Could Hong Kong fintech companies try to flee the country?

It’s no secret anymore that Hong Kong is in chaos after so many days of protests. The local population is trying to desperately avoid falling under the direct control of the People’s Republic of China and it’s understandable.

The laws that Hong Kongers have become used to after the UK left are very hard to give up for Chinese laws which in some cases directly contradict what people are accommodated to.

However, this article is not focusing on the sentiment that ordinary Hong Kong citizens have towards the extradition bill, as that’s pretty much obvious at this point. What the article will be focusing on are the companies operating in the fintech industry and their plans to somehow move outside of the country should things get too heated.

Why fintech companies would want to leave

One very simple reason is due to the rules and regulation that China has towards everything Fintech. This is especially important for companies working with the blockchain and creating cryptocurrency projects. It’s no secret that the CCP (Chinese Communist Party) has become much more aversive to cryptos once they started to get global traction.

Both mining and trading cryptocurrencies on Chinese soil is illegal, therefore Hong Kong-based companies could face bankruptcy or even worse, lawsuits.

Furthermore, there are allegedly requirements from the Chinese government that tech companies, be they focused on consumer goods or financial services are required to compile the data about their customers, both local and foreign, and report it on a regular basis.

This is, of course, just an assumption or an allegation that several politicians and people have made against the Chinese government. This was quite the issue when the whole Huawei controversy was going on in the United States, but it seems to be boiling down to a simmer now.

But, the fact that there was a case with a large Chinese corporation illegally gathering data of their users is already a basis for bad customer sentiment. Even if the CCP were to allow Hong Kong fintech companies to continue operations despite the regulations, these companies would lose customer trust immediately for operating under Chinese law.

How would they deal with it?

There have been numerous occasions where a company’s country of residence got into some controversy on a global level, which affected the company’s profits in general. One such example I can think of is illustrated in this Libramarkets review, which talks about the company’s operations in German.

This is an example of how a country’s reputation can affect a company’s performance. For the company that I mentioned, it was a boost towards trustworthiness to have an office or some kind of presence in Germany, because most people trust EU and German law more than they’d trust something else.

Something similar can be said about Hong Kong companies. Currently, they are operating under a jurisdiction which is trustworthy on a global level. Having that taken away could be disastrous for them, therefore they’re forced to look for alternative countries to move to.

What are the options if worse comes to worst?

There are multiple options that these companies could go for, but currently, the best choice seems to be Australia, simply due to the cost of operations and an already strong presence of the Fintech industry there.

Many were saying that Taiwan would have been a great destination for these companies, but in all honesty, it’s just a matter of time before the CCP starts to focus on Taiwan as well, simply because the two countries have had political differences for decades now.

Will the companies flee?

When trying to discuss this event, we need to look at it from a slightly different angle than political. In this case, it’s all about the profitability and relevance of a brand which is in serious danger simply because the country that governs them may change.

Fleeing from the country is definitely going to be easy for service-based Fintech companies, while those that manufacture hardware are going to find it much harder.

Judging by how things have been developing it’s unlikely that companies will start moving en masse, although reports are already in that they’ve started laying down plans for Canada and Australia.

Regardless of how we look at it, the attempt to pass the extradition bill in Hong Kong was a message from China that they haven’t forgotten about the 50-year plan.