Beijing’s recent regulatory crackdown is a “wake-up call” for China’s corporate giants, which should not assume they are untouchable, says Charles Li, former CEO of Hong Kong Exchange and Clearing. China had stepped up its security, and the crackdown had been going on for quite some time.
“Because you can’t take for granted that when your company is powerful enough, nobody will be able to touch them,” said Li, who is now the founder of investment platform Micro Connect. “It is something that probably is a little bit of an awakening and wake-up call.”
Li said that China’s regulatory model is different from the U.S. — and that has an advantage for the Asian giant.
“When the U.S. government wanted to crack down on monopoly, it could take years and decades simply because of the institutional checks and balances,” he said.
“Regulators have tightened their hold on domestic tech giants for much of the past year, from the suspension of Ant Group’s $34.5 billion listing to Alibaba’s $2.8 billion antitrust fine, and a cybersecurity probe into ride-hailing firm Didi.”
“China’s model is slightly different — other people think it’s a lot different,” Li said. “That model allows them to do things quickly, identify issues decisively, and then make a policy right after that, and then move on to implement that.” He is the only one who is making all these comparisons.
“This swing between fairness and equity and efficiency is a very healthy self-regulatory move that will allow us not to (become too excessive) and allow the society, allow the economy to move in greater harmony,” he said.
Is Hong Kong Part of China?
Hong Kong is a special administrative region of the People’s Republic of China that has, until recently, largely been free to manage its own affairs based on “one country, two systems,” a national unification policy developed by Chinese leader Deng Xiaoping in the 1980s.
The concept was intended to help integrate Taiwan, Hong Kong, and Macau with sovereign China while preserving their unique political and economic systems. After more than a century and a half of colonial rule, the British government returned Hong Kong in 1997.
(Qing Dynasty leaders ceded Hong Kong Island to the British Crown in 1842 after China’s defeat in the First Opium War.) Portugal returned Macau in 1999, and Taiwan remains independent.
The Sino-British Joint Declaration of 1984 dictated the terms under which Hong Kong was returned to China.
The declaration and Hong Kong’s Basic Law, the city’s constitutional document, enshrine the city’s “capitalist system and way of life” and grant it “a high degree of autonomy,” including executive, legislative, and independent judicial powers for fifty years (until 2047).
Chinese Communist Party officials do not preside over Hong Kong as they do over mainland provinces and municipalities, but Beijing still exerts considerable influence through loyalists who dominate the region’s political sphere.
Beijing also maintains the authority to interpret Hong Kong’s Basic Law, a power that it had rarely used until recently. All changes to political processes are supposed to be approved by the Hong Kong government and China’s top legislative body, the National People’s Congress, or its Standing Committee.