LegCo’s Christopher Cheung suggestion sparks accusation of condoning capital controls

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LegCo member suggestion to counter protester plans prompts immediate blowback from think tank, legislator.

Photo credit: Christopher Cheung from Wikimedia Commons

Editor’s note: This article has been updated in light of new information.

A proposal to thwart protester plans to impact the banking system from the LegCo representative for the Financial Services, Christopher Cheung Wah-fung prompted reactions from the economic think tank, The Lion Rock Institute, and fellow legislators.

Protesters have raised the idea of an economic means of action, which involves taking out large sums of money to convert into foreign currency and cancel accounts belonging to Chinese-funded banks. During a policy address consultation, Mr Cheung made comments that The Lion Rock Institute interpreted as suggesting that the Lam administration should establish capital controls, such as limiting cash withdrawals to hinder Hongkongers from disrupting the financial centre.

Since the incident, Mr Cheung’s office has hotly contested this characterisation. Interpretation of a key part of his comments hinges on the comment in the below video, from the 30-second mark onwards.

Mr Cheung’s office suggests it translates as, “To calm the current rioting activities and to address the concerns of the impact of the recent unrealistic appeal by some people to withdraw cash from the banking system in Hong Kong undermining the status of Hong Kong as an “international” financial centre, there is currently no effective measure to stop such “unscrupulous call” to squeeze out the bank. I suggested to the Chief Executive that there might be a need for the government to implement some policies to stop the loophole.”

The Lion Rock Institute published a press release strongly opposing Mr Cheung’s proposal, saying that the implementation of such controls would reduce HK to a “third-rate financial centre”. “A world-class financial centre,” it states, “must fulfil the commitment of free flows of funds, including to enter and exit at any time.” If people are not able to take money out, Lion Rock’s Michael Ko states, they will not put any back in.

IT Legco member Charles Mok has weighed in on the issue: “It’s a pretty idiotic comment or proposal to make for someone in his position. Not only is it not well thought out, even the talk of it from someone as esteemed and powerful as Mr Cheung would seriously lower international confidence in Hong Kong as a free port and financial centre.”

Michael Ko, Executive Director of The Lion Rock Institute, also commented that ignoring such a statement, even if Cheung did not make any specific suggestions, “[i]t is dangerous to ignore his spoken submission of policy address for capital control. We need to show the government whenever there is an anti-free market idea, there are voices of opposition.” He added that it is imperative for members of society to stop the government from seriously considering adding such a proposal to the agenda.

As demonstrations continue for the twelfth week in Hong Kong, much of the hubbub around anti-extradition law activity has centred around police misconduct. Cheung, who is also vice-chair of the IPCC, made a recent statement in defence of unidentified officers which has completely overshadowed his aforementioned comments in the media.

Upon reaching out to Mr Cheung’s office for comment, the politician responded to Harbour Times with a statement that insisted his primary goal is to protect Hong Kong’s status as a free port and financial hub, and that his original intentions had been misconstrued.

The full statement is provided below:

“My proposal to the Chief Executive on August 21 was that the signboard of the International Finance Centre cannot be lost. It is necessary to ensure that the financial system (gold, stocks, remittances, banks) is functioning well and orderly so that there won’t be any opportunities to be exploited. It is also necessary to appeal to the public not to be instigated and self-defeating. For those who deliberately confuse people and deliberately disrupt financial markets, they must be stopped or refuted in a timely manner.

I always support the provisions of Articles 109, 112, 114 and 116 of the Basic Law. We must ensure that Hong Kong continues to maintain its status as a free port, a separate customs territory and an international financial centre, and continue to open up markets such as foreign exchange, gold, securities and futures, and maintain the freedom of capital flow. Therefore, it is not that pointed out by some groups that I want to restrict the free flow of funds or advocate capital control.

The free flow of information is of paramount importance to the successful operation of the international financial centre. However, it is totally different from some people or organizations that have publicly appealed to “withdraw money” or squeeze out the banks in a way to disrupt the financial market or turn it into a failure. The latter way is completely malicious and destructive.

When envisaging research legislation, I had not discussed with Chinese banks, or with the aim to protect their interests, but proceeded from maintaining the order and stability of Hong Kong’s overall financial market. As for the argument that no cash withdrawals indiscriminately are allowed, it is just that somebody misunderstood my starting point and it was not my original intention.”

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