Hong Kong leader Carrie Lam on Tuesday refused to budge on the demands of the pro-democracy protesters marching through the streets of the Chinese territory, even as the demonstrations became increasingly violent.
Meanwhile, in the Virgin Islands, a jurisdiction that mediates trillions of dollars in Chinese assets each year, some financial services experts say it’s too soon to predict the impact of the unrest on this territory, but the outlook might not be as negative as it appears.
“In financial services, when anything happens to your core market, of course you’re going to be nervous, but my rule of thumb: Disruption is not necessarily a bad thing for a BVI law firm,” said Colin Riegels, a former managing partner at Harneys who now consults for the VI firm.
Hong Kong leader Carrie Lam on Tuesday refused to budge on the demands of the pro-democracy protesters marching through the streets of the Chinese territory, even as the demonstrations became increasingly violent.
Meanwhile, in the Virgin Islands, a jurisdiction that mediates trillions of dollars in Chinese assets each year, some financial services experts say it’s too soon to predict the impact of the unrest on this territory, but the outlook might not be as negative as it appears.
“In financial services, when anything happens to your core mar- ket, of course you’re going to be nervous, but my rule of thumb: Dis- ruption is not necessarily a bad thing for a BVI law firm,” said Colin Riegels, a former managing partner at Harneys who now consults for the VI firm.
Over the past 30 years, as China has opened up to become the second largest economy in the world, it has developed a symbiotic relationship with the VI, in which Chinese clients use off-shore vehicles for business purposes, wealth structuring, asset planning and other services, taking advantage of the VI’s stable legal structure and low tax rate.
VI-China relations
According to the South China Morning Post, China, including Hong Kong and Macau, is responsible for more than 40 percent of the $1.5 trillion mediated through the more than 400,000 VI-registered companies.
That reputation likely will continue to work to the VI’s benefit, Mr. Riegels said.
“Essentially a lot of what we market is asset security, particularly for people who are concerned about their governments and assets, and so in a strange way it absolutely wouldn’t shock me that people being uncertain about Hong Kong’s future could actually lead to an uptick [in the VI’s business],” he said. “But how much do you want to roll the dice?”
Robert Briant, partner and head of the corporate department at Conyers, spoke similarly, calling the protests “a double-edged sword.”
“But if there’s some uncertainty as to the rule of law [in Hong Kong], that’s good for the BVI,” he said.
The protesters are demanding the withdrawal of a bill — since removed from the Legislative Council’s agenda, but not yet formally withdrawn — that would allow extradition of some people facing criminal charges in mainland China.
Opponents claim the bill would create a slippery slope under which the Chinese government could target its political enemies.
But the proposed law is just the latest in a long-simmering tension over the former British colony’s semiautonomous status, which gives the territory a separate legal system that has allowed it to become one of the world’s leading offshore financial jurisdictions.
Meanwhile, the relationship between China and the VI continues to be strong.
This year’s Vistra 2020 report found that most of the VI’s 11.2 percent growth in new incorporation volumes in the first nine months of 2018 over the previous year came from China, resulting in the VI’s ranking as the second-most important off-shore territory worldwide.
Meeting with protestors
Ms. Lam disputed charges that her government is ignoring the protesters, who are also demanding democratic elections and an inquiry into police brutality used against protesters.
She held a meeting with protestors on Monday, though opponents dismissed it as a stalling tactic.
For now, Messrs. Briant and Riegels agreed that it’s too soon to tell what consequences the upheaval may have. In the short term, they said, the VI shouldn’t worry.
“So far the party line is that the protests are not having any impact on business in Hong Kong,” Mr. Briant said. “Our Hong Kong offices are busy.”
Nevertheless, the loss of Hong Kong as a separate jurisdiction — for instance, if China were to gain complete control and prohibit the use of offshore vehicles — could be catastrophic for the VI and the global economy as a whole, Mr. Briant said.
“If Hong Kong ceases to be an effective global financial centre, the disruption in global business would be extraordinary, but that’s an Armageddon scenario,” he said. “You don’t lose financial centres overnight. In the medium term, [the protests] are positive for us.”