China's Top HK Official Says Security Will Ensure City's Success
China's top official for Hong Kong affairs said the city needs to prioritize national security to ensure prosperity.
The China-imposed national security law helped Hong Kong maintain its status as an international financial hub, Xia Baolong, director of the Hong Kong and Macau Affairs Office in Beijing, said Saturday on his third trip to the semi-autonomous city in three years.
'Profound changes are occurring inside and outside Hong Kong. It is necessary to fully implement the One Country, Two Systems principle, guided by national security, to provide favorable safety protection for achieving better development of Hong Kong,' Xia told a government forum marking the fifth anniversary of Beijing's implementation of the 2020 national security law, which silenced dissent in the once-freewheeling territory.
His comments build on China's emphasis on national security in recent years, after massive pro-democracy protests roiled the former British colony in 2019. A continuing crackdown on perceived threats and the introduction of supporting legislation has stifled political dissent and led to the imprisonment of dozens of former activists.
Earlier this month, Beijing's national security office in the city carried out its first known joint operation with local police to investigate a case of alleged foreign collusion. In the same week, authorities invoked a security law to ban a Taiwanese-made video game they accused of advocating for overthrowing the government.
Xia's speech at the forum represents the most public appearance he has made during his five-day trip that began Wednesday, which has included meetings with political and business leaders.
He also held discussions with university presidents earlier in the week, in a move seen as reinforcing Beijing's vision for Hong Kong as an innovation and talent hub.
Appointed as Beijing's top man in Hong Kong in 2020, Xia's tenure has seen growing integration between the Asian financial hub with the rest of China. He has urged the city to accelerate the development of its so-called Northern Metropolis, a sprawling area bordering the mainland city of Shenzhen.
Xia's visit comes as Hong Kong grapples with economic headwinds, buffeted by a slowing Chinese economy and a prolonged property slump. The city is also caught in the crossfire of the US-China trade war, with tariffs imposed by the Trump administration now applying to Hong Kong-made goods, further blurring the lines between the city and mainland China.
Still, some observers argue Hong Kong could paradoxically gain from the deteriorating US-China relationship. Having declared the city 'over' last February, former Morgan Stanley Asia Chairman Stephen Roach said recently that the territory may benefit because of its unique position as China's most important window to international finance.
This article was generated from an automated news agency feed without modifications to text.
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Q) What is your take on Q4 earnings from India Inc.? Any hits and misses which you tracked in the results? A) If we review Q4 earnings, aggregate profit after tax (PAT) for BSE 500 companies grew by 10% Y-o-Y and by 9% for the full FY25. There was sluggish domestic consumption and limited government spending in the first half due to elections and a volatile geo-political environment. This was a big step down from a stellar performance in FY24 that saw a 30% growth. BFSI sector stood out, contributing 1.84 % to the GDP and posted improved profits. Almost all stakeholders in the sector, MNCs, Private firms, Small & Midcap companies performed well. Metals, Telecom, Chemicals and Cement also supported positively to the growth. Certain sectors that showed sluggishness were PSUs, Industrials and IT. FY26 could see a turnaround, we expect the PAT growth to improve in most sectors on account of increase in demand and stability on the global trade front. US tariff wars could see a conclusion and that should bring a much needed respite and decrease volatility. We are bullish on BFSI which will continue to shine and have another good year, Agriculture and Defence is also looking to outshine in FY 26. Q) Nifty Bank hit a record high in June which suggests that there is a lot of interest in banking stocks. What is fueling rally in financials – is it the rate cut by RBI? A) As we discussed earlier, the BFSI sector has stood out in FY25 as an outperformer. Bank Nifty hit a record high in June following earnings growth numbers and a positive outlook for FY26. What was more positive is that we saw broad based growth across all verticals in BFSI. Banking, Wealth, Insurance across small , mid and large cap companies saw increase in earnings. If we look at number, on Y-o-Y basis, there was a 16% increase in PAT, 14% increase in Non-Interest Income, 13% increase in retail advance and 14% increase in MSME advances. These are very healthy numbers across the board. Recent rate cuts by RBI has definitely helped banks