Finance

Chinese President Xi Jinping arrived Thursday in the special administrative region of Hong Kong, state media said.
The trip is for the 25th anniversary on Friday of Hong Kong’s handover to China from British colonial rule.
The visit marks Xi’s first travel off mainland China since the pandemic began more than two years ago.

China’s President Xi Jinping, pictured on the left, looks at Hong Kong’s outgoing Chief Executive Carrie Lam as he prepares to speak following his arrival in Hong Kong on June 30, 2022, for celebrations marking the 25th anniversary of Hong Kong’s handover from Britain to China.
Selim Chtayti | Afp | Getty Images

BEIJING — Chinese President Xi Jinping arrived Thursday in the special administrative region of Hong Kong, state media said.
The trip is for the 25th anniversary on Friday of Hong Kong’s handover to China from British colonial rule.

The visit marks Xi’s first travel off mainland China since the pandemic began more than two years ago.
In a brief speech upon arriving in Hong Kong, Xi said Beijing would stick to the “one country, two systems” policy that he claimed would “ensure the long term prosperity and stability in Hong Kong,” according to an official English translation carried by state media.
The “one country, two systems” policy has allowed the Chinese city of Hong Kong to operate as a semi-autonomous region under Beijing’s rule.
Large-scale, violent protests in 2019 were initially triggered by a controversial extradition bill that many in Hong Kong claimed went against the principle of “one country, two systems.” The region’s retail sales contracted in 2019 and 2020 as protests disrupted the local economy, even before the pandemic shut Hong Kong off from foreign and mainland tourists. 

Xi said Thursday that Hong Kong overcame “severe tasks” and “a number of risks and challenges” in the last few years, without going into detail.

In a 2020 speech in Shenzhen, Xi said the mainland Chinese city should promote development of Guangdong, Hong Kong, Macao — the Greater Bay area — and enrich the new practice of “one country, two systems.'”
He did not specifically say what the “new practice” entailed. That speech commemorated the 40th anniversary of the establishment of the Shenzhen special economic zone in the southern province of Guangdong.
Xi closed his remarks Thursday by referring to his aim of building China into a greater power.
“Hong Kong will make great contribution to the rejuvenation of the Chinese nation,” he said.
Xi arrived in Hong Kong with his wife at West Kowloon railway station, according to a live broadcast Thursday afternoon on state media.
The stream showed a station filled with children and adults chanting “welcome” in Mandarin and waving the flags of Hong Kong and China.
On Friday, Beijing loyalist John Lee will begin his five-year term as Hong Kong chief executive, replacing outgoing Chief Executive Carrie Lam. Lee was the only candidate for the position in an election held in May.
— CNBC’s Su-Lin Tan contributed to this report.

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Rather than spend or invest, 58.3% of survey respondents said they preferred to save their money, according to a People’s Bank of China second quarter report.
That’s a jump from 54.7% in the first quarter, which already marked the highest on record for data going back to 2002.
If Chinese consumers did plan to increase spending in the next three months, the most popular choice was education, followed by health care and big-ticket items, the survey found.

Education remained the most popular category for Chinese consumer’s planned spending, according to a People’s Bank of China survey in the second quarter of 2022.
China News Service | China News Service | Getty Images

BEIJING — Chinese consumers’ inclination to save is at its highest in two decades, the People’s Bank of China found in a second quarter survey.
Rather than spend or invest, 58.3% of survey respondents said they preferred to save their money. That’s a jump from 54.7% in the first quarter, which already marked the highest on record for the data which goes back to 2002.

The new record came as mainland China enforced strict Covid controls in the second quarter to control the virus’ worst outbreak in the country since early 2020. Shanghai locked down in April and May, while Beijing banned dining out in restaurants in May, among other restrictions.
Both cities have since eased those controls, and this week, the central government cut the quarantine time for international travelers and for local contacts of people infected with Covid.
The PBOC said its quarterly survey, conducted since 1999, covered 20,000 people with bank deposits across 50 large-, medium- and small-sized cities in the country. The latest results came out Wednesday.
A big driver of consumer cautiousness is worries about future income.

