Hong Kong's still ‘over' but Stephen Roach says city a surprise trade war winner

The Star

07-06-2025

American economist Stephen Roach has said that Hong Kong has benefited from the US-China trade war despite last year having declared the city to be 'over', even as he claimed that other aspects of the financial hub had worsened.
The former Morgan Stanley Asia chairman sparked debate last year after he penned an opinion piece which argued, in part, that Hong Kong would be caught in the 'crossfire' of the worsening US-China rivalry.
'The word caught is the word that, if I had to write the piece again, I would probably change, because I think, ironically, Hong Kong has benefited from the crossfire between the US and China,' he told the Post in a recent interview.
Despite worsening ties between the two superpowers since US President Donald Trump began levying his so-called reciprocal tariffs on China and the rest of the world, Hong Kong's stock market has seen solid gains.
The benchmark Hang Seng Index is up by around 50 per cent since Roach made his original claim, while Hong Kong has rocketed to the top of the global fundraising table following a string of high-profile initial public offerings last month, including from mainland Chinese battery maker Contemporary Amperex Technology.
Roach, who is now a faculty member at Yale University, said the 'sell America' trade had become a 'global mantra' and Hong Kong was a beneficiary.
But asked whether he felt his initial assessment of the city being 'over' was premature, he noted he would say the same again.
'No economy or city state is over ... but this image of a dynamic, powerful system as part of the 'one country, two systems' model, I think that's just as close to being over today as it was when I originally wrote the piece,' he said, referring to the city's governing principle.
'The governance story is still, I think, very much working against this notion of Hong Kong as a free, independent, autonomous city state. If anything, it's gotten worse.'
Roach added that the strong performance of the city's stock market had 'instilled sort of a new swagger in Hong Kong bordering on denial'.
He said there were 'questions that could be raised' about the city's independent rule of law, pointing to the departure of foreign non-permanent judges. He also raised concerns about the fast-tracking of the domestic national security law last year and what he described as continuing efforts to 'quash dissent'.
While the Hong Kong government had 'risen to the challenge' to demonstrate to the world that the city should be considered 'special', American investors in particular had developed an 'unwillingness' to distinguish it from the rest of China, he said.
'Where I've come out, reluctantly, is that as great a city as Hong Kong is, it's just another big Chinese city,' he said. 'I think it's increasingly a one country, one system model with a solid financial capital raising infrastructure embedded in Hong Kong.'
Executive Council convenor Regina Ip Lau Suk-yee, who previously hit back at Roach over his 'Hong Kong is over' remarks, maintained that the American economist did not understand the city.
She said the 'pessimistic views' Roach expressed last year 'were primarily based on the Hong Kong stock market's poor performance'.
'He overlooked China's strength in technological innovations and Hong Kong's unique advantages based on its separate systems. We are the only part of China that can invest, manage and provide trading platforms for digital assets.'
She cited the city's recently passed law on stablecoins, which she said would help Hong Kong be the country's 'testing ground' for cryptocurrencies.
Stablecoins are a type of cryptocurrency token that maintain a fixed value by being pegged to a reference asset, typically fiat currencies such as the US dollar.
The law, which was passed last month and is set to take effect later this year, establishes a regulatory regime for stablecoins, paving the way for issuers to obtain licences and sell the digital assets to the public.
'Despite ongoing US-China tensions, Hong Kong will continue to have an important role to play in building bridges between China and the West,' Ip said. - SOUTH CHINA MORNING POST