For decades, Hong Kong has been a magnet for the rich.
From wealthy Chinese setting up family trusts to millionaires migrating from across Southeast Asia, all of them have been sucked in by the city’s promise of free capital flows, a trustworthy legal system and extensive financial expertise.
It is a winning combination that helped Hong Kong leapfrog Switzerland as the world’s biggest cross-border wealth hub last year, as the city rode a wave of blockbuster listings by Chinese technology companies.
But some worry this model could now come under threat. Over the past few months, Beijing has launched a slew of measures to tighten controls over cross-border financial flows, seeking to prevent tax avoidance and capital flight.
Major brokerages have been punished for helping mainland investors illicitly buy overseas stocks, while banks have tightened checks for mainland customers applying to set up Hong Kong accounts.
Perhaps the most significant news came in late July, when Beijing announced that offshore trusts would now be subject to China’s personal income tax – closing a loophole that had allowed wealthy Chinese families to shield massive amounts of income from taxation.
In Hong Kong, some fear the new rules could disrupt – or even divert – capital flows into the city’s vast wealth management industry. But analysts said the city could benefit over the long term.