Tokyo is on a charm offensive, hoping to lure Hong Kong firms spooked by protests and a controversial National Security Law imposed by China. However, the city is proving a tough sell.
“I want to make Tokyo Asia’s No. 1 financial city,” Tokyo Governor Yuriko Koike said last month, as the Japanese capital opened an information center in Hong Kong for international businesses considering a move.
Tokyo’s courtship comes with some concrete promises, including temporary offices for firms that want to try out life in Japan.
Photo: AFP
There are also a number of more theoretical incentives being floated, including tax breaks, streamlined bureaucracy and even a special economic zone like Shenzhen, China’s “Silicon Valley.”
In some ways, Japan might seem an obvious alternative for businesses looking to leave Hong Kong: It is the world’s third-largest economy, home to the Tokyo Stock Exchange, and already houses outposts of numerous financial institutions and international firms.
However, there are some serious stumbling blocks and competitors that experts say mean Tokyo’s hopes for regional financial dominance might be little more than a pipe dream.
For a start, Japan’s income taxes are sky high, comparatively, topping out at 45 percent against Singapore’s 22 percent and Hong Kong’s 17 percent.
Low English fluency levels are also a chronic handicap, as is the country’s comparatively sluggish adoption of digital technology.
Trade on Tokyo’s stock markets was halted for an entire day last month because of a “hardware failure” — a glitch seen as unlikely to boost confidence and bring new traders flocking.
European Business Council in Japan president Michael Mroczek said that there were high hopes for Japanese Prime Minister Yoshihide Suga’s digitization and deregulation push.
However, “there’s also a lot of skepticism because there haven’t been a lot of changes” over the past few years when similar initiatives have been proposed, he added.
Japan’s particularly strict approach to border controls during the COVID-19 pandemic — when foreign residents were for months not allowed to return even as Japanese citizens did — has been seen by some as discrimination and could also be off-putting for tentative transplants, Mroczek said.
Tokyo is not the only city in the Asia-Pacific region that seeks to take advantage of a potential Hong Kong exodus.
Australia has announced new visa opportunities for Hong Kong students and entrepreneurs, and officials have said that they would be “very proactive” in encouraging businesses to relocate.
While the Singaporean government officially only says that it seeks a “stable, calm and prosperous” Hong Kong, it is probably the most obvious alternative for firms, IHS Markit chief economist for Asia-Pacific Rajiv Biswas said.
“Most international financial services firms may already have a large presence in Singapore, and therefore may prefer to expand their existing operations in Singapore rather than finding another new location,” Biswas said.
However, there are still questions about whether an exodus from Hong Kong is really on the cards, whichever regional city stands to gain.
“I wouldn’t expect big firms to announce that they are pulling out of Hong Kong completely,” Capital Economics Ltd chief Asia economist Mark Williams said. “It’s more likely that firms will just gradually reduce their headcount in Hong Kong and increase it elsewhere.”
Since 2014, the Hong Kong stock exchange has been directly connected to Shanghai’s, allowing companies based in the territory to invest in companies listed in mainland China more easily. Hong Kong’s proximity to Shenzhen is another important plus for some businesses.
“Wait and see is the general attitude,” one foreign employee at a major Western bank in Hong Kong said on condition of anonymity, adding that he personally was not yet thinking about relocating.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort