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 **

Two national security cases have recently wrapped up in quick succession.

On Thursday (10 September), two members of the "Hong Kong Democratic Independence Union" were sentenced to three years, and three years and two months in prison respectively. Both had pleaded guilty to "conspiracy to commit secession" under the Hong Kong National Security Law.

Then today (11 September), sentence was passed in the "incitement to subversion" case against the Hong Kong Alliance in Support of Patriotic Democratic Movements of China (the Alliance). Albert Ho Chun-yan, who pleaded guilty, was jailed for five years and two months.

The two defendants who pleaded not guilty, Lee Cheuk-yan and Chow Hang-tung, were jailed for seven years and seven years and three months respectively. 

The judge made it clear in sentencing why the Alliance case fell into the "serious circumstances" category. The case did not involve violence or any concrete method put forward by the defendants for "ending one-party rule."

But society was in turmoil at the time of the offence.

The defendants' activities continued for a full 14 months after the National Security Law came into force. Those activities were citywide in scope and attracted widespread attention.

The defendants believed that what they advocated might be unlawful, yet persisted regardless. The offending was premeditated.

The trials and tribulations Hong Kong has weathered since the handover amount to one giant political experiment. Every kind of political proposition has been put to the test, and we have seen the results.

Had these cases arisen in the early days after the handover, the verdicts might have read very differently to some.

Two young men aged 25 to 27, jailed for more than three years over a "nation-building union" that looked doomed to fail, might have seemed like the court making a mountain out of a molehill.

The same goes for the Alliance. Had its standing committee members been prosecuted in those early days, some might have felt they were merely chanting slogans to promote democracy. Perfectly harmless, undeserving of arrest and imprisonment.

But after more than two decades of development, we can now see with total clarity what these incendiary political activities can achieve. 

From the mass march against Article 23 legislation in 2003, to the illegal Occupy Central movement in 2014, to the all-out riots of 2019, unlawful activities escalated step by step until violent protests spun completely out of control.

The breaking point came on 11 November 2019 with the Ma On Shan incident, in which a man was set on fire. An utterly depraved manifestation of violent lawbreaking. 

The perpetrators believed they held the truth in their hands. They doused an unarmed civilian in flammable liquid and set him alight, intending to burn him to death. His only fault was trying to stop rioters vandalizing the MTR station.

Political violence had reached a point of no return, spiraling beyond control.

At the core of the Alliance stood the so-called traditional pan-democrats. They claimed to be promoting democracy in Hong Kong and the country. Yet they turned a blind eye to the street violence they themselves had incited, at times even tacitly condoning it. 

One need only look at what was exposed during the trial of Jimmy Lai to see this plainly. 

Back then, Lai instructed the senior management of Apple Daily to uphold "no distinction between the peaceful and the valiant".

In other words, they were not to draw a line between themselves and the valiant faction advocating violent struggle. That alone showed that the movement's descent into violence had the backing of big bosses behind the scenes. 

And behind these local opposition bosses stood the political forces of the United States and the West. 

Take Lee Cheuk-yan, a central figure in the Alliance case.

The Hong Kong Confederation of Trade Unions (HKCTU), to which he belonged, relied for years on funding from the National Endowment for Democracy (NED). Beginning in 1994, the HKCTU applied every year for grants from the NED-affiliated American Center for International Labor Solidarity. The cumulative total came to HK$13 million. 

Here was an organization directly funded by a foreign government, running labor and social movements in Hong Kong. Who could believe it thinks independently?

Piece the whole picture together and the through-line becomes complete. Beginning in the late 1980s, in the closing stages of the Cold War between the United States and the Soviet Union, the CIA set out to overthrow the entire socialist camp led by the Soviet Union. 

China's "June Fourth incident" also occurred against this backdrop.

While China and the United States had not yet fallen out completely, such activities proceeded in the shadows. After the rupture, and especially after Washington launched its trade war against China in 2018, the United States embarked on subversion against China without scruple. 

These were not activities to promote the development of democracy in China. They were subversive operations aimed at toppling state power. 

Consider this: the CIA today openly recruits spies targeting China. That tells you how grave the situation is.

With the Alliance case tried and sentenced, the legal boundary for such acts of subversion has now been clearly drawn. Do not imagine that chanting a few incendiary slogans or setting up some reactionary organizations is harmless. A single spark can start a prairie fire.

Drawing the legal red line is precisely about nipping these subversive activities in the bud.

Lo Wing-hung