Photographer: Roy Liu / Bloomberg
Photographer: Roy Liu / Bloomberg
It was the freezing of bank accounts that changed Dan’s opinion.
The Hong Kong, a 50-year-old finance worker, has seen China tighten the city in recent years with growing nervousness. Still, as a self-described apolitical person (he hadn’t attended any of the protests that affected the city in 2019, for example), he wasn’t really worried about being affected personally.
Then, last month, banks, including British lender HSBC Holdings Plc, froze the account of former lawmaker Ted Hui after he went into exile in the UK with his family. A church that helped protesters also had their account suspended.
“It’s a game changer,” said Dan, who called for only his first name to be used because he is afraid of the repercussions of public speaking.
He is now in the process of transferring about $ 100,000 (most of his savings) to an account in Canada, leaving only a small amount in Hong Kong to cover daily expenses.
Hong Kong police cited money laundering as a reason to call for the accounts to be frozen, with a strong focus on the power that police powers could have as a result of the comprehensive national security law imposed on the city last year.
“The security law allows for the freezing of assets for issues that endanger national security, which are not specified,” said Philip Dykes, former chairman of the Hong Kong Bar Association, adding. that Hong Kong is “unusual in the breadth of possible crimes that” endanger the country’s security. “
Imposed on the city without debate in the local legislature, the full text of the national security law was first revealed at midnight on June 30, the same time it came into force. The law has been justified as a necessary antidote to restoring 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 were frozen. In 2019, HSBC close the bank account of Spark Alliance, a group that raised funds to provide legal assistance to protesters, after detecting activities other than the stated purpose of the company account.
Ted Hui arrested during a protest in June 2020.
Photographer: Justin Chin / Bloomberg
But what surprised the Hong Kongers even more in the Ted Hui case was the fact that the accounts of their family members had also been frozen, prompting concern that they might be held responsible for the actions of their relations. .
An HSBC spokesman said in December that it must comply with the laws of the jurisdiction in which it operates. Hui intensified his criticism of HSBC last week, after CEO Noel Quinn explained in a personal email to Hui that the bank had no option to block his account following a police lawsuit.
In a post on Facebook, Hui said the bank “did not provide the legal basis” to freeze its accounts and those of his family members and did not explain why his family was also “collectively punished. “.
In addition to the fear that these powers may be used arbitrarily, Dan worries that if he does not act sooner, it will be too late, for example, if Hong Kong residents begin to face restrictions on moving money to the ‘foreigner.
Hong Kong has a freely convertible currency, while the people of mainland China are subject to a $ 50,000 limit on foreign exchange purchases per year.
Open options
More Hong Kongers are turning their savings into other currencies, even if they haven’t really taken the step to move money.
Source: Hong Kong Monetary Authority
Since the security law was passed, the political situation “has deteriorated very quickly,” Dan said. The Hong Kong government only needs to tighten the rules on transferring funds “a little bit and then you will have a lot of problems if you want to withdraw money,” he said.
Anxiety is felt, for example, by the proliferation of discussions on social media that offer advice on creating offshore accounts, transferring money to other assets, or opening accounts in American banks, which is perceived less flexible to the demands of the Chinese authorities.
“As the vice tightens, Hong Kong will look less and less safe as a place where people can park their money,” said Andrew Collier, CEO of Orient Capital Research. “We have not reached the turning point, but none of this augurs well for the future of Hong Kong’s financial system.”
Data from the Hong Kong Monetary Authority, which shows that total bank deposits increased by more than 7% in the first three quarters of 2020, do not tell the full story. Money has continued to flow in Hong Kong due to high demand for initial public offerings as well as a strong currency. As such, the personal savings movement does not necessarily damage official numbers.
There are indications elsewhere that the pace of money leaving the city is increasing. According to figures from the Mandatory Pension Fund, the Hong Kong Pension Fund, the total amount of withdrawals of people leaving the city permanently increased by almost 20% to A $ 5.1 billion ($ 660 million) for the year ended June 2020, compared to the same period last year, the highest level in at least five years.
Increased withdrawals
Hong Kongers who leave take their pensions
Source: Mandatory Forecast Fund, Bloomberg
In the meantime, another sign is the growing interest in UK property in Hong Kong seeking to settle in the country. This is a trend that is likely to continue based on strong demand in Hong Kong for British national overseas passports, which offer a path to British citizenship.
Bank of America Corp. analysts they estimated in a research note that emigration-related money outflows to the UK alone could reach 280 billion Australian dollars ($ 36 billion) this year and 588 billion Australian dollars over the next five years. Analysts said the total amount of money that would leave the city could be greater, as countries such as Australia and Canada have also relaxed Hong Kong’s immigration policies.
Internships are important
In the UK, financial advisers say they are starting to see the number of people asking about asset transfers.
“It was a fluke to begin with and hopefully it will soon be a flood,” said David Denton, who specializes in international financial planning at wealth manager Quilter International. However, it warns customers to be aware that moving from a low-tax destination like Hong Kong to a higher tax place like Britain is something that needs careful planning.
Get out of the way
The number of Hong Kongs holding British overseas national passports has jumped significantly
Source: UK Home Office
“If you’re leaving Hong Kong because you’re afraid of politics, you may want to release and take everything you have out of Hong Kong,” Denton said. “Psychologically, it can be a good thing, from a tax standpoint, it can be exactly the wrong thing.”
This is a point echoed by Colin Monton of wealth manager Rathbones. He tells customers to deliver around 18 months, or at least a full fiscal year, to get ready and not make big moves like just sending money without thinking about the implications. Products that may make sense as expatriates, such as offshore bonds, are efficient overseas, but can be imposed punitively in the UK if not handled the right way, he said.
As for the basics, like getting a bank account in the UK, I suggest starting by seeing if your current Hong Kong bank, especially if it’s a major international transaction, can help you with your arm in the foreigner, although you should be prepared to do paperwork.
“Anti-money laundering requirements are sometimes stricter if it is unknown or expatriated from a higher risk jurisdiction,” Monton said. “You’re often asked for additional identification, so be prepared for that.”
In Hong Kong, Simon Parfitt, director of Pyrmont Wealth Management Ltd., says “people definitely tune in” and asks more “focused questions” than vague inquiries.
“Hong Kong is home to many and it’s not like they’re definitely leaving and never coming back,” Parfitt added. “But they’re valuing where they want their kids to grow up.”