Photographer: Roy Liu / Bloomberg
Photographer: Roy Liu / Bloomberg
It was the freezing of bank accounts that changed Dan’s mind.
The Hong Konger, a financial worker in his early fifties, saw China tighten its grip on the city with increasing nervousness in recent years. But as a self-proclaimed apolitical person – for example, he hadn’t attended any of the protests that hit the city in 2019 – he wasn’t really concerned about personal ramifications.
Last month, banks, including British lender HSBC Holdings Plc, froze former lawmaker Ted Hui’s account after he went into exile in the UK with his family. A church that helped protesters was also suspended.
“It’s a game changer,” said Dan, who asked if only his first name could be used because he feared the consequences of public speaking.
He is now moving about $ 100,000 – most of his savings – into 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 for the request to freeze the accounts, sharply emphasizing the extent of the powers of the police force in the wake of the sweeping national security law imposed on the city last year. imposed.
“The security law permits freezing of funds for matters that endanger national security that are not specified,” said Philip Dykes, former president of the Hong Kong Bar Association, adding that Hong Kong is “unusual in the breadth of possible crimes affecting ‘national security.’ “
The full text of the National Security Act, which was imposed on the city without debate in the local legislature, was first unveiled at midnight on June 30 – the same time it went into effect. The law is justified as a necessary antidote to restore stability after months of protests. It also claims global jurisdiction to ban secession, terrorism, subversion and collusion with foreign forces.
It was not the first time that accounts related to the protest movement had been frozen. In 2019 HSBC closed the bank account of Spark Alliance – a group that raised money to provide legal aid to protesters – after it spotted an activity that differed from the stated purpose of the company account.
Ted Hui was arrested during a protest in June 2020.
Photographer: Justin Chin / Bloomberg
But what shocked Hong Kongers even more in the Ted Hui case was the fact that his family members’ accounts had also been frozen, raising concerns that people could be held responsible for the actions of their relationships.
An HSBC spokesman said in December that it must adhere to the laws of the jurisdiction in which it operates. Hui reinforced his criticism of HSBC last week after Chief Executive Officer Noel Quinn explained in a personal email to Hui that at the request of the police, the bank had no choice to block his account.
In a Facebook post, Hui said the bank “had not provided the legal basis” for freezing his and his family members’ accounts and did not explain why his family was also being “collectively punished”.
In addition to fears that such powers could be used arbitrarily, Dan is concerned that it may be too late if he does not act quickly, for example if Hong Kong residents begin to have restrictions on moving money abroad.
Hong Kong has a freely convertible currency, while people in mainland China are subject to a maximum of $ 50,000 in foreign exchange purchases per year.
Options Open
More Hong Kongers are converting their savings into other currencies, even if they haven’t made the leap to actually move money
Source: Hong Kong Monetary Authority
Since the security law was passed, the political situation has “deteriorated very rapidly,” said Dan. The Hong Kong government just needs to tighten the rules around moving funds overseas “a little bit and you’ll get in trouble if you want to move money,” he said.
For example, the fear is palpable in the proliferation of discussions on social networks offering advice on creating offshore accounts, moving money to other assets, or opening accounts with US banks, which are believed to be less flexible for the demands of the Chinese authorities.
“As the vice tightens, Hong Kong will look less and less safe as a place for people to park their money,” said Andrew Collier, general manager of Orient Capital Research. “We haven’t reached the tipping point yet, but this doesn’t bode well for the future of Hong Kong’s financial system.”
Data from the Hong Kong Monetary Authority, showing that total bank deposits increased by more than 7% in the first three quarters of 2020, does not tell the full story. Money continues to flow into Hong Kong due to high demand for IPOs and a strong currency. As such, the personal savings movement doesn’t necessarily put a dent in the official numbers.
Elsewhere, there are signs that the rate at which money is leaving the city is accelerating. According to figures from the Mandatory Provident Fund, Hong Kong’s pension fund, the total number of admissions of persons leaving the city for good has 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.
Payouts are increasing
Departing Hong Kongers take their pension pots with them
Source: Mandatory Provident Fund, Bloomberg
Meanwhile, The rising interest in UK real estate from Hong Kongers looking for a foothold in the country is another sign. That is a trend that is likely to continue based on the strong demand in Hong Kong for UK national overseas passports, which provide a path to UK citizenship.
Analysts at Bank of America Corp. in a research note emigration-related outflows 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 leaving the city could be higher, the analysts said, as countries like Australia and Canada have also relaxed immigration policies for Hong Kongers.
Practical matters are important
In the UK, financial advisors say they are starting to see the number of people inquiring about asset transfers increasing.
“It was a trick to start with and we expect it to be a flood soon,” said David Denton, who specializes in international financial planning at asset manager Quilter International. However, he warns customers to be aware that moving from a low-tax destination like Hong Kong to a higher-tax place like Great Britain is something that needs to be carefully planned.
Leave the route
The number of Hong Kongers with British Overseas National Passports has increased significantly
Source: UK Home Office
“If you leave Hong Kong because of your political fear, you may want to liberate and get everything you have from Hong Kong,” Denton said. “Psychologically it can be a good thing, fiscally it can be exactly the wrong thing.”
That’s a point echoed by Colin Monton of asset manager Rathbones. He tells clients that they should give themselves about 18 months, or at least a full tax year, to prepare and not get the hang of it, like just sending money without thinking about the implications. Products that could make sense as an expat – such as offshore bonds, for example – are efficient overseas but could be criminally taxed in the UK if not properly managed, he said.
For the basics, such as getting a UK bank account, he suggests starting with seeing if your current Hong Kong bank, especially if it’s a major international operation, can help with their overseas branch – although you should be ready for paperwork.
“Anti-money laundering requirements are sometimes stricter if you are unfamiliar or if you are an expatriate from a higher risk jurisdiction,” Monton said. “You are often asked for additional identification, so be prepared for that.”
In Hong Kong, Simon Parfitt, director at Pyrmont Wealth Management Ltd., says that “people definitely take out feelers” and ask more “focused questions” rather than just vague questions.
“Hong Kong is home to many and it is not like they are leaving for good and never coming back,” Parfitt added. “But they judge where they want their children to grow up.”