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Is Hong Kong ‘over’? Stephen Roach’s FCC speech becomes talk of the town

Early this year, Yale economist and former longtime Hong Kong resident Stephen Roach wrote an opinion piece in the Financial Times that became the talk of the town, thanks in no small part to its headline: “It pains me to say Hong Kong is over.” This month, he stirred up discussion again when he appeared at the FCC to expand on his dire prediction for Hong Kong’s economic future.

Roach, the former chairman of Morgan Stanley Asia, says his argument is based on three factors: Hong Kong’s tight links to mainland China’s sputtering economy, worsening U.S.-China relations that have caught Hong Kong in the crossfire, and the erosion of Hong Kong’s political autonomy under the Beijing-imposed national security law as well as the recently enacted local version.

“What’s really over?” he said at a fully-booked FCC Club Lunch hosted by Correspondent Governor Jennifer Jett. “What’s over, in my opinion, is the imagery that many still cling to in looking to the future of a prideful city — Asia’s world city, Milton Friedman’s favorite free market.”

Stephen Roach. Photo: FCC

“The Hong Kong of old is not the Hong Kong of today, and especially not the Hong Kong of tomorrow. The title of my article was intended as a wake-up call, an appeal for you in Hong Kong to come to grips with this seemingly harsh realization.”

Though Hong Kong’s defenders point to the city’s remarkable resilience in the face of challenging times such as the Asian financial crisis, the 1997 handover and the SARS epidemic, in Roach’s view “this time is different.”

“Without a rebound in the mainland Chinese economy, Hong Kong is unlikely to spring back to life on its own,” he said. “That’s because the linkages between the PRC and Hong Kong economies have become tighter than ever.”

Roach emphasized that he was not trying to be political but analytical, invoking Mao Zedong’s hallmark slogan to “seek truth from facts.” He urged the audience to take similarly “analytically-grounded, empirically-supported views.”

Roach said Hong Kong’s problems will get worse if left unaddressed, and that past solutions no longer suffice.

“The very real struggles of Hong Kong are not about to vanish into thin air. Like it or not, Hong Kong’s dynamism, its energy, and its independence are now in flux,” he said.

Stephen Roach. Photo: FCC

“You cannot afford to take your city’s seemingly innate resilience for granted. That’s what is over.”

Just as with his Financial Times article and a follow-up piece in The South China Morning Post, government officials and others strongly pushed back against Roach’s comments at the FCC.

In a 1,500-word statement that did not mention Roach by name, the HKSAR government said that “some individuals” had made comments on Hong Kong’s economy that overlooked the city’s advantages and “positive development momentum.”

Despite a complicated external environment, the statement said, the Hong Kong and mainland Chinese economies are growing at a faster pace than some developed economies. Hong Kong’s GDP grew 3.3% in 2023 and 2.7% in the first quarter of this year, it noted, and is projected to grow between 2.5% and 3.5% for 2024 overall.

Roach, who told The South China Morning Post that the government’s statement suggested a “worrisome sense of denial,” also cited economic growth figures in his remarks at the FCC. But he put them in broader context, noting that Hong Kong’s economic growth has decelerated in tandem with that of mainland China.

“Over the past 12 years, 2012 to 2023, the Chinese economy grew by an average of 6.3% annually; that was a 3.7-percentage-point deceleration from the spectacular 10% pace of the preceding 32 years from 1980 to 2011,” Roach explained.

“Spoiler alert: Growth in the Hong Kong economy has also decelerated by 3.7 percentage points, slowing from a 5.1% pace over 1980 to 2011 to just 1.4% from 2012 to 2023.”

That makes sense, Roach said, given increased cross-border integration.

“The Hong Kong economy has effectively been swallowed up by the mainland economy — hook, line, and sinker,” he said.

Executive Council Convenor Regina Ip also publicly criticized Roach’s FCC speech, saying in an opinion piece published by Hong Kong Free Press that Roach is no “prophet of Hong Kong.”

“It is true that Hong Kong is facing some tough economic headwinds because of geopolitical uncertainty and structural problems,” she wrote. “But its future is bright, because Hong Kong is working hard to restructure its economy.”

Ip also emphasized Hong Kong’s integration with the Greater Bay Area as a key driver of the local economy, adding that, “With strong support from mainland China, Hong Kong will never lack the resources we need to enhance our talent pool and technological capabilities.”

That reliance on China is exactly what puts Hong Kong in such a precarious position, Roach said, adding that he hoped the questions he was raising would make “good trouble” for a city he will always love.

“With China unlikely to regain its once powerful economic momentum, Hong Kong seems quite likely to follow suit,” he said. “With the case for Hong Kong’s resilience now made in China, we need to peer into the future through a very different lens.”

Watch the full talk on our YouTube channel below:

This Club Lunch is also available as our latest episode of The Correspondent, the FCC’s own podcast. Catch up with the lunchtime talk that became the talk of the town — from government press releases to Chinese and English-language opinion pieces:

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