If you’ve not been paying attention to Hong Kong lately, you may not have noticed the financial gateway to China is in riot mode and the airport is functionally closed for business for a second straight day.
The protests started over a proposed law that would force the city to extradite criminals to mainland China to face charges in China’s more confusing justice system — one that borders on “compromised” — instead of Hong Kong’s system with its roots in the English system. China’s put off the imposition of the law, but pointedly not withdrawn it prompting many to suspect it’s still coming. With all this in the midst of Trump’s trade war with China, is it time for Biglaw firms with a strong Hong Kong presence to begin to panic?
The protests themselves shouldn’t worry Biglaw outposts in China, but if international business perceives an erosion of the rule of law in Hong Kong — either through the imposition of the extradition law or a massive crackdown — the foundation of the Hong Kong market would crumble instantly. The whole economy rests on the idea that the Chinese government will remain true to its word to keep Hong Kong open — which spills over into providing confidence that other markets like Shanghai will also be governed softly. As Bloomberg notes:
Yet that’s only half the story. Hong Kong is an important gateway for capital, too. So the bigger fear is the damage done to Hong Kong’s standing as a conduit between China and the rest of the world. Even if its economic relevance to China has faded over time, it’s still an important valve for foreign money flowing into and out of the world’s second-biggest economy.
Hong Kong’s stock market clocks in at around $5 trillion and the M&A and IPO work generated in the city keeps a lot of lawyers busy. Mayer Brown, Linklaters, Baker McKenzie… most global firms have a presence there and it’s not a stretch to say that the pivot to law coming from the Big 4 accounting firms rests on a good deal on connections to the Hong Kong market too. If the flow of foreign capital through Hong Kong shuts down, there’s going to be a lot of turmoil in the legal industry. Bloomberg’s already expecting a recession in Hong Kong later this year — if capital flees in droves, that can turn a lot worse.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.