Stephen Roach does a U-turn on his views on Hong Kong

Mark Pinkstone/Former Chief Information Officer of HK government

Morgan Stanley’s former Asian chairman Stephen Roach, who last year infamously forecasted the death of Hong Kong, has changed his tune and now says Hong Kong is the driving force behind China’s economy.

It is far from over and Roach says that if he had to rewrite a piece on Hong Kong it would be that Hong Kong is experiencing a revival because of its Chinese characteristics, not in spite of it.

The admission by Roach is commendable in that he has admitted the error of his ways. But Roach is a businessman and a financier, not a politician. The lawmakers in the hallowed halls of congress and the senate remain in denial that Hong Kong is progressively moving forward and is a world player in the global economy, despite its size. They remain defiant in acknowledging the fact that our legal system is the same as theirs with an added benefit of bringing in foreign judges to ensure fairness of trials. But they are politicians, so admitting the truth is not on their agenda.

Roach has had a rethink about what he said last year, spurred on by the rift between US President Donald Trump and China and the role played by Hong Kong in combatting Trump’s bullying tactics. The city’s emergence as a bulwark against hostile US actions is strengthening the outlook for Hong Kong.

But Roach, being a typical American, still has a dig at Hong Kong’s national security law, which is very similar to the state and federal security laws of the US.

The city is being caught in the middle of the US and China rivalry, says Roach and Beijing’s intervention in the shape of a national security law is undermining Hong Kong’s political autonomy. These two elements continue to be concerns, according to Roach, who said Hong Kong is “now in China’s orbit completely from an economic, administrative and legal point of view.”

He added that the US-China conflict was more of an opportunity for Hong Kong than a threat.

“Hong Kong’s financial success may be determined more by its ties to China, and the impact that US pressures have had on forcing something closer to a full-blown financial decoupling between the US and China,” said Roach. “Hong Kong is in a position to benefit from that.”

Whether or not there is a financial decoupling with the US in the near future remains to be seen. But Hong Kong has always benefitted from its position in China.

The economist also believes that the conflict between the US and China is getting worse. “And Hong Kong — rather than getting hammered in the crossfire as I expected and wrote — may be benefiting from that, because of its unique position as China’s most important window to international finance,” he told Bloomberg.

Bloomberg also noticed in its report that the Hang Seng Index has rallied 16 per cent, outpacing the S&P 500, in which has little has changed. Share listings have raised HK$77 billion ($9.9 billion) in Hong Kong this year through May, the most since 2021, led by Contemporary Amperex Technology Co. — better known as CATL – Roach’s original thesis for Hong Kong’s demise which he maintained throughout 2024.

In February last year, Roach wrote in the Financial Times that “Hong Kong is now over,” citing a sluggish stock market performance. He said “the wheels had come off” in 2019-20 when there were “massive pro-democracy demonstrations” against the proposed extradition bill and the introduction of the national security laws. He claimed that “the 50-year transition period to full takeover by the People’s Republic of China had been effectively cut in half.”

This, of course drew strong rebuttals from officials and politicians in Hong Kong and Beijing. But throughout the year Roach continued his rhetoric that Hong Kong was doomed.

It was the bullying tactics of Trump who changed his mind. First the trade sanctions, followed by sanctions on Hong Kong’s senior officials, then stripping Hong Kong of its special status that allowed it to be treated separately from China and then the scrapping of visas for students attending Harvard University.

Bloomberg noted that it’s not just in finance that Hong Kong may increase its edge. Policies by US President Donald Trump such as revoking visas for Chinese students and his assault on elite colleges such as Harvard may also drive human capital towards the city.

To which he responded, “Our loss is your gain,” he said of Hong Kong.

Mark Pinkstone

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

The decision by the Chief Executive John Lee to establish an independent committee to investigate the Tai Po fire is the correct move to expedite closure for the bereaved families who lost loved ones in the deadly fire which took 160 lives.

He had a choice. The normally hostile western media were clamouring for an investigative commission of inquiry which would have taken years to complete its work due to legal wrangling, thus prolonging closure. The bereaved rightly want to know how and by whom the fires started. And they want to know as soon as possible.

It is likely Lee consulted the justice and legal departments before reaching his conclusion that an independent committee was the correct path to follow. His heart went out to the bereaved while wishing a quick inquiry into the causes of the fire.

Immediately after the fire, the government arrested a number of company directors and contractors and seized their books to investigate any culpability in the awarding of contracts and procedures of the renovation works.

Despite western criticism, the government and the public were quick to respond to the disaster. The government set up a $300 million relief fund, and this was quickly boosted to $3.3 billion by corporate and public donations. More than 1 451residents have been accommodated, through the co-ordination of the Home and Youth Affairs Bureau, in youth hostels, camps, or hotel rooms. Another 3,059 residents are currently living in transitional housing units provided by the Housing Bureau or units from the Hong Kong Housing Society. Hong Kong cares.

Not wasting time, Chief Executive John Lee Ka-chiu quicky appointed Justice David Lok Kai-hong to chair an independent commission to be flanked by committee members Chan Kin-por and Rex Auyeung Pak-kuen. The committee’s mandate covers critical areas—the origin of the fire and why it spread so rapidly and whether fire-safety equipment, maintenance standards and regulatory oversight were properly adhered to. The panel was given sweeping powers by the Chief Executive and nine months to uncover the causes, expose any corruption in renovation works, and recommend sweeping reforms.

The special committee will have maximum autonomy and flexibility but does not have the authority to summon witness as in an inquiry. Should such a case arise, and should it require formal statutory powers to compel evidence on specific issues, it can ask the Chief Executive to convert it into a full Commission of Inquiry in the same way past major probes have been conducted.

Addressing concerns about not immediately establishing a statutory inquiry, Lee explained the current structure allows faster start-up while retaining the option to escalate if needed, covering both immediate fire-safety failures and long-standing concerns over maintenance contract irregularities.

A commission of inquiry can be lengthy and prolonged by legal arguments. The Commission of Inquiry into mishaps in the opening of the new airport at Chek Lap Kok in 1998 is said to have a hundred lawyers arguing for their clients and with the disastrous Grenfell Tower fire (which was similar to the Wang Fuk Court fire in Tai Po) in the UK in 2017, an independent investigation committee led by retired justices published its report in stages, with the first report taking two years after the disaster, and the second report taking seven years after the disaster. The unfortunate bereaved waited.

Lee said the goal of this independent committee in Hong Kong is to complete the review within nine months, mainly due to adopting a hybrid model. It takes both the flexibility and efficiency of the independent review committee and the statutory power of the independent investigation committee as a cover. It is a pioneering approach of "the integration of power and effectiveness", and we hope to make it clear to the public as soon as possible.

Lee stressed that the final report and all recommendations will be made public, except for material related to ongoing court cases, and interim reports may be issued to keep the public informed.

The Wang Fu Court fire was a disaster that should never have happened. The independent committee will have its work cut out determining the cause of the fire without any legal framework. But its recommendations will go to the government to act accordingly and swiftly to bring those responsible to be accountable for the 160 lives lost. It is also a subject for the new legislators to debate when the Legislative Council opens on January 7.