By several measures, the PBOC’s survey pointed to falling income expectations. The study’s index for the job outlook fell to 44.5%, the lowest since the first quarter of 2009’s 42.2% print, according to the CEIC database.

The overall share of respondents most inclined to spend rose slightly from the first quarter by 0.1 percentage points to 23.8%.
If Chinese consumers did plan to increase spending in the next three months, the most popular choice was education, followed by health care and big-ticket items, the survey found.
However, consumers’ inclinations to invest fell by 3.7 percentage points to 17.9% in the second quarter, with stocks the least attractive asset.
The unemployment rate in China’s 31 largest cities has surpassed pandemic highs this year to reach 6.9% in May. The jobless rate for young people ages 16 to 24 has remained far higher, at 18.4% in May. The number of higher education graduates reached new annual records in the last few years.

China tries to boost youth employment

To address young people’s unemployment, the country’s economic planning agency will implement a “bailout policy” to help businesses stabilize and expand their headcount, Yang Yinkai, Deputy Secretary-General of the National Development and Reform Commission, told reporters this week. That’s according to a CNBC translation of the Chinese.
He said small businesses that offered college graduates a certain number of jobs and met other conditions could get preferential support. Yang added the government would carry out vocational skills training, and speeding up recruitment of civil servants and teachers for kindergartens to middle schools.

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Earlier this month, Beijing also called on state-owned enterprises to increase their recruitment of college graduates this year.
In a statement to CNBC this month, the PBOC said its employment-friendly measures included helping migrant workers and university graduates become eligible for guaranteed start-up loans in regions away from their hometown.
The central bank said it would encourage banks to extend loan repayment deadlines for small businesses and truck drivers, as well as those for consumption loans and mortgages for personal residences.

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Coinbase plans to hire a regional manager to oversee its European operations, Nana Murugesan, the firm’s vice president of international, told CNBC.
The company is in talks to get regulatory approval in various countries, including France, said Katherine Minarik, Coinbase’s vice president of legal.
Coinbase is racing to keep pace with rivals like Binance, FTX and Crypto.com, which have gained significant traction in territories outside the U.S.

Coinbase reported a 27% decline in revenues in the first quarter as usage of the platform dipped.
Chesnot | Getty Images

Coinbase is seeking licenses with various countries in Europe as part of an aggressive expansion in the region.
The exchange already has an active presence in the U.K., Ireland and Germany, but wants to set up operations in Spain, Italy, France, the Netherlands and Switzerland, according to Nana Murugesan, Coinbase’s vice president of international. Coinbase recently hired its first employee in Switzerland, he says.

The U.S. crypto giant is looking to international markets to drive growth amid fears of a looming “crypto winter.” Earlier this month, Coinbase announced it would lay off 18% of its workforce, while other firms including Gemini and BlockFi haven taken similar steps amid a fall in crypto prices.
Still, Murugesan says Coinbase is planning to hire a regional manager to oversee its European operations. The firm is mainly prioritizing “mission-critical roles” in fields like security and compliance after a period of rapid growth, he added.
“When we entered U.K. and Europe, this was actually during the last big bear market in 2015-2016,” said Murugesan, who joined Coinbase in January 2022.
“But then when you fast forward to 2017-2018, the U.K. is now a massive part of our business, as is Europe,” he added. “We entered, we made bets. I’m sure it was probably a tough time. But it’s paid off, significantly.”
Coinbase is in talks to get approval under anti-money laundering rules in a number of countries, including France, said Katherine Minarik, the company’s vice president of legal.

The company is gearing up for MiCA, or Markets in Crypto-Assets, a landmark piece of legislation from the EU that aims to harmonize the regulation of crypto across the bloc.

Officials from the European Council and Parliament are due to meet Thursday in a bid to reach an agreement on the rules. If all goes smoothly, the expectation is that MiCA will come into force by 2024.
Once approved, it will enable Coinbase to “passport” its services into all 27 EU member states, Minarik said.

Slow and steady wins the race?