by providing excess liquidity but is not the only reason fuelling this rally. RBI rate cuts were as recent as February but we have seen good numbers coming in all through FY 25. Key factors supporting this rally are more on the fundamental side, most banks now have significant revenues coming in from non-interest activities such as wealth and insurance. They are high margin businesses with a huge growth potential. India still underserved and under penetrated when it comes to financial services; hence, there is a significant head room. Banks are sitting on credible data and are able to convert their existing CASA customers by cross selling and thus increasing their revenue per client. On the credit side, the growth cycle is strong and is expected to grow at 13-14% which should continue to support profits. NBFC's credit growth outpaced banks and will continue to do so in FY26. Q) Which sectors are likely to remain in limelight in the 2H2024? A) We are bullish on BFSI, with the recent RBI rate cut we can expect strong liquidity. There is scope for penetration for financial services, credit growth is growing strong. Supported with slight improvement in demand, we should see this sector giving another strong year. We are also taking positive calls on Defence fulled by governments efforts to have a self-sutainable defence industry and reduce the dependency on imports. The order pipeline here looks solid and defence production is projected to reach from Rs. 1.75 Trillion in FY25 to Rs. 3 Trillion in FY 29. The ministry of defence has already singed a record 193 contracts worth Rs. 2 Trillion. Out of these 177 contracts were handed to domestic companies, this shows the governments commitment of making India a defence manufacturer in their own right. Infrastructure and related sectors are also looking bullish, policy support is on their side particularly in the areas of renewable energy and power generation. Big infra companies will continue to benefit from India's growing infra need in Roads, Airports, Dams and Railways. Q) The tonality keeps changing from the US when it comes to 'Trade Talks'. Do you think it is still a relevant headwind for equity markets across the globe? A) In our view, US trade talks were never a major factor for equity markets in India. Yes, they played a role for equity markets across the globe, but for India it never posed a very big problem. There was a lot of stir created early on when the tariff wars started but soon it was realised that it was more of a bargaining stunt to get the stakeholders on the table to negotiate rather than a permanent change of structure in the global trade ecosystem. My only point of concern is FII inflow into our equity markets. While our DIIs have been a major support, we can't ignore the validation that comes from FIIs and the quantum of their capital that ensures Indian equities are in green. Trade Talks create a little uncertainty that results in institutional money being kept at bay, that's the only relevant headwind I think that matters. Q) China equity markets are up in double digits while we have underperformed most EM peers. Does it make a case for global diversification? A) China equity in recent times have outperformed all the other EMs. This is a little ironical seeing how the main target of US trade wars is China, and their companies are facing an uphill battle in case tariffs are increased substantially. I would still refrain from considering the Chinese stock market as an investment destination. The main reason being the opaqueness of the country and the dictatorial laws that can be brought down by the government onto the private sector. Inspite of giving double digit returns, the 3-yr performance of China based Mutual funds is still as low as 2%. For global diversification I think US tech stocks are a better bet. With AI changing the face of computing, I think the biggest beneficiaries will US companies who are the biggest stakeholders. Historically as well, US companies are at the center of every digital / computer revolution that has happened and I don't see why it should be any different now. Q) Which sector(s) is/are looking overheated and why? A) In Indian markets, I think one can be cautious while investing in Auto. FY25 saw a modest growth of 6.4% driven by passenger and two wheelers while the commercial vehicles growth remained flat. We have seen an impressive performance over last 24 months with increased sales across all verticals but going forward I think it's a little over heated. Also, the EV industry is giving the sector some headache, while most auto companies have installed EVE capacities, consumer acceptance of EV is not growing at a desirable pace. Adoption has been slow and due to EV related lack of Infra it is not expected to pick up very soon. We are also expecting a cyclical slowdown in sales, only silver lining are the SUV sales which continue to grow but other passenger vehicles along with two wheelers are looking bleak. ( Disclaimer : Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
