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Why Hong-Kong is Important to China? By Arka & Subham

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By Power of Vision


Throughout the previous year, we are hearing news about protests in Hong-Kong against Chinese aggression. One thing I observed here that the government is not taking as drastic steps against the protesters as it takes against any kind of protest in mainland China.

Why is it so?

Why Chinese army, PLA is not coming to Hong-Kong?

To, analyze these questions we need to look back to history. It was a former British colony, it was ruled by British government from 1841 to 1997. On the year 1997, Britain returned it China under a condition of being governed under  “One country two systems” framework that allows some freedom that it’s mainland counterparts don’t enjoy. Under this system, Hong-Kong is guaranteed to have some special; status which allows it to negotiate trade and investment agreements with other countries. At the time amalgamation Hong-Kong’s GDP was 18.4% of China’s GDP.

Mainly there are 4 reasons behind China’s dependency on Hong-Kong. The factors are as follows,

·       Open capital markets,

·       Chinese Yuan goes global,

·       China’s overseas investment,

·       Facilitating China’s trade.

Open Capital Markets

China still has extensive capital controls and often intervenes it’s financial markets and banking system. So, international investors don’t feel comfortable tom invest there.

This city has got an open market contrary to the rest of China. So most of the large Chinese compani9eds including giants like Alibaba, JD.com are registered in the Hong-Kong stock exchange in order to get overseas investment.

The Chinese companies that are investing in overseas companies, are also dependent on the Hong-Kong stock exchange for doing that.

On the year 2018 Chinese companies have raised $35 billion from the Hong-Kong market by IPO. They also had tapped the Hong-Kong debt market for 33% of their offshore &usd funding.

Chinese Yuan Goes Global

Hong-Kong’s status as an independent international trading centre helps China. According to Bank Of International Settlement, showed that Hong-Kong is the largest market in terms of Chinese Yuan transactions.

 China’s overseas investment

By 2018, Hong-Kong accounted for 55.55% of China’s direct overseas investment according to National Bureau Of Statistics. Chinese companies invest elsewhere in the world through Hong-Kong in order to take advantage of relaxations.

 

China’s Overseas Business

Today at the height of China-US trade war when both of the countries slapped elevated tariffs on each other’s products. Under this rule exports to the US routed through one or more countries will face tariffs based on transaction price on the very first stage. Chinese exporters take advantage of this by selling products in a low price to are exporter in Hong-Kong.

So, conclusively we can say China had used Hong-Kong to mislead global investors by portraying herself as liberal to the world and at the same time autocrat leaders of China are trying to snatch freedom from the people of Hong-Kong. We Indians, as historical custodian of peace and liberty should support legitimate demand of Hong-Kong’s independence from China.

(Reference: www.cnbc.com  and https://in.mobile.reuters.com/)


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