While Coinbase is the biggest crypto exchange in the U.S., it’s facing intense competition from newer players like Binance, FTX and Crypto.com. Binance’s U.S. affiliate recently ditched fees for customers trading bitcoin, news that sent shares of Coinbase tumbling.
Coinbase is racing to keep pace with its rivals, which are gaining significant traction in territories outside the U.S.
In the Middle East, for example, both Binance and FTX obtained licenses in Dubai. Binance also secured authorization in France and Italy and is seeking approvals in additional European countries.
“Being a publicly traded company, the bar is very high,” Murugesan said. “Sometimes it may take a bit longer to get some things done. But we want to stay the course.”
At the same, major crypto players — Coinbase included — are reeling from a dramatic plunge in digital currency prices, which some investors believe will be the start of a much longer downturn known as “crypto winter.”

A confluence of factors is weighing on the market, including higher interest rates from the Federal Reserve and the collapse of the UST stablecoin. The slump in token prices has in turn led to solvency issues at investment firms that loaded up with leverage, like Three Arrows Capital.
Coinbase made a sudden U-turn on its cost-cutting strategy this month, announcing plans to cut roughly 1,100 employees globally. Though the cuts affected 18% of Coinbase’s global headcount overall, Murugesan says its U.K. workforce was less impacted with around 7% of roles cut locally.
Coinbase reported a 27% decline in revenues in the first quarter as overall usage of the platform declined. The business is currently heavily reliant on trading fees. But it’s hoping to diversify into new products, including nonfungible tokens and interest-like rewards known as staking.
Coinbase has around 9.2 million monthly transacting users globally but less than 50% of those are using the app for trading, Murugesan said.

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With a recession possibly around the corner, investors are writing fewer — and smaller — checks.
That’s led to a rotation out of certain pockets of fintech such as crypto and “buy now, pay later.”
Investors are flocking to less sexy areas like digitizing payment processing for businesses.

There has been something of a rotation out of certain pockets of fintech that were hyped by venture capitalists last year, such as crypto and “buy now, pay later,” and into less sexy areas focused on generating stable streams of income.
Jantakon Kokthong / Eyeem | Eyeem | Getty Images

Financial technology is the hottest area of investment for venture capitalists — $1 out of every $5 of funding flowed into fintech startups in 2021.
But with a recession possibly around the corner, investors are writing fewer — and smaller — checks. And they’re getting much more selective about the kind of companies they want to back.

According to CB Insights, global venture investment in fintech firms sank 18% in the first quarter of 2022.
That’s led to something of a rotation out of certain pockets of fintech that were hyped by venture capitalists last year, such as crypto and “buy now, pay later,” and into less sexy areas focused on generating stable streams of income, like digitizing payment processing for businesses.
So what’s hot in fintech right now? And what’s not? I went to the Money 20/20 Europe event in Amsterdam in June to speak to some of the region’s top startup investors, entrepreneurs and analysts. Here’s what they had to say.

What’s hot?

Investors are still obsessed with the idea of making and accepting payments less onerous for businesses and consumers. Stripe may be facing a few questions over its eyewatering $95 billion valuation. But that hasn’t stopped VCs from looking for the next winners in the digital payments space.
“I think we’ll see a next generation of fintechs emerge,” said Ricardo Schafer, partner at German venture capital firm Target Global. “It’s a lot easier to build stuff.”

Niche industry buzzwords like “open banking,” “banking-as-a-service” and “embedded finance” are now in vogue, with a slew of new fintech firms hoping to eat away at the volumes of incumbent players.
Open banking makes it easier for firms that aren’t licensed lenders to develop financial services by linking directly to people’s bank accounts. Something that’s caught the eye of investors is the use of this technology for facilitating payments. It’s an especially hot area right now, with several startups hoping to disrupt credit cards which charge merchants hefty fees.

