As China-US ties worsen, Hong Kong bankers fear for their careers

It was supposed to be a big celebration for Hong Kong. This week’s Global Financial Leaders' Investment Summit, organized by the city’s central bank, was meant to showcase the revival of Hong Kong as Asia’s financial hub, after years of isolation that resulted from stringent Covid controls.
 

But the mood is all gloom and doom. Since China’s Communist Party congress last month, bankers and asset managers I have spoken to are worried. They wonder whether they have viable careers at all.

The defiant tone President Xi Jinping took toward the US got those hardworking financiers scared. Already, strains between the two global superpowers led some of the biggest US pension funds to reassess their exposure to China, with one slashing its portfolio allocation and another halting new investments.

What if geopolitical tension over Taiwan intensifies and Washington DC imposes more sanctions on Chinese companies, or even restricts US investments in Chinese assets? 

There would be knee-jerk liquidation followed by a collapse in trading. Hong Kong’s stock market is dominated by foreigners, who, as of 2020, accounted for more than 40% of total trading, with US institutions alone contributing 10%, according to the latest data available. If they walk away, investment banks will struggle to sell new public listings, while sales desks can say goodbye to commissions.

Even for those who tap into Chinese money, investment management is no longer an intellectually satisfying profession in Xi’s new China, which prioritizes industrials over consumer tech and embraces the state’s role in the economy. Just look at how volatile the Hang Seng Index has become — even unconfirmed social media posts can swing the entire market. Out are fundamental valuation methods; in is rampant speculation on topics ranging from China reopening its economy to state-owned entities buying large stakes in big tech companies. It’s as if the entire market has become a meme stock. What’s a professional’s value-add then?

Xi, for one, doesn’t see bankers offering much value. Six of the 13 new members of the Politburo have backgrounds in science and tech. He Lifeng, widely tipped as the next economic tsar, is not a member of the Politburo Standing Committee, China’s most powerful decision-making body.

For decades, financiers in Hong Kong have been China’s biggest cheerleaders and its bridge to developed nations. They advocated for economic growth and argued for a better relationship between the two superpowers when no one else was. Even they’re losing faith in Xi’s China.