For years, Hong Kong has been a trusted offshore banking center for people around the world. High net worth individuals and corporations alike have flocked to Hong Kong to take advantage of favorable taxation and regulation, as well as a gateway to new investment opportunities.
Right now, however, Hong Kong citizens are looking to get out of their market and take advantage of offshore banking.
2020 Hong Kong Protest Spikes Wealth Transfer
It all started last year with protest that made headlines all over the world. Now, it’s happening again and in bigger numbers. Why are Hong Kong citizens all of a sudden trying to move their assets?
Recently, China unveiled a law that would extend their laws into Hong Kong. Specifically, China wants to include their intensive national security law in Hong Kong, and this is a move that’s not popular in Hong Kong. Long considered to be an autonomous region, Hong Kong has long enjoyed both the inclusion in China’s global network and the exclusion of their strict restrictions. Now, it looks as if Hong Kong residents will no longer enjoy some of their freedoms.
The new security law that’s being enforced in Hong Kong will drastically change what everyday life looks like in the region. The new law extends security practices that can ban activist groups and also allow courts to punish national security violators with lengthy jail sentences. Perhaps most daunting for Hong Kong residents is the reality that China might open their feared security agencies in Hong Kong, which will give the country inside access into everything that happens in Hong Kong.
Last year’s protests were a clear indicators that Chinese residents were not happy with the government, and we’re seeing it again. Hong Kong residents are protesting the extension of the intrusive national security laws, which are likely to have major economic impacts on the region.
For instance, the United States has already said that they will be potentially ending at least some of the special trade and economic deals they’ve long had in place with Hong Kong. They are doing this on the basis that Hong Kong is no longer autonomous. This alone will have economic impacts in Hong Kong.
This won’t be the only thing that will hurt the local economy, however. As an exodus of investors take their assets other places, Hong Kong will be left reeling. In fact, this trend is already being seen.
Hong Kongers are Going Offshore
Offshore banking centers in various areas are seeing increases in demand as people slowly but surely take their investments out of Hong Kong. Offshore banking jurisdictions such as the United Kingdom, Singapore, Australia, Canada, and Switzerland are seeing influxes in demand and wait times on opening offshore bank accounts are growing in response to this exodus.
Statistics are already showing this exodus to be a reality. In fact, in April, Hong Kong local currency deposits fell 1.1% from the prior year. Offshore banking jurisdictions such as Singapore, the United Kingdom, Sydney, and Taiwan have specifically noted that they are seeing a higher demand from Hong Kong residents in response to the extension of the Chinese national security law. HSBC and Standard Chartered has already reported that they are seeing a 25-30% increase in inquiries in Hong Kong residents alone.
The New Normal?
Although Hong Kong was one of the most reputable offshore jurisdictions for years, now things are changing quickly. By taking their funds and assets offshore, Hong Kong residents are keeping their investments safe.
This underscores a major need for offshore banking. When things go bad domestically, whether due to economic, political, or governmental reasons, having your assets spread out should be a part of your wealth management strategy. In Hong Kong, high worth net individuals are preparing by reducing their Hong Kong assets or by taking the necessary steps to ensure they can quickly withdraw when they decide the time is right.
With growing tension between the United States and China and new tightening laws being enforced upon Hong Kong, residents in Hong Kong are looking to move assets before it’s too late. This situation demonstrates exactly why offshore banking is an excellent facet of any wealth management strategy. Although Hong Kong was once a place where people rushed to with their investments, now the region’s residents are rushing out to find other banking alternatives where their assets can be better protected.
Takeaway
The exodus being seen in Hong Kong is only expected to escalate as more and more people look for ways to get their assets out of the Hong Kong and Chinese market as things seem to be destabilizing quickly.
Offshore banking centers such as Singapore, Australia, Switzerland, and Canada are now among the most sought after as people in Hong Kong look to keep their assets safe, but these are also excellent offshore jurisdictions for anyone who wants to diversify their wealth management strategy.
If you want to learn more about the offshore asset protection strategy that are suitable to your needs, make use of our free consultation session.
JUN
2020
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