Tokyo, Sydney aim to lure HK financial firms, but Singapore a top draw

By Alun John, Scott Murdoch and Anshuman Daga

Japan, Australia and some other nations are readying incentives to attract banks and asset managers in Hong Kong that are worried about the new security law imposed by China, but finance sector experts said even if they move, it will be to Singapore.

High taxes and costs, bloated bureaucracies and cultural differences in some of these Asia-Pacific nations present formidable challenges for the Hong Kong financial institutions to relocate even partially, while Singapore's similarities to Hong Kong give it an advantage, they said, though the Southeast Asian city-state has not actively been seeking such business.

Beijing imposed a tough national security law from July 1 on Hong Kong, regional home to many global financial groups, prompting companies to reassess their operations there.

Hong Kong's financial regulators said last week they had been approached by institutions concerned about the law, but they said it would not affect operations.

Nonetheless, rivals hope to benefit from the concerns.

"The political upheaval in Hong Kong has created an opportunity for Australia and Sydney to become a stronger regional financial center," Senator Andrew Bragg wrote to Australia's Treasurer this month, proposing policy changes.

Japan included attracting “excellent human resources” to form a global financial center in an economic policy roadmap earlier this month, following official remarks they could win business from Hong Kong.

Ruling party draft proposals include visa support and streamlining approvals for investment management licences.

Smaller financial centers are also trying their luck.

Busan in South Korea is offering tax breaks and rent free offices to financial firms, while Taiwan's top regulator told Reuters he hoped the island's rule of law and democratic values would attract business.


However, the mooted reforms do not move the dial enough, say some sector professionals.

"Tokyo will, frankly, struggle to steal significant market share from, let alone replace, Hong Kong," said Steven Tran, a partner at law firm Mayer Brown in Hong Kong, who was previously based in Tokyo for four years.

Tran said Japanese taxes, together with a perceived greater level of bureaucracy, higher labor costs and less English language fluency, would make it harder for financial institutions to operate regional hubs from Tokyo.

Hong Kong’s corporate tax rate of 16.5% is a little over half that of Japan's and Australia's, and among the lowest in the region.

Convincing senior staff to give up an international lifestyle in Hong Kong is another challenge.

"Typically, when expatriates move to Japan they need much more hand-holding than when moving to Hong Kong," said Jeremy Laughlin, a Tokyo-based business development manager at Santa Fe Relocation.

Language and cultural difficulties as well as the absence of adequate financial infrastructure could scupper South Korea and Taiwan's efforts too.

Cultural issues are less difficult for Australia, but Financial Services Council CEO Sally Loane said Australia needed to implement greater tax reform and make regulatory changes to align its fund management industry with other Asian jurisdictions to attract Hong Kong business.


Institutions have not made any major moves from Hong Kong as yet, but they are being circumspect even about discussing contingency plans as the topic is sensitive and many hope to expand in mainland China.

Lawyers and advisers say Singapore is the most likely beneficiary of any relocation, thanks to its corporate tax rate of 17%, a business friendly environment, and its standing as a financial centre.

"Everyone is competing for talent but in terms of population, economic profile, and ease of doing business, Singapore is the most similar to Hong Kong," said Jason Salim, a Singapore-based analyst at risk consultancy Control Risks.

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

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Under COVID-19 conditions I wonder how much one’s location is relevant.

In time COVID-19 will blow over, but the impact in working will remain.

Personal tax rates being lower would be a draw for individuals but do businesses need to be situated in the same location as the individuals, when many are working from home anyway?

0 ( +0 / -0 )

It’s the personal tax rates that are the biggest issue. Why would financial professionals agree to pay 50% in Australia or Japan when they can pay 20% in Singapore

5 ( +5 / -0 )

Japan needs to ease the excessive tax rules for foreign residents and finance rules if they want to get the bankers back. I know many who moved away to HK and Singapore because of these issues but most would like to return to Tokyo if things relaxed a bit.

1 ( +3 / -2 )

Japan has little clue on how to attract talented foreigners-Singapore is the clear winner here.

7 ( +7 / -0 )

Singapore is the best choice for now, but I wish Taiwan is able to attract a few.

Costs of living are much lower, it is a safe, clean and organized country without the rigid laws and regulations of Singapore. The drawback is language, Taiwan is still not very English friendly.

But I am still rooting for them!!

2 ( +2 / -0 )

Australia has shown it may quickly close its borders so I not sure it is a good candidate.

1 ( +1 / -0 )

Smart countries would try to  repel bankers and asset managers, rather than attract them. There's a good article about how London has suffered economically rather benefited from being a global financial capital.

The bankers add very little value to the real economy, while their presence pushes up property values and other local assets, making life miserable for everyone else.

3 ( +5 / -2 )

The xenophobia combined with all the red tape and taxes should put Tokyo near the bottom of any list.

The drawback is language, Taiwan is still not very English friendly.

Is it really as bad as Japan? I know that the Taipei metro uses English only as the fourth language in announcements but it has to give priority to its own languages first.

2 ( +2 / -0 )

Singapore is HK's twin in so many ways so it's a no brainer. However the future of HK as a financial hub solely depends on US policy on HK dollar. And I strongly doubt Trump or any president pull the trigger, the implications are just too big. They will probably just throw sanctions on some individuals and business will return to normal. No mass panic or exodus will happen

1 ( +1 / -0 )

There's a good article about how London has suffered economically rather benefited from being a global financial capital.

Jeff, which article you are referring to ?

0 ( +0 / -0 )

Of course Singapore is the draw (not sure about Australia)

Japan suffers from red tape and an inability to adapt and change in the banking sector. Faxes, seals, paper documentation, it goes on and on.

1 ( +1 / -0 )

Is it really as bad as Japan? 

Yes I think its a bit worse than Japan in terms of language.

But Taiwan has potential and I wish they develop on it.

0 ( +0 / -0 )

Any companies considering relocating to Japan will already have a decent sized base in Japan and have been watching how Japan has handled COVID-19. They will also have seen workers locked out of Japan and unable to re-enter - even with Permanent Resident visas - if they happened to leave Japan before countries went in the ban list. They will have seen discrimination.

The politicians here have no clue the damage that did to Japans reputation to foreign companies. Even if they call it the Come To... Japan campaign, they won’t repair that damage.

4 ( +4 / -0 )

Jeff, which article you are referring to ?

I read it about a year ago, but sorry, I can't find it now. It argued how London's financial sector has sucked up huge amounts of the UK's human resources and other resources, which if employed by manufacturing, IT, etc., would have spread wealth more thoroughly thru society, instead of so much of the UK's wealthy being locked up in the 1%, many of whom are foreigners, anyway.

0 ( +0 / -0 )

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