Companies like Visa, Mastercard and even Apple are paying close attention to the trend. Visa acquired Sweden’s Tink for more than $2 billion, while Apple snapped up Credit Kudos, a company that relies on consumers’ banking information to help with underwriting loans, to drive its expansion into “buy now, pay later” loans.
“Open banking in general has gone from a big buzz word to being seamlessly integrated in processes that nobody really cares about anymore, like bill payments or top-ups,” said Daniel Kjellen, CEO of Tink.
Kjellen said Tink is now so popular in its home market of Sweden that it’s being used by about 60% of the adult population each month. “This is a serious number,” he says.
Embedded finance is all about integrating financial services products into companies that have nothing to do with finance. Imagine Disney offering its own bank accounts which you could use online or at its theme parks. But all the work that goes into making that happen would be handled by third-party firms whose names you might never encounter.
Banking-as-a-service is a part of this trend. It lets companies outside of the traditional world of finance piggyback on a regulated institution to offer their own payment cards, loans and digital wallets. 
“You can either start building the tech yourself and start applying for licenses yourself, which is going to take years and probably tens of millions in funding, or you can find a partner,” said Iana Dimitrova, CEO of OpenPayd.

What’s not?

Got an idea for a new crypto exchange you’re just dying to pitch? Or think you might be onto the next Klarna? You might have a tougher time raising funds.
“The tokenization and the coin side of things we want to stay away from right now,” said Farhan Lalji, managing director at fintech-focused venture fund Anthemis Capital.
However, the infrastructure supporting crypto — whether it’s software analyzing data on the blockchain or keeping digital assets safe from hacks — is a trend he thinks will stand the test of time.
“Infrastructure doesn’t depend on one particular currency going up or down,” he said.

Investors see more potential in companies making it easier for people to access digital assets without all the knowhow of someone who trades cryptocurrencies and nonfungible tokens every day — part of a broader trend called “Web3.”
When it comes to crypto, “the areas that most interest us today are areas that we have an analogue experience to in classic industries,” said Rana Yared, a partner at venture capital firm Balderton.
As for BNPL, there’s been something of a shift in the business models VCs are gravitating toward. While the likes of Klarna and Affirm have seen their valuations plummet, BNPL startups focused on settling transactions between businesses are gaining a lot of traction.
“Growth in B2C [business-to-consumer] BNPL is slowing … and regulatory concerns could curtail growth,” said Philip Benton, fintech analyst at market research firm Omdia.
Business-to-business BNPL, on the other hand, is “starting from a very low base” and therefore has “huge” potential, he added.

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U.S. stock index futures were flat during overnight trading Wednesday, as the S&P 500 prepares to wrap its worst first half in decades.
Futures contracts tied to the Dow Jones Industrial Average added 0.1%. S&P 500 futures gained 0.07%, while Nasdaq 100 futures were flat.

During regular trading the Dow advanced 82 points, or 0.27%, for the first positive day in three. The S&P 500 and Nasdaq Composite both posted a third straight negative day, declining 0.07% and 0.03%, respectively.
The Dow and S&P 500 are on track for their worst three-month period since the first quarter of 2020 when Covid lockdowns sent stocks tumbling. The tech-heavy Nasdaq Composite is down more than 20% over the last three months, its worst stretch since 2008.
The S&P 500 is also on track for its worst first half of the year since 1970, as myriad factors pressure markets.
“Surging inflation, the pivot in Fed policy, and historically pricey equity valuations were on the minds of investors as the year began,” noted John Lynch, chief investment officer for Comerica Wealth Management.
“[T]he combination of COVID-19 lockdowns in China and Russia’s invasion of Ukraine has escalated volatility further with investors becoming increasingly concerned about the possibility of [a] global recession sometime within the next year,” he added.

