HK could pay a financial price for hindering free speech

The Hong Kong government’s decision in October to expel Victor Mallet, the Asia news editor of the Financial Times, and then to deny his request for even temporary re-entry, stank of the heavy-handedness of Beijing. 

The action that put Mallet beyond the pale was to welcome a speech by Andy Chan, leader of a fledgling pro-Hong Kong independence party, at the Foreign Correspondents’ Club where Mallet was first vice president. China demanded the speech be cancelled, but the FCC refused. So, Mallet paid the price by having the city’s government throw him out for encouraging the very free speech it is meant to protect under One Country, Two Systems – the agreement struck with the UK before the latter handed the territory back to China in 1997. 

It marked yet another sorry milestone in the 50-year journey that marks the gradual erosion of independence in the territory. China’s idea of One Country, Two Systems appears to have been heavier on marketing than genuine intent. Investors and others may roll their eyes at the shrill protestations of journalistic organs (such as AsianInvestor) over the treatment of one of their own.

But it would be wise to remember that much of Hong Kong’s value as a financial centre derives from trust in the universality and impartiality of its laws, plus the city’s commitment to freedom of speech and accuracy of information. 

Banning a journalist for supporting an opinion is a reminder that China’s government appears willing to either suppress information it deems contrary to its political goals or punish those who it feels stand them. Perhaps worse is the Hong Kong government’s willingness to act the lackey to Beijing. Companies and investors expect to have to hold their noses at the degree of corruption and vice-like control exerted by the Communist Party within the mainland when doing business there. But Hong Kong is expressly meant to be different. 

STIFLING DISSENT 

The danger is that Beijing may feel emboldened by its ability to get one journalist thrown out. In October, it was a journalist. In the future, it could be international companies, or fund houses. 

Plus, the Chinese government’s demands for censorship could extend into areas such as data and research, as well as journalism. There has already been one sign to feed the suspicions of those inclined to believe in Beijing’s pernicious influence. 

In 2016, ratings agency Moody’s was fined HK$11 million by Hong Kong’s Securities & Futures Commission (SFC) for a 2011 report it issued about 61 Chinese companies that it considered to have weak corporate governance and opacity in business models and financial reporting. In September, the Hong Kong Court of Final Appeal upheld the SFC’s view that the report qualified as a ratings notice, and that Moody’s did not provide sufficient explanations and justifications for the ‘red flags’ it put against these companies.

For some onlookers, this marks further evidence that China was punishing an international organisation for issuing a report deemed damaging to its interests – even if it was helpful for investors.   

In fairness this may not have been the case – the SFC has a generally strong reputation for independence. But one consequence of Beijing (or its Hong Kong proxies) filing away at the edges of Hong Kong’s free speech is that the territory’s institutions become tainted by perceptions that they are susceptible to such pressure too. This risks eroding the trust placed in them. 

This is a dangerous path for Hong Kong’s future. If the impartiality of the news and information being offered in the city fractures and the government and regulators’ commitment to upholding the law falls into question, the city could rapidly lose its business and finance-friendly image. Reputations are a little like cake-making; they require painstaking effort, yet can be destroyed by the slightest miscalculation.

In its seeming haste to kowtow to every whim of the Chinese government, the Hong Kong administration risks dropping the cake it has taken more than a century to bake.