Creditability, Hong Kong's biggest asset

Edward Tsang 2019.08.22; edited 08.23

What is Hong Kong's biggest asset? Creditability!
Hong Kong’s international position depends on its creditability: its rule of law and strictly adhered regulations.
Creditability comes from trust by others. A government can only control what it does, but it is up to other people to trust the government or not. Trust must be earned; it must be earned over time. That is why Shanghai and Shenzhen cannot replace Hong Kong in the short term. To gain creditability, Beijing has to give its people, among other things, freedom of speech, free press, an independent judicial system, and accountable administrations. Beating up people, being caught lying and refusing to communicate does not help.
Judged by the way that Beijing handles Hong Kong, I am not sure how much it understands the importance of creditability.

Creditability, Hong Kong's biggest asset

What is Hong Kong's biggest asset? I would say "creditability".

Foreign companies do business in Hong Kong because they believe that their rights are protected there. They believe that they are protected by the law and the judicial system. They believe that they will be treated reasonably fairly in Hong Kong's business world. Hong Kong is a financial centre because investors believe that the financial markets in Hong Kong are regulated, accounts are properly made, accounts are rigorously audited, nobody is allowed to gain advantage over others through insider information, confidential information are safely kept, payments are cleared efficiently and correctly, ..., etc.

It is up to others to trust you or not

Creditability comes from trust by others. A government can only control what it does, but it is up to others to decide whether to trust the government or not. A government cannot force others to trust it. Beating up people doesn't gain trust. Threatening people doesn't gain trust. Being caught lying damages creditability. Refusing dialogues doesn't help; neither does condoning violence by the police force. Money cannot buy creditability directly. Trust must be earned -- earned over time.

It is difficult to value creditability

The value of creditability is qualitative, rather than quantitative. Countries and companies tend to avoid dealings with countries that lack creditability. There is not much that a country can do if others refuse to do business with it.

An accountant might want to put a value to Hong kong's creditability (goodwill in accounting terms). Unfortunately, creditability is difficult to value; but it is certainly in tens of trillions in US$. If other countries consider Hong Kong as an ordinary city of China, then they move their companies out of Hong Kong. Without international business, property prices will collapse. Employment would be a problem. Brain drain would reduce Hong Kong's competitiveness. Beijing will lose a system to channel money in and out of China. Beijing will lose future incomes from Hong Kong.

How to replace Hong Kong?

Hong Kong is a special city in China because it is trusted by investors (as said above). People trust Hong Kong because the British has built up its creditability over a long time. Creditability cannot be built up overnight. Money can buy infrastructure, but not trust. That is why Shanghai and Shenzhen cannot replace Hong Kong in the short term. To gain creditability, Beijing has to give these cities, among other things, the freedom of speech, free press, an independent judicial system, an accountable administration.

Creditability is undermined by the Hong Kong police

On 21st July, 2019, mobs indiscriminately attacked people in Yuen Long. The police were absent for 4 hours. They even closed the police station and refused to take emergency calls. The police's abnormal behaviour convinced many that they collaborated with the mob. On 11th August 2019, a protester lost an eye after being shot by a policeman in Tsim Sha Tsui. The Amnesty International urged the Hong Kong police to exercise restrain. A CCTV footage released on 19th August 2019 showed two police officials torturing a 62-year-ld patient detainee in a hospital. (Their defense was quite unbelievable: "we didn't realise that CCTV was installed in the room"!) YouTube is filled with videos showing the Hong Kong police applying excessive force. In the process of doing so, policemen hide their IDs, which is against police rules.

Creditability undermined by the current Hong Kong government

Since the Hong Kong government started to introduce the extradition bill in June 2019, the government has done a lot to damage its creditability. By supporting the Hong Kong government, Beijing has suffered a lot of creditability loss too. So far, the Hong Kong government gives no satisfactory answer to brutality in its police force. The government refused to set up independent investigations as requested by the public. In fact, the government has not directly answered to any of major demands by the public, despite demonstrations by over 1 million (9th June 2019), 2 million (16th June 2019) and 1.7 million people (18th August 2019).

I am not sure if Beijing understands...

The Hong Kong government again and again damage its creditability. They did so with Beijing's support. Does Beijing understand the importance of creditability? Does Beijing understand that, unless a government is (rightly or wrongly) perceived to be credible, they will not be able to govern an international city? If Beijing understands, then it should urgently replace the current Hong Kong administration, as it damages Beijing's creditability by the day.

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Disclaimer

The author studies the above topic as a scholar. The discussion above is not politically motivated. Neither is any value judgements intended.