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Japan companies heading to exit after Hong Kong crackdowns

(ATF) China’s crackdown on political and social dissent in Hong Kong will force Japanese companies to leave the territory, a top banker has warned.

Yoshitaka Kitao, chief executive of SBI Holdings, which runs Japan’s largest online brokerage, told the Financial Times on March 8 that he was planning to pull his company’s operations out of Hong Kong.

“Without freedom, there is no financial business,” he said.

Other Japanese companies, Kitao told the newspaper, were thinking about doing the same but were less willing to say so openly. “They are unlike me,” the FT quoted him as saying. “I’m a very straightforward guy. But all the others, in their bellies, they think they should move out or won’t invest more in Hong Kong,”

Beijing is quashing dissent in the formerly autonomous Hong Kong after a period of huge pro-democracy demonstrations in 2019. China has imposed a broad “national security” law on the city that has criminalised much opposition.

DOWNGRADING CITY

Carrie Lam, Hong Kong’s chief executive, on Monday March 8 denied that Beijing’s overhaul of the city’s electoral system was aimed at eliminating opposition, but said there would be no public consultation over the changes.

Lawyers and business people have warned that dismantling Hong Kong’s rule of law would make the city less attractive for arbitration and contracts, and spur companies to relocate their global and regional headquarters.

Senior Chinese leaders have also called for reining in the city’s largely independent judiciary, undermining what has been long considered one of Asia’s fairest and most transparent legal systems.

Many international business figures have anonymously voiced fears over the Hong Kong crackdown, fearing that companies and individuals could be targeted under vague and capricious new laws.

Few have voiced them as publicly as Kitao, whose company last year had a market capitalisation of US$5.9 billion. Shares in the conglomerate were up 1.3% in morning trading on March 9.

GDP BELOW ESTIMATES

Kitao’s comments come as Japanese officials announced the country’s economy grew an annualised 11.7% in October-December, slightly below the initial estimate of a 12.7% expansion.

The revised data from the Cabinet Office, issued on March 9, showed Japan has continued to shake off the drag from the coronavirus pandemic.

On a quarter-on-quarter basis, gross domestic product (GDP) expanded 2.8%, worse than the initial reading of 3.0%.

“While the downward GDP revision suggests that the economy fared a little worse than initially reported over the winter, we continue to expect the economy to avoid a contraction this quarter and to rebound strongly later in the year,” Japan economist at Capital Economics Tom Learmouth said.

With reporting by Agence France-Presse and Reuters

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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