You might think the death of liberalism in Asia’s financial center, Hong Kong, which hosts $10trn of cross-border investments, would trigger panic, capital flight and a business exodus. Instead Hong Kong is enjoying a financial boom. Share offerings have soared as China’s leading companies list there. Western firms are in the thick of it: the top underwriters are Morgan Stanley and Goldman Sachs. In 2020, the value of us dollar payments cleared in Hong Kong, a hub for the world’s reserve currency, hit a record $11trn.

The same pattern of political oppression and commercial effervescence is to be found on the mainland…Yet when they talk to shareholders about China, global firms gloss over this brutal reality: “Very happy,” says Siemens; “Phenomenal,” reckons Apple; and “Remarkable,” says Starbucks…Tougher policing does not affect Westerners, says a mainland financier. His foreign clients in Hong Kong laugh about the anxious memos they receive from bosses at home, asking about political developments. “It doesn’t really affect their life, right? They’re not going on the street to try to demonstrate against the government.”

Mainland China attracted $163bn of fresh multinational investment in 2020, more than any other country. It is opening the mainland capital markets to foreigners, who have invested $900bn, in a landmark shift for global finance.

Moreover, the pull China exerts is no longer just a matter of size—although, with 18% of world GDP, it has that too. The country is also where firms discover consumer trends and innovations. It is increasingly where commodity prices and the cost of capital are set, and is becoming a source of regulations. Business is betting that, in Hong Kong and the mainland, China’s… government is capable of self-restraint in the commercial sphere, providing contractual certainty, despite the lack of fully independent courts and free speech. Though China’s best-known tycoon, Jack Ma, has fallen from political favor, foreign investors’ stakes in his empire are still worth over $500bn.

Excerpts from Dealing with China, The Way its Going to Be, Economist, Mar 20, 2021