Hong Kong’s Clout as a Global Financial Center Clouded by Uncertainty
wsj.com
wsj.com
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.
It depends on what you want? The point is that you can shop for features, and Delaware isn't the end all be all.
Sometimes it is as simple as making a list of the things you want and googling for it or asking around.
Other times it requires actually reading the incorporation statutes, trudging through case law, simple because a state sucks at marketing.
And other times it requires introducing and passing a new law in that state.
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...
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.
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.
In terms of labor, specialists like having multiple employment options in case they ever need to jump ship, and for specialized enough services centers are the only places capable of offering such networks. New York is still the largest financial center in the US despite many attempts to dethrone it because it has built up so much of a center. And people don't really abandon centers unless something catastrophic happens.
London acts as a financial centre for many businesses seeking to do business with EU nations. Hong Kong was historically the financial centre for traders seeking to do business with China. Being a former British colony, they had advantages such as being literate in English and understanding both eastern and western cultures.
If indeed globalization has not yet run its course, we may see less and less of a need for these financial centres in the future.
Once the trade war nonsense ends, you'll see these stories and comments disappear. Just like all the "I hate facebook" stories and comments. Just like the "Russia controls everything in the US" stories and comments.
Until it's time for "We've always been at war with eurasia". If only these people cared about freedom here at home as much as they "care" about freedom in china. You'll notice that most of the people ( journalists and commenters ) crying about censorship, privacy, freedom etc in china are the same ones demanding more censorship, less privacy and less freedom here and on social media.
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.
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.
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.
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.
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.
They also tried to stop Portugal from giving the people of Macau citizenship because they were afraid the Hong Kong people would also demand it.
> documents recently released by the National Archives in Britain suggest that beginning in the 1950s, the colonial governors who ran Hong Kong repeatedly sought to introduce popular elections but abandoned those efforts in the face of pressure by Communist Party leaders in Beijing
https://www.nytimes.com/2014/10/28/world/asia/china-began-pu...
Britain also tried to stop Portugal from giving the people of Macau citizenship so they wouldn’t look as bad when they didn’t give citizenship to the people of Hong Kong.
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.
Singapore wins just by being open, competent, non-corrupt and there.
Having North Korea a stone's throw away doesn't exactly help either.
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!
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.
There is official training program for government officials from China to Singapore. Probably inspired China's confident rejection of western government model and insist on strict top-down control.
But China's inspiration is from USA.
Everything, literally, everything is set to use USA as the inspirational counterpart. I mean, literally, everything. Name anything you can think of, I can tell a story how the daily life has the USA reference or influence.
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.
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.
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.
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.
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.
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.