In a speech to U.S. governors in February, Secretary of State Mike Pompeo warned that China was actively working to exploit American vulnerabilities at all levels. Two can play at that game.
In June, China imposed its draconian national security law on Hong Kong, extending the reach of the Communist Party's security apparatus throughout the territory. Now businesses want out. A survey this month by the American Chamber of Commerce in Hong Kong found that 76 percent of respondents were "somewhat" or "extremely" concerned about the new national security law, and 63 percent feared that it would harm Hong Kong's business prospects. Thirty-five percent of Hong Kongers polled said they were considering plans to relocate their capital, assets or business operations. As authorities use the law to crack down on the pro-democracy movement, these sentiments are likely to grow.
It's a grim story. The resulting intellectual and capital flight from China will be significant. But the United States is in a position to offer a helping hand, and it should seize the opportunity. If that flight could be directed to America, even in part, the economic benefits could be enormous.
American tech companies have already made a move that points to the troubles ahead for businesses in Hong Kong. Facebook, Google and Twitter have suspended processing government requests for user data in the territory, fearing that this information could be abused by Beijing. If China extends its "Great Firewall" to Hong Kong, these companies may have no choice but to leave.
The tech giants are not the only businesses likely to suffer. Hong Kong is a major banking hub and a territory where global business has flourished. Financial institutions have real reasons to be concerned about Beijing's invasiveness. Banks seeking to maintain solid reputations will also loathe the prospect of being lumped in with some of the less-than-transparent counterparts operating on the mainland.
There are 56 banks incorporated in Hong Kong. The banks are divided into three tiers (licensed, restricted license and deposit). Some are domiciled in China. Others are based elsewhere and already have a presence in the United States.
But for those seeking a new headquarters or a greater U.S. presence, Washington should consider offering generous tax incentives. States should also consider offering additional benefits, such as subsidized construction or low-interest loans. These practices are already in place as states compete for new Amazon facilities, for example, given the potential to increase local and regional economic growth. Pacific states, in particular, should consider such inducements, since the West Coast is a natural landing spot for financial institutions and bankers.
The opportunities extend beyond banks, too. Data from the Hong Kong Companies Registry indicates that in May 2020, there were about 1.3 million local companies incorporated and registered in Hong Kong. Of those companies, 850 are public. Efforts should be made, at both the state and federal levels, to woo those that would benefit the U.S. economy.
The United States should not stop at businesses. Many Hong Kong residents are highly educated, with deep expertise in financial markets and other important industries. Beyond the moral imperative of assisting freedom-loving citizens of a city now under an oppressive authoritarian regime, opening our shores to Hong Kong emigres is a win-win-win for the United States. It promotes the health of the U.S. economy by adding valuable new intellectual capital, undercuts China's ability to benefit from their talents and productivity, and supports the American values of democracy and freedom.
Laying out a welcome mat for Hong Kongers and their businesses does not have to be hard. It's too late to include provisions in the newly signed Hong Kong Autonomy Act, which imposes new sanctions on those undermining the rights and freedoms of Hong Kong. But Congress should consider tweaks to current legislative efforts that offer protection to the people of Hong Kong, including relaxed visa restrictions to the United States. Relaxed business restrictions should be added to the mix.
Admittedly, many Hong Kongers will wish to remain in the region. Likely options include Singapore, Malaysia, Thailand, Vietnam, Australia or other countries that operate free of Chinese control. Some may likewise choose to go to Britain, which has also taken steps to help them leave Hong Kong.
But for Hong Kong's people and businesses alike, Washington should make it clear that America is still a land of opportunity. The net effect could be an enormous transfer of wealth and intellectual property from China to the United States, rather than the other way around. What's not to like?
Jonathan Schanzer is senior vice president for research at Foundation for Defense of Democracies, where Eric Lorber is senior director for FDD's Center on Economic and Financial Power. Both previously worked at the U.S. Treasury Department.