000 mainland students attended Hong Kong colleges and universities in the 2016-17 school year, making it the largest non-resident student group, according to the latest data from city education authorities.

A growing number of mainland companies have also chosen to list on the Hong Kong stock market over the past two decades.
At the end of 2019, there were 1,241 mainland firms listed in the city, accounting for 50.7 per cent of the total.

But mainlanders are beginning to realise Hong Kong is no longer a safe haven for their wealth, as the city faces challenges in upholding its freely convertible currency and independent judiciary, said a Guangdong-based political and economic expert, who requested anonymity.

“The group is heavily invested in Hong Kong, but largely lacks a voice or political representation in its uncertain future,” he said.

“Outwardly, they absolutely oppose Hong Kong’s pro-democracy, anti-government protests and strongly support the new national security law. At the same time, they will vote with their feet and relocate to other places where they think their wealth and family members will be safe,” he added.

Simon Shen, a political scientist and associate professor of the Chinese University of Hong Kong, said the city’s status depends on the future of China-US relations.

“If China and the US economically decouple in the next decade, the original function of Hong Kong is unlikely to be sustained in the long run, unless Beijing is willing to apply a more relaxed approach to governing Hong Kong,” he said.

“But I also think both China and the US need some intermediary like Hong Kong to be a buffer. The only question is whether Hong Kong will be that buffer in the next decade, or whether it will be Singapore or Taiwan instead.”

Affluent mainlanders do not want Hong Kong to be under direct US influence nor be directly manipulated by Beijing, said Shen.
A by-product of the national security law could be a more direct participation of mainland stakeholders in the city, as traditional interests like local elites, family dynasties and foreign investors would see their influence decline, he added.

In the meantime, some mainland investors are scrambling for more information about developments, though few details beyond official propaganda are available on China’s tightly controlled internet.

“I tried to look for other people’s opinions about the economic impact on the city and the country, but with little success,” said Shao Liyue, a veteran stock investor from Guangzhou, the capital of Guangdong province.

“I found few valuable posts when searching ‘Hong Kong’ plus other keywords, like ‘separate customs territory’, ‘decoupling’ or the ‘Hong Kong dollar’s peg to the US dollar’,” he said, adding the city mattered to mainland trading firms because of its separate legal, regulatory and financial system.

Kent Cai, who owns company in Ningbo, an industrial hub in Zhejiang province, said he will continue to use Hong Kong bank accounts.

“After all, Hong Kong is still the only point through which China can access global trade and capital for foreign trading companies like us.”




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