Red Star over Hong Kong

For 24 years, from 1995 until 2019, Hong Kong, the erstwhile British colony and currently a Special Administrative Region of China, ranked as the world’s freest economy and a global financial centre. On each of the four metrics that went into the determination of the freedom ranking — rule of law, regulatory efficiency, open markets, and size of government — Hong Kong fared exceedingly well. Despite Hong Kong’s nurturing of oligopolies, these freedoms catalysed prosperity not only for itself, but also for China, at a time when the mainland did not have developed financial markets or ‘rule of law’ provisions that protect property rights. The ‘one country, two systems’ constitutional arrangement, which underwrote the freedoms that Hong Kong offered, served as a win-win proposition.

But that era of economic freedom and prosperity — and, indeed, of Hong Kong’s status as a global financial centre — has been put at risk in recent years, first by the “pro-democracy” protests, and more recently by the gradual erosion of the ‘one country, two systems’ principle. In particular, China’s recent efforts to enforce a ‘national security law’ in Hong Kong in order to crack down on protests have amplified fears of a loss of economic freedoms. Recent open threats to British bank HSBC to publicly back the law or risk losing Chinese authorities’ and agencies’ custom proved particularly grating. HSBC and Standard Chartered Bank have cravenly kowtowed, with public declarations of support for the law.

This isn’t, of course, the first instance of Big Capital capitulating to authoritarianism; and yet, Hong Kong’s descent, and the realisation that its best days of economic freedom are likely over, holds out important lessons for other geographies. For India, which ranks a lowly 120th place on the economic freedom index for 2020, these could not be more stark. The best bet to emerge stronger from the Covid-19-induced crisis to the economy lies in the expansion of economic freedoms. Even a gradual chipping away at the fetters that cramp such freedoms will yield immeasurable gains.

The writer is Associate Editor with BusinessLine