Photographer: Roy Liu / Bloomberg
Photographer: Roy Liu / Bloomberg
It was the freezing of bank accounts that changed Dan’s plan.
The Hong Konger, a financial worker in his early 50s, has seen growing nervousness over the past few years as China tightens its grip on the city. But as a self-described apolitical person – he did not attend any of the protests that hit the city in 2019, for example – he was not really worried that he would be personally affected.
Last month, banks, including British lender HSBC Holdings Plc, froze the account of former lawmaker Ted Hui after he went into exile in the UK with his family. A church that helped protesters’ account was also suspended.
“It’s a game changer,” said Dan, who asked that only his first name be used because he was afraid of the consequences of speaking in public.
He is now moving about $ 100,000 – the bulk of his savings – to an account in Canada, leaving only a small amount in Hong Kong to cover daily expenses.
Hong Kong police cited money laundering as the reason why the bills had to be frozen, and it focused sharply on the extent of the powers that can be exercised by the police following the comprehensive national security law imposed on the city last year is.
“The Security Act allows for the freezing of assets for matters which endanger national security, and which are not specified,” said Philip Dykes, former chairman of the Hong Kong Bar Association, adding that Hong Kong ‘is unusual in scope. of possible offenses that ‘endanger a national danger’. security. ‘”
The full text of the national security law was laid out in the city without debate in the local legislature, and was unveiled for the first time at midnight on June 30 – the same moment it went into effect. The law is justified as an essential antidote to restore stability after months of protests. It also demands global jurisdiction to ban secession, terrorism, undermining and collusion with foreign powers.
This was not the first time that bills linked to the protest movement have been frozen. In 2019, HSBC closed the bank account of Spark Alliance – a group that raised funds to provide legal aid to protesters – after noticing activity different from the purpose of the company account.
Ted Hui arrested during a protest in June 2020.
Photographer: Justin Chin / Bloomberg
But what further shocked Hong Kongers in the Ted Hui case was the fact that the reports of his family members were also frozen, raising concerns that people could be held accountable for the actions of their relations.
An HSBC spokesman said in December he needed to comply with the laws of the jurisdiction in which he works. Hui intensified his criticism of HSBC last week after CEO Noel Quinn explained in a personal email to Hui that the bank had no choice but to block his account following a police claim.
In a Facebook post, Hui said the bank “could not provide the legal basis” for freezing his accounts and those of his family members and did not explain why his family was also “jointly punished”.
In addition to the fear that such powers could be used arbitrarily, Dan is worried that if he does not act soon, it may be too late – for example, if Hong Kong residents start getting restrictions on moving money overseas.
Hong Kong has a free convertible currency, while people in mainland China have a $ 50,000 limit on foreign exchange purchases per year.
Options open
More Hong Kongers convert their savings into other currencies, even if they did not take the opportunity to move money
Source: Hong Kong Monetary Authority
Since the adoption of the security law, the political situation has “deteriorated very rapidly,” Dan said. The Hong Kong government just needs to tighten the rules on moving funds abroad a bit, and then you’ll get in trouble if you want to withdraw money, ‘he said.
The anxiety can be detected by, for example, the increase in discussions on social networks that offer advice on creating foreign accounts, the transfer of money to other assets, or the opening of accounts with US banks, which is less flexible according to the demands of the Chinese authorities.
“As the bottom line increases, Hong Kong is going to look less and less secure as a place where people can park their money,” said Andrew Collier, managing director of Orient Capital Research. “We have not yet reached the turning point, but none of this bodes well for the future of the Hong Kong financial system.”
Data from the Hong Kong Monetary Authority, which shows that total bank deposits rose by more than 7% in the first three quarters of 2020, does not tell the full story. Money continued to flow to Hong Kong due to the huge demand for initial public offerings, as well as a strong currency. As such, the movement of personal savings does not necessarily make a dent in official numbers.
There are signs elsewhere that the rate of money leaving the city is increasing. According to figures from the Compulsory Provident Fund, the Hong Kong Pension Fund, the total number of withdrawals from individuals leaving the city permanently increased by almost 20% to HK $ 5.1 billion ($ 660 million) for the year ended June 2020, compared to the same period in the previous year, the highest level in at least five years.
Withdrawals increase
Departing Hong Kongers take their pension pots with them
Source: Compulsory Provident Fund, Bloomberg
Meanwhile, it a rising interest in Hong Kongers in British property in search of a foothold in the country is another sign. This is a trend that is likely to continue due to the strong demand in Hong Kong for British national overseas passports, which paves the way for British citizenship.
Analysts at Bank of America Corp. estimates in a research note that emigration-related outflows of money to the UK alone could reach HK $ 280 billion ($ 36 billion) this year, and HK $ 588 billion over the next five years. The total amount of money leaving the city could be higher, analysts say, as countries such as Australia and Canada have also relaxed immigration policies for Hong Kongers.
Practical matters
In the UK, financial advisers say they are starting to see the number of people inquiring about asset transfers.
“It was a drop to start with and we expect it to be a flood soon,” said David Denton, who specializes in international financial planning at wealth manager Quilter International. However, he warns that customers are aware that careful planning must be done to move from a low tax destination like Hong Kong to a higher tax place like Britain.
Exit route
The number of Hong Kongers holding British national overseas passports has jumped significantly
Source: UK Home Office
“If you leave Hong Kong because you are politically scared, you may want to liberate and take everything you have out of Hong Kong,” Denton said. “Psychologically it can be a good thing, tax-wise it can be exactly the wrong thing.”
This is a point that reflects Colin Monton of wealth manager Rathbones. He tells clients to give themselves about 18 months, or at least a full tax year, to prepare and not make knee-jerk movements like just sending money over without thinking about the implications. Products that make sense as an expat – such as foreign securities, for example – are effective abroad, but could be subject to punitive taxation in the UK if not managed properly, he said.
For the basics, such as acquiring a UK bank account, he suggests starting to see if your current bank in Hong Kong, especially if it is a major international operation, can help ease their overseas arm – although you must be ready for paperwork.
“The requirements against money laundering are sometimes stricter if you are unknown or if you are an expat from a higher risk jurisdiction,” Monton said. “Additional identification is often requested – so be prepared.”
In Hong Kong, Simon Parfitt, director of Pyrmont Wealth Management Ltd., says “people are definitely putting out feelers” and asking more “focused questions” rather than just vague queries.
“Hong Kong is home to many and it’s not like they’ll definitely leave and will never come back,” Parfitt added. “But they judge where they want their children to grow up.”