The real threat
Life is full of surprises and uncertainties. Just a few months ago Premier Wen Jiabao came out in support of Hong Kong being China's only international financial centre. But recently, the State Council announced that Shanghai should strive to become an international financial centre and international shipping centre, in line with the country's growing economic power, by 2020.
Conspiracy theories aside, many see this as an undeniable threat to Hong Kong's future. They suspect that the recent turmoil in the local financial sector might have impelled Beijing's change of heart. They believe the central government might have been irritated by the extension of a ban on the trading of companies' shares by directors and major shareholders. The move provoked more than 200 listed companies to send an open petition to the Hong Kong Stock Exchange, making it look woefully inadequate in discharging its duty as a securities watchdog.
Rumours have been circulating that many Chinese enterprises are unhappy that the listing committee of Hong Kong Exchanges and Clearing and the Securities and Futures Commission are controlled by foreign investors. They fear the blackout rule will make it easier for international funds to manipulate and raid Chinese enterprises, making the Hong Kong market unreliable.
These unfounded rumours seem to be spreading like wildfire, but the fate of Hong Kong as a financial centre doesn't seem to draw much attention in the public discourse.
Lately, Hong Kong seems to be confronted by challenges from all sides. At the recent Group of 20 summit in London, French President Nicolas Sarkozy suggested the inclusion of Hong Kong and Macau on a list of tax havens. Mr Sarkozy subsequently toned down his position after meeting President Hu Jintao.
A blacklisting of Hong Kong would have severely affected inbound and outbound investment, damaged our international reputation, and deterred multinational corporations from setting up headquarters here.
However, we should not gloat just because our rival Singapore has, to a certain extent, been characterised as a tax haven. Indeed, the island state is striving to become the Asian Switzerland. Singapore has been put on a so-called grey list of tax havens by the Organisation for Economic Co-operation and Development, which means it has accepted international tax standards but has yet to implement the required measures.
Hong Kong may have a simple tax regime, but it lacks transparency. We should legislate amendments to endorse OECD standards for the exchange of information through double taxation agreements with more jurisdictions. At present, we only have such bilateral arrangements with the mainland, Belgium, Luxembourg and Thailand. We have merely committed to implement the internationally agreed tax standards, which is not enough. We need to do drastically more to reinforce our standing as an open, international financial centre.
The recent court battle over the PCCW privatisation bid has exposed the biased attitude of some legislators and media outlets, which could also damage our international reputation.
The PCCW saga has sparked public uproar because of the vote-rigging allegations surrounding the deal. Even so, we should respect the court's ruling in favour of the HK$15.93 billion buyout. To side with public sentiment, some pro-China politicians have suggested that Hong Kong should abandon the principle of the separation of three powers - administrative, legislative and judicial. Instead, they say, the judiciary should address policy issues. This kind of reckless comment could push Hong Kong's rule of law to the brink of collapse.
The PCCW saga has highlighted the independence of our judiciary, which has refused to be swayed by public opinion.
Upholding the rule of law, especially now when we are faced with challenges, both internally and externally, is of utmost importance. Failing that, with or without the threat from Shanghai, our days as an international financial centre will be numbered.
Albert Cheng King-hon is a political commentator