Roach’s Logic 101: If Hong Kong Is “Over,” So Is America

Americans never struggle to find an angle from which to talk down Hong Kong. So let me borrow their playbook and use the same logic to talk down America for a change.

US stocks have recently returned to record highs. But Goldman Sachs estimates that AI-related shares now account for as much as 45% of total US market capitalization. America is no longer a genuinely diversified market.

America’s economic performance is tightly tied to AI mania, while its underlying growth foundation remains weak. First-quarter GDP expanded at an annualized quarter-on-quarter rate of 2.1%, but personal consumption expenditure rose by just 0.5%.

Beneath the illusion of prosperity created by inflated AI stocks, consumer demand is weak and will continue to weigh on America’s economic momentum.

America has also thoroughly become a country dominated by Indians and Chinese, gradually losing its distinctive Western character. Indian Americans make up only 1.5% of the US population, yet their share among chief executives is strikingly high. Fifteen Fortune 100 CEOs are of Indian descent, and the proportion is even higher at the very top tier of corporate America.

The technology sector, meanwhile, has been almost completely taken over by Indians and Chinese. A viral topic on overseas platforms last October claimed that Meta, Facebook’s parent company, had effectively become a “Chinese company.” Meta’s engineering ranks, the story said, were packed with Chinese employees.

One Meta employee wrote on social media that 80% of the employee’s entire team was Chinese and that these colleagues preferred speaking Chinese in the office. There were also many Indian employees, leaving white staff as a minority. Reportedly, quite a few were unhappy about it.

You may think this description of America sounds deeply biased. In fact, I am simply following the logic of Stephen Roach, the former chairman of Morgan Stanley Asia-Pacific. More than two years ago, when Hong Kong’s stock market was in the doldrums, Roach declared that “Hong Kong is over,” arguing that the market had declined after the enactment of the National Security Law.

Over the past two years, however, Hong Kong stocks have become active again. Roach changed his tune last year and said that “Hong Kong is back.” Now he is at it again, publishing another bearish article titled, “Yes, the Hong Kong of Old is Over.”

Roach’s critique of Hong Kong rests on several main arguments.

First, “mainlandization” of listed companies.

Roach argues that Hong Kong has reclaimed the global top spot for IPOs, an achievement the SAR government cites as proof of economic resilience. But he says this success rests largely on intervention and policy support from Chinese Mainland authorities. Many companies listing in Hong Kong, he notes, are Chinese Mainland giants, including CATL, Luxshare Precision and Zhipu.

Roach says Chinese companies account for 90% to 95% of funds raised in recent Hong Kong IPOs. In his view, that means Hong Kong has become a financing platform dominated by Chinese issuers rather than a truly globalized market.

But Roach’s comments are little more than an American self-fulfilling prophecy. During the first Trump administration, Trump openly attacked Hong Kong’s stock market. The US government sanctioned Hong Kong officials, and the White House even urged US funds not to invest in Hong Kong equities. Foreign capital naturally declined as a result.

Then Beijing threw its full support behind Hong Kong. As the United States stepped up its pressure on Chinese companies, a wave of first-class Chinese Mainland businesses shifted their focus to Hong Kong listings and revived the city’s stock market.

If these companies were second-rate, Roach’s argument might carry some weight. But many are industry leaders. CATL is the world’s biggest lithium-battery producer, with a 40.2% global market share in the first five months of this year, while Luxshare Precision is a leading global electronics manufacturer.

In the past, these corporate giants would have listed in the United States. Now, intimidated by Washington, they are choosing Hong Kong. That is proof that Hong Kong remains a top-tier global market. If Roach criticizes Hong Kong simply because of the nationality of its listed companies, would he call New York a Chinese city if companies such as CATL all rushed to list there?

Second, close links with the Chinese Mainland economy.

Roach stresses that Hong Kong’s economic performance is closely tied to Chinese Mainland macroeconomic trends. He also points to slower growth in the Chinese Mainland, noting that GDP growth eased to 4.3% in the second quarter this year. He worries that this will undermine Hong Kong’s future recovery momentum.

Hong Kong’s economy is indeed closely correlated with Chinese Mainland macroeconomic performance. But that has long been one of Hong Kong’s defining strengths. As an externally oriented economy beside China’s exceptionally fast-growing economic engine, Hong Kong has benefited enormously from that proximity.

As for Chinese Mainland GDP growth, Roach need not worry on China’s behalf. I am confident that full-year GDP growth will reach 4.7%. The economy charged ahead too quickly in the first quarter, slowed appropriately in the second, and will gather pace again in the third and fourth quarters.

The Chinese Mainland economy is not weak. With an economy worth RMB 140 trillion that is still expanding at such a rapid pace, it remains a pillar supporting Hong Kong’s growth.

