WHATEVER VIEW is taken on the mayhem in Hong Kong—righteous rebellion or obscene rioting—it is a disaster for the territory’s economy. And if one place stands to benefit from Hong Kong’s troubles, it is that other east Asian, self-governing, Chinese-majority, financial, commercial and shipping hub: Singapore.
The two places have always seemed to have much else in common. Take the ease of doing business, where, thanks to light-touch regulation and efficient, uncorrupt bureaucracies, Singapore has second place and Hong Kong fourth in the World Bank’s rankings of 190 countries. And both cities have prided themselves on their adherence to the rule of law and the low levels of violence on their streets.
On all these counts, the events of the past four months have dented Hong Kong’s reputation. Many businesses have been forced into unscheduled closures because mass demonstrations—or in recent days, the suspension of much of its mass-transit-railway network—have kept staff and customers away. As protests have deteriorated into street battles, tear-gas, petrol bombs and vandalism have made some parts of town physically hazardous. And Hong Kong has looked at times closer to anarchy than to the rule of law.
Some data are already available indicating the short-term impact of the unrest. In August the number of tourists entering Hong Kong fell by 39% overall compared with the same month last year. The number of mainland-Chinese tourists fell by 42%. The first week of October—when the weather is often good and mainland China enjoys a “golden week” holiday—normally sees a spike in the number of visitors to Hong Kong. This year the number entering by road across the land border from mainland China was down by about 40%, and the number coming by train by 50%. Singapore, in contrast, saw an annual increase in tourists from China of 8% in July, the most recent month for which data are available. Mainland China accounts for 21% of the tourists visiting Singapore, compared with nearly 80% of those going to Hong Kong.
Some evidence has also emerged that people are shifting their money as well as their travel plans. Analysis by Goldman Sachs of data for August showed a modest net outflow from Hong Kong-dollar bank deposits, and an inflow into the Singapore dollar. The analysts estimated that up to $3bn-4bn-worth of deposits may have flowed to Singapore from Hong Kong.
The very rich, in China and Hong Kong as elsewhere, have long found Singapore attractive. They like to invest in property there, sometimes as a possible bolthole. Since the beginning of 2017, mainland Chinese buyers have acquired more than 1,000 private homes in Singapore, despite a 20% stamp duty charged to foreigners.
The bigger picture, however, regardless of the recent upheaval, is of a longer-term displacement of institutional financial activity from one centre to the other. Hong Kong’s financial industry is squeezed between the ambitions of mainland Chinese cities, notably Shanghai and its own neighbour, Shenzhen, which are not hampered by its tormented relationship with the central government, and competition from other big centres in the Asian time zone that are fully outside China, such as Singapore, Sydney and Tokyo.
Already, Singapore has a lead in asset-management services, with $3.4trn under management at the end of 2018 compared with $3.1trn in Hong Kong. Even (or perhaps especially) for wealthy Chinese who have managed to move capital out of the mainland, Hong Kong may appear uncomfortably within China’s reach. The worry is that Hong Kong will lose its edge in other activities, such as investment banking and equities trading—in which context the withdrawal by Hong Kong’s stock exchange on October 8th of its takeover bid for the London Stock Exchange was a blow to its efforts to consolidate its position. The danger will intensify if Hong Kong’s present troubles instil lasting poison into its relations with its economic hinterland, China, which dwarfs the one Singapore enjoys in South-East Asia.
Singapore and Hong Kong have also long offered rival political models. Singapore, put crudely, has been an illiberal democracy; Hong Kong a liberal autocracy. One has a freely elected government but strict laws limiting, for example, public protest and some political debate. The other has a chief executive “elected” by a few hundred officials, a partially elected and weak legislature, but robust traditions of freedoms of speech and assembly. So this has been an opportunity for Singapore, discreetly, to point to its own stability. On October 4th the foreign ministry advised Singaporeans to “defer non-essential travel” to Hong Kong.
The pro-government Straits Times would have felt no embarrassment or irony with its story on a ban on any rally in Singapore in support of the protesters in Hong Kong, on a day of solidarity demonstrations in a number of cities worldwide. The headline read: “Anti-totalitarianism day: No permits for Singapore assemblies”. One young protester in Hong Kong, apparently a Singaporean, created a flurry of social-media debate with a photo of himself holding a placard reading: “Don’t let Hong Kong be like Singapore, where people live in fear.”
Pro-government Singaporean commentators were quick to condemn him; even many government critics thought he was overstating the case. But, hard though it is to gauge public opinion, a survey in July suggested that 75% of Singaporeans sympathised with the protesters in Hong Kong.
Writing last month in the Hong Kong Free Press, an online journal, Kirsten Han, an independent Singaporean journalist, noted that the percentage has probably fallen sharply since then. Leslie Fong, a former editor of the Straits Times, wrote in the South China Morning Post, a Hong Kong paper, of the sorrow many of his compatriots feel “at the sad spectacle of a city smothering itself in full global view”.
Many Singaporeans, Ms Han noted, have bought the argument about politics that Hong Kong’s leaders have been deploying in vain to defuse the protests: that they are fundamentally about economic issues, such as property prices. They are indeed among the causes of the discontent. But so is the pent-up frustration of years of living in a political system in which only certain voices seem to be heard. And that is a frustration some in Singapore, with its very different system, also feel.