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The Federal Reserve has taken aggressive action to try and bring down rampant inflation, which has surged to a 40-year high.
Federal Reserve Bank of Cleveland President Loretta Mester told CNBC that she supports a 75 basis point hike at the central bank’s upcoming July meeting if current economic conditions persist. Earlier in June, the Fed raised its benchmark interest rate by three-quarters of a percentage point, which was the largest increase since 1994.
Some Wall Street watchers are worried that too-aggressive action will tip the economy into a recession.
“We do not believe the stock market has bottomed yet and we see further downside ahead. Investors should be holding elevated levels of cash right now,” said George Ball, chairman of Sanders Morris Harris.
“We see the S&P 500 bottoming at around 3,100, as the Federal Reserve’s aggressive, but necessary inflation-fighting measures are likely to depress corporate earnings and push stocks lower,” he added.
All three major averages are on track to end June with losses. The Nasdaq Composite is on pace for a third straight month of declines. The tech-heavy index has been hit especially hard as investors rotate out of growth-oriented areas of the market. Rising rates makes future profits — like those promised by growth companies — less attractive.
The index is more than 30% below its Nov. 22 all-time high. Some of the largest technology companies have registered sizeable declines this year, with Netflix down 70%. Apple and Alphabet have each lost roughly 22%, while Facebook-parent Meta has slid 51%.
On the economic data front, weekly jobless claims will be in focus Thursday. Economists surveyed by Dow Jones are expecting 230,000 first-time filers. Personal income and spending data will also be released.
On the earnings front Constellation Brands and Walgreens Boots Alliance will post quarterly updates before the opening bell, while Micron is on deck for after the market closes.

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The Consumer Financial Protection Bureau said in an advisory opinion Wednesday that “pay-to-pay” fees charged by debt collectors are often illegal.
The watchdog labeled these as a type of “junk” fee, on which it has been cracking down more broadly this year.

Anchiy | E+ | Getty Images

Certain “junk” fees often levied by debt collectors are illegal under federal law, the Consumer Financial Protection Bureau said Wednesday.
Debt collectors charge so-called “pay-to-pay” fees, which are also known as convenience fees, when consumers make a payment online or over the phone, according to the federal agency.

These fees violate the Fair Debt Collection Practices Act when they aren’t “expressly authorized by the agreement creating the debt” or in instances when they’re not “expressly authorized by law,” the CFPB said in an advisory opinion.
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“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” CFPB Director Rohit Chopra said Wednesday in a written statement. “Today’s advisory opinion shows that these fees are often illegal, and provides a roadmap on the fees that a debt collector can lawfully collect.”
The Consumer Financial Protection Act transferred primary responsibility for the Fair Debt Collection Practices Act, including issuing regulations and ensuring compliance, to the CFPB in 2010, according to the agency announcement.
The bureau issued a request in January asking consumers for input on hidden and excessive fees from a range of lenders. Last week, CFPB officials indicated they may tighten rules governing late fees charged by credit card companies, which the agency categorized as another type of “junk” fee.

‘Heavy handed’ to some, welcome relief to others

The U.S. Chamber of Commerce on Tuesday called Chopra’s agenda “ideologically driven” and “unlawful,” creating “uncertainty” that would lead financial companies to limit mortgages, car loans and personal credit to consumers.
Among other criticisms, the business trade group said the bureau director “coined the term ‘junk fees’ as ‘exploitive income streams’ in a heavy-handed attempt to vilify legal products that have well-disclosed terms.”
Leah Dempsey, a shareholder at the lobbying firm Brownstein Hyatt Farber Schreck and a consultant for ACA International, a trade group representing debt collectors, cast doubt on the legality of the CFPB’s actions Wednesday.

“There is judicial precedent in various states that contradicts the actions today of a single, unelected director at the CFPB,” Dempsey said in a written statement.
But some consumer groups see additional action on debt-collection fees as welcome to relieve financial burdens on struggling households.
“People in those situations are probably least able to carry any additional burden of cost” associated with debt they’ve already had trouble repaying, according to Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling, a nonprofit offering debt advice to consumers.

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A security guard stands next to a Bed Bath & Beyond sign at the entrance to a New York City store location.
Scott Mlyn | CNBC

Check out the companies making headlines in midday trading.
Bed Bath & Beyond — Shares of the retailer plummeted 23.6% after the company missed revenue estimates and posted a wider-than-expected loss in the recent quarter. Bed Bath & Beyond also announced it is replacing CEO Mark Tritton.

