China security law has Hong Kongers eyeing offshore accounts

Linda J. Dodson

HONG KONG — Hong Kong banks and investment managers are seeing a surge of inquiries about offshore accounts in the wake of China’s decision to introduce a new national security law in the territory.

Managers of family offices say that since Beijing unveiled its plans for the law in May they see more demand for information on offshore accounts as clients seek ways to move their money. Banks such as HSBC, Standard Chartered, Citigroup and Singapore’s DBS have also seen increases in inquiries regarding offshore banking services of 30% to 50% according to six people who are familiar with the trends.

However, they said there has not been a noticable outflow of capital so far.

The increased number of inquiries mirrors activity seen last year as anti-government protests in Hong Kong turned violent, encouraging people to look for ways to safeguard their wealth.

The national security law punishes acts of “separatism, subversion, terrorism and foreign interference,” It has raised fears of a harsher crackdown on dissent in Hong Kong and the implications for the city’s status as a global financial center. The U.S. has threatened to revoke trade and investment privileges it grants to Hong Kong, saying the law shows the territory is no longer autonomous.

Hong Kong-based Eva Law, a family office and investment manager and chair of the Association of Family Offices in Asia, said: “Founders of organizations with businesses in Hong Kong or China, or with onshore clients in China, are reluctantly and slowly de-investing from the city. They have increased the share of their liquid assets in recent times, and at times are moving a part of [those] liquid assets to offshore centers to diversify risk.”

Favored destinations include Singapore, Switzerland, the U.K., Canada and Australia, Law said. “Wealthy professionals have so far not had multiple accounts and in the current environment [they] are rushing to open offshore accounts.”

“Family offices are continuing to set up multiple offshore accounts so they are well diversified in the current situation,” said Chiman Kwan, chief executive of Raffles Family Office, which manages $2 billion. “The preference is for an account in Singapore or Zurich. Very little capital has actually moved yet.”

Others seeking offshore accounts are individuals of more modest means who are worried about the future of city and fear that the end of the Hong Kong dollar’s peg to the U.S dollar would decimate their savings. The authorities have repeatedly given assurances that the peg is not under threat.

While data from the Hong Kong Monetary Authority has not shown a big fall in deposits, Singapore’s Monetary Authority said this month that its banks have attracted inflows from foreign deposit holders, including Hong Kong, since mid-last year. Singapore is a regional rival to Hong Kong as an international business center.

Total foreign-currency deposits, not including those of lenders, in Singapore’s banking system stood at SG$781 billion ($562 billion) at the end of April, 20% higher than a year ago, the de facto central bank said.

Hong Kong’s local-currency deposits fell 1.1%, to HK$6.9 trillion ($890 billion) in April from a year earlier, the Hong Kong Monetary Authority said in its monthly report.

Visits to several branches of Citigroup, HSBC and Standard Chartered across Hong Kong island over the past week showed a steady stream of people lining up to inquire about multicurrency and offshore accounts.

Inquiries at one of the banks had grown from about 100 a week to about 150 since late May, one source said.

Wilson Tong, a 65-year-old retired businessman, said he has visited various bank branches in Hong Kong over the past week, looking to set up an offshore account for his retirement fund. “I have never seen so many people queuing up in the priority banking area,” said Tong, who was born in Hong Kong and has his entire family here. “It’s like panic-buying of U.S. dollars,” he said.

Fiona Chan, a software developer who wants to work in Singapore in the next few years, hopes to open an account in the city-state and transfer about half her savings there.

“My friends and colleagues are doing the same, and with new laws coming in China I wanted to look at other options. Singapore, [which has] a stable currency is my choice,” she said, adding the bank informed her it could take between two and five weeks to activate her account.

A spokeswoman for HSBC declined to comment on the rush to open accounts but said the bank hasn’t seen any significant capital outflow. DBS declined to comment.

A spokeswoman for Standard Chartered said while there have been inquiries about offshore bank accounts, the bank had not seen any “noticeable” capital outflows.

A spokesman for Citigroup said the bank had seen a pick-up in questions about opening local accounts as customers visit branches more due to subsiding fears over the coronavirus, but not a rise in capital outflows or offshore account openings.

Capital outflows can happen only once accounts are opened and one of the people monitoring the increase in account openings said that the amounts moved could remain small for a few years.

Tong sums the sentiment. “I don’t know when I will actually move out of Hong Kong, but it feels more secure to have a plan B. You can’t get it wrong by holding the greenback.”

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