Third, Hong Kong becoming a Chinese city

Roach presents no particularly compelling evidence. He merely notes that more people in Hong Kong are speaking Putonghua. With a touch of sarcasm, he says the Putonghua pinyin “Xianggang” now captures the city’s true identity better than the traditional English name, “Hong Kong.”

Roach also points to the SAR government’s newly launched first Five-Year Plan. He worries that such plans could become exercises in over-promising and under-delivering.

Roach need not worry about China’s or Hong Kong’s ability to plan. If Chinese people were as prone as Americans to over-promising and under-delivering, China could not have built even half of its high-speed rail network.

More Chinese Mainland people are coming to Hong Kong, but Hong Kong has always been an international city where talent converges from every direction. Americans are coming less often because of their own government’s political interference. More Chinese Mainland elites arriving in Hong Kong are simply a healthy complement.

If Roach’s racially tinged criticism held up, then America’s many Indian-American CEOs would justify calling the United States “Amerika,” using the Hindi term. Hong Kong is an international city. As long as talented people gather here, why should anyone care about their ethnicity?

Roach’s commentary is simply laughable. Americans really cannot bear to see Hong Kong doing well.

As a former Morgan Stanley executive, Roach should set aside U.S. interests and look at the issue purely from a financial perspective. If he did, he would have to admit that Hong Kong’s ability to attract so many world-leading companies is an opportunity not seen in more than a century.

Ask yourself this: has Hong Kong’s stock market ever before attracted the world’s leading company in any major industry to list in the city?

Lo Wing-hung

Bastille Commentary

** 博客文章文責自負,不代表本公司立場 **

On the surface, China-US relations look calm. In reality, both sides are locked in close combat.

Foreign Minister Wang Yi met US Secretary of State Marco Rubio on July 22. The meeting took place on the sidelines of the ASEAN Foreign Ministers' Meeting in Manila.

According to Xinhua, Wang Yi told Rubio that this year marks a landmark year for China-US relations. He noted that the two heads of state held a historic summit in Beijing, which established a positioning of "constructive and stable" strategic relations between the two countries.

Wang also set out China's firm position on what he called a series of negative words and actions by the US side. He demanded that Washington respect China's core interests, abide by the one-China principle, effectively manage frictions and disagreements, and address China's legitimate concerns, so that this year of opportunity for bilateral relations can become reality. Xinhua described the meeting as pragmatic, positive, and constructive.

Wang Yi's phrase "recent series of negative words and actions by the US" deserves close attention. The fact that the meeting was ultimately summed up as "constructive" suggests Washington offered certain commitments behind closed doors.

Two recent moves from the US side stand out as negative. While Washington has delayed new arms sales to Taiwan, it has refused to commit to stopping them altogether. The other issue is tied to AI large language models. China's Moonshot AI recently released its new Kimi K3 model, and its capabilities have caught up with America's most advanced systems.

The breakthrough triggered intense attention and drew a wave of negative commentary from US officials.

US Treasury Secretary Scott Bessent insists that America remains ahead. He claims the US leads China in AI by roughly a year. His next goal is to push America's share of global computing capacity from the current 60 percent straight up to 80 percent.

Bessent then said on July 21 that Washington would rigorously scrutinize AI models developed overseas with open-source code, including products released by Chinese firms. Should any such model be found to have stolen the intellectual property of US companies, he said, the US government has the means to impose sanctions.

Bessent also said the US government may go a step further and assess whether American companies using Chinese AI models should be required to disclose this to their customers. He likened the issue to that of counterfeit goods, stressing that businesses cannot use products built on stolen intellectual property.

These remarks show that the Trump administration has been thrown off balance by China's new model. It is now scrambling for ways to suppress it. The scrutiny of China's AI sector, which had focused on export controls over advanced chips, may now widen to cover training data, the provenance of underlying technology, corporate disclosure obligations, and intellectual property disputes. Fresh risk added to the US-China AI rivalry.

It's fair to assume that Wang Yi's warning to Rubio went beyond demanding a full halt to US arms sales to Taiwan. The warning was also aimed squarely at Bessent's remarks, calling for an end to the smearing and suppression of Chinese AI models.

This can be summed up in two points.

First, faced with the shock of China's AI advances, the US wants to preserve its own technological lead while unjustly suppressing others at the same time. No amount of spin from Bessent can whitewash that kind of behavior.

Second, Bessent's accusation that Chinese models copied American ones is, in essence, a trumped-up charge. It is one the US can investigate, "convict," and sanction entirely on its own terms. Wang Yi's warning was, in effect, laying the unpleasant truth on the table in advance.

From Beijing's perspective, if Washington uses this as a pretext to escalate, China could immediately turn the tables. President Xi could simply decline to visit the US in September, and Trump, in turn, need not bother coming to Shenzhen in October. That would inevitably rattle the US economy and stock market, right before Trump has to explain himself to voters in November's midterm elections.