Photographer: Roy Liu / Bloomberg
Photographer: Roy Liu / Bloomberg
It was the freezing of bank accounts that changed Dan’s opinion.
The Hongkonger, a 50-year-old financial worker, has watched China tighten its grip on the city in recent years with growing nervousness. Still, as a self-styled apolitical person – he didn’t see any of the protests that hit the city in 2019, for example – he wasn’t really concerned about being personally affected.
Then, last month, banks, including British bank HSBC Holdings Plc, froze ex-lawmaker Ted Hui’s account after he went into exile in the UK with his family. A church that helped protesters also had its account suspended.
“It’s a game changer,” said Dan, who asked that only his first name be used because he is afraid of the repercussions of public speaking.
He is now 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 the reason for requesting a freeze on the accounts, emphasizing how vast the powers exercised by the police could be in the wake of the national security law imposed on the city last year.
“The security law allows assets to be frozen for matters that endanger national security, which are unspecified,” said Philip Dykes, former president of the Hong Kong Bar Association, adding that Hong Kong is “unusual in scope. of possible crimes that endanger national security. ‘”
Imposed on the city without debate in the local legislature, the full text of the national security law was first released at midnight on June 30 – the same time it came into force. The law was justified as a necessary antidote to restore stability after months of protests. It also claims global jurisdiction to stop secession, terrorism, subversion and collusion with foreign forces.
It was not the first time that accounts linked to the protest movement have been frozen. In 2019, HSBC closed the Spark Alliance bank account – a group that raised funds to provide legal assistance to protesters – after it detected activities that were different from the stated purpose of the company’s account.
Ted Hui is arrested during a protest in June 2020.
Photographer: Justin Chin / Bloomberg
But what shocked Hong Kong residents even more in the case of Ted Hui was the fact that their family accounts had also been frozen, raising concerns that people could be held responsible for the actions of their relatives.
An HSBC spokesman said in December that he must obey the laws of the jurisdiction in which he 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 choice in blocking his account after a police demand.
In a Facebook post, Hui said the bank “failed to provide the legal basis” to freeze its accounts and those of its family members and did not explain why its family was also “collectively punished”.
In addition to fears that such powers could be used arbitrarily, Dan fears that if he doesn’t act soon, it may be too late – for example, if Hong Kong residents start facing restrictions on transferring money abroad.
Hong Kong has a freely convertible currency, while people in mainland China are subject to a $ 50,000 limit on foreign currency purchases per year.
Open options
More Hong Kong people are converting their savings into other currencies, even if they have not taken the time to move money around
Source: Hong Kong Monetary Authority
Since the security law was passed, the political situation “has deteriorated very quickly,” said Dan. The Hong Kong government just needs to tighten the rules regarding the movement of funds abroad “a little bit and then you will have a lot of problems if you want to move money, ”he said.
Anxiety is palpable, for example, with the proliferation of discussions on social networks offering advice on setting up offshore accounts, moving money to other assets or opening accounts at American banks, which are perceived as less flexible to the demands of Chinese authorities. .
“As the vice president tightens, Hong Kong will look less and less secure as a place for people to park their money,” said Andrew Collier, managing director at Orient Capital Research. “We have not yet reached the tipping point, but none of this bodes well for the future of Hong Kong’s financial system.”
Hong Kong Monetary Authority data, which shows that total bank deposits increased by more than 7% in the first three quarters of 2020, does not tell the whole story. Money continued to flow to Hong Kong due to high demand for initial public offerings, as well as a strong currency. As such, the movement of personal savings does not necessarily affect official figures.
There are signs 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 withdrawal amount of individuals who left the city permanently increased by almost 20% to HK $ 5.1 billion ($ 660 million) in the year ended in June 2020, compared to the same period in the previous year, the highest level in at least five years.
Increasing withdrawals
Hong Kong residents are taking their pension pots with them
Source: Compulsory Pension Fund, Bloomberg
Meanwhile, The growing interest in property in the UK by Hong Kong residents seeking a position in the country is another sign. This is a trend that is likely to continue based on strong demand in Hong Kong for British national passports, which offer a path to British citizenship.
Bank of America Corp. analysts estimated in a research note that the outflow of emigration-related money to the UK alone could reach HK $ 280 billion ($ 36 billion) this year and HK $ 588 billion in the next five years. The total amount of money leaving the city may be higher, analysts said, as countries like Australia and Canada have also relaxed immigration policies for Hong Kong residents.
Practical aspects are important
In the UK, financial advisers say they are starting to see the number of people asking about asset transfers increasing.
“It was a trickle at first and we hope it will soon be a flood,” said David Denton, an expert in international financial planning at the wealth management company Quilter International. He cautions customers, however, to be aware that moving from a low-tax destination like Hong Kong to a higher-tax location like Britain is something that needs careful planning.
Exit Route
The number of Hong Kong citizens with British national passports has increased significantly
Source: UK Home Office
“If you are leaving Hong Kong because you are politically afraid, you may want to break free and take everything you have from Hong Kong,” said Denton. “Psychologically, it can be a good thing, in terms of taxes, it can be exactly the wrong thing.”
This is a point echoed by Colin Monton, of wealth manager Rathbones. He tells clients to devote about 18 months, or at least a full fiscal year, to getting ready and not making automatic moves, like just sending money without thinking about the implications. Products that may make sense to an expatriate – such as offshore bonds, for example – are effective abroad, but can be punished for in the UK if they are not managed properly, he said.
For the basics, how to get a bank account in the UK, he suggests starting by checking if your current Hong Kong bank, especially if it is a major international operation, can help ease your arm abroad – although you should be ready to the paperwork.
“The requirements to combat money laundering are sometimes stricter if you are unknown or an expatriate from a higher risk jurisdiction,” said Monton. “You are often asked to provide additional identification – so be prepared for that.”
In Hong Kong, Simon Parfitt, director of Pyrmont Wealth Management Ltd., says that “people are definitely testing” and asking more “specific questions” instead of just vague questions.
“Hong Kong is home to many and it’s not like they are definitely leaving and never coming back,” added Parfitt. “But they are assessing where they want their children to grow up.”