Carnival — Shares of the cruise line operator fell 14.1% after Morgan Stanley cut its price target on the stock roughly in half and said it could potentially go to zero in the face of another demand shock, given Carnival’s debt levels. The call dragged other cruise stocks lower. Royal Caribbean and Norwegian Cruise Line Holdings dropped 10.3% and 9.3%, respectively.
Upstart — Shares of the AI lending platform dropped 10.2% after Morgan Stanley downgraded the stock to underweight from equal weight. The Wall Street firm said rising interest rates and a troublesome macroenvironment is hurting Upstart’s growth trajectory.
Bath & Body Works — The retailer’s stock fell nearly 9% after JPMorgan downgraded shares to neutral from overweight. The firm lowered its second quarter and full-year earnings estimates for Bath & Body Works after reducing second quarter average unit retail estimates by 4% year over year.
Teradyne — Shares of the semiconductor testing company slid 5.2% following a downgrade to neutral from buy from Bank of America. The firm said Teradyne’s exposure to Apple could ding the stock in the near term, given uncertainty around iPhone demand.
Tesla — Shares declined 1.8% following a Wall Street Journal report that said Tesla is closing its San Mateo, California, office and laying off 200 workers. CNBC confirmed the report.

General Mills — The stock jumped 6.4% after General Mills reported an earnings beat on the top and bottom lines. Still, the cereal company’s full-year profit estimates were weaker than expected, because of a consumer shift to cheaper brands.
O’Reilly Automotive — The auto parts company traded up 1.1% following an upgrade to buy from neutral from D.A. Davidson. The firm said O’Reilly is their “preferred way” to play the auto parts theme compared to AutoZone and Advance Auto Parts. Auto parts companies, which typically sell nondiscretionary products, are expected to weather downturns better than other retailers.
McDonald’s — Shares climbed 2% following an upgrade to overweight by Atlantic Equities. The firm said hamburger chain will hold out as consumer spending slows.
Goldman Sachs — Shares rose 1.3% after Bank of America upgraded Goldman Sachs to a buy from a neutral rating and said the bank will thrive even in an economic slowdown.
— CNBC’s Yun Li, Tanaya Macheel and Samantha Subin contributed reporting.

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“Another one!” was how a Singaporean manager of serviced apartments greeted your correspondent, fresh off the plane from Hong Kong. The response tells you which of the two cities is currently enjoying an influx of people and business. The latest impetus has been their contrasting approaches to the pandemic. Singapore began opening up to the rest of the world last year; by comparison, although the quarantine periods for arrivals to China and Hong Kong have been shortened, there is no sign yet of their end. Hong Kong is widely seen as the third-most-important city for global finance and business, after New York and London, and ahead of Shanghai and Singapore. Most historians trace its rise as a financial centre to the early 1970s, when it became a hub for Asian offshore financing. Its importance increased dramatically after China began to open up under Deng Xiaoping in 1978. Hong Kong was where Western bankers could rub shoulders with Chinese businessmen while private-sector activity in the mainland was still finding its feet. The deals they made were governed by the territory’s reliable regulatory framework and courts that made use of English law. Yet even before the pandemic, the established order of Asia’s global hubs was being thrown into doubt. Over the quarter-century since Hong Kong was returned to Chinese sovereignty, the mainland has tightened its grip on the territory’s institutions. Under its influence, Hong Kong has introduced a sinister national-security law; the city’s independent judiciary, long valued by foreign investors, has been weakened by political intervention. That has tarnished its appeal relative to Singapore, another entrepot with a common-law legal system, business-friendly regulation and low taxes. South-East Asia has become an increasingly desirable place for Western companies to do business, which, by virtue of proximity, further burnishes Singapore’s allure. And for firms intending to do business in China, meanwhile, the benefits of setting up in Hong Kong, rather than Shanghai, are diminishing. How will the roles of these cities evolve in the face of such forces? To answer the question, consider three measures of the importance of a city for global business and finance: its use as a base for conducting regional or global business; its position as a centre for wealth made elsewhere to be managed and invested; and the size of its capital market and the banking activities associated with it.Start with where business is. Hong Kong’s status as a regional base for global firms was always tied to China, but that relationship has become closer still in recent years. In 2012, 333 American firms used the city as a base for their Asian or greater China operations. That number has steadily declined since. Meanwhile, the number of Chinese firms with regional headquarters in the territory is booming (see chart).Singapore does not produce similar statistics, but a flurry of recent openings by big firms is illustrative. Sony Music, an American entertainment company; Dyson, a British home-appliance maker; and VinFast, a Vietnamese maker of electric vehicles, have all set up regional or global headquarters there in recent years. Chinese tech firms including Alibaba, TikTok and Tencent have done so, too, led by their need to be outside the great firewall in order to run their global operations.Singapore has publicly been ambivalent about stealing business from Hong Kong. Lee Hsien Loong, the city-state’s prime minister, has welcomed expats, but said that he would be just as happy if they felt able to remain in Hong Kong, contributing to the region’s dynamism. But in the background the approach is less magnanimous; the city’s sharp-elbowed investment-promotion agency works to help would-be migrants with visas and business registrations. Shanghai had attracted Western outposts before the pandemic. Some firms, such as Coca-Cola, had moved their Asia headquarters there from Hong Kong. Regulatory changes in 2020 allowed foreign investment banks to run majority-controlled businesses in China. Several have consequently expanded their operations in Shanghai and Beijing. Foreign asset managers including BlackRock and Amundi have also scaled up their onshore presence. The city’s grim lockdowns may have cooled that ardour in the near term. In a recent survey by the American Chamber of Commerce in Shanghai, only one American firm out of 133 planned to increase its investment in China. Yet for firms intending to have some exposure to the mainland, Shanghai may ultimately prove unavoidable. The more Hong Kong comes under China’s thumb, the less unattractive being based on the mainland becomes. China may be more draconian in its approach both to governance and covid-19, but it is at least home to a huge market. “If you want to be in China, it will be increasingly important to be onshore and close to your clients and companies,” says Christian Brun of Wellesley, an executive-recruitment firm for the financial-services industry. Mr Brun predicts job growth on the mainland and in Singapore, with fewer roles for expats in particular in Hong Kong. (He himself has moved from Hong Kong to Singapore.)A second gauge of the cities’ relative dominance is wealth management. It is here that the competition between Hong Kong and Singapore has been fiercest. By one measure, Hong Kong’s pot of assets under management and fund advisory rose from nearly $1.3trn in 2010 to more than $3trn in 2020. But a comparable measure for Singapore shot up from around $1trn to $3.4trn, with the city overtaking Hong Kong as long ago as 2017. Its simple laws for establishing trusts and its tax efficiency have attracted wealth to it. A new form of investment vehicle launched in 2020, the variable-capital company, has also proved popular with fund managers. Hong Kong has been squeezed in other areas of investment management, too. Of the 20 largest venture-capital-fund managers globally, measured by capital raised in the past decade, seven were in Beijing, Shanghai and Shenzhen. Venture capitalists hoping to cash in on South-East Asia’s boom have chosen Singapore as a base. The city’s closer links with Indian firms are also an attraction.When it comes to capital markets and investment banking, our third gauge of the cities’ importance, though, Hong Kong retains its crown. With China’s government showing no sign of allowing capital to flow freely in and out of the mainland soon, the territory’s value as a gateway remains. It hosts the Connect programmes that allow foreign investors to trade onshore bonds and equities, and Chinese punters to trade stocks in the territory. Three-quarters of all transactions in yuan made through the swift interbank-messaging system are booked in Hong Kong. The territory has been a hub for Chinese firms to list in recent years, including Alibaba and jd.com in 2019 and 2020 (though few have come this year). Overall, the value of the city’s listed stocks runs to nearly $5trn, compared with $7trn in Shanghai and $700bn in Singapore. That in turn has helped Hong Kong sustain an edge in global banking, even though some desks have moved to Singapore to skirt the territory’s quarantine rules. Hong Kong, then, will remain a route to investing in China. But it may be less likely to attract other sorts of new business. The companies that do move there are more likely to be Chinese. To others, Hong Kong’s delay in reopening seems to typify its indifferent approach to its global status. Faced with it, firms seeking to do business in Asia more broadly may choose Singapore. And those wanting to do business in China may expand their presence onshore instead. Where Hong Kong alone used to suffice, some firms may start to see a Shanghai-and-Singapore strategy—which uses the first for operations in China and the second for those in the rest of Asia—as an attractive long-term bet. ■ More