hk london and nyc WSJ
In rankings of the world’s international financial centers, London, New York and Hong Kong regularly dominate the top three spots. All boast the financial, physical and human infrastructure needed to conduct business across borders while sharing an openness to the world rooted in history and culture.
But those assets matter less in a world that is deglobalizing. The three are internationalist outposts out of step in countries that are turning nationalist.
All are magnets for foreign workers, for example, each with a foreign-born population share far larger than their countries’. But barriers to immigration are rising in the U.S. and soon, probably, in Britain, while doubts about Hong Kong’s autonomy from China could diminish its appeal to foreign expatriates. In London and New York, job growth has slowed; Hong Kong is in recession. In all three cities, property prices are falling under the combined pressure of high costs, economic headwinds and political uncertainty.
In 2016, London was the only region in England to vote to remain in the European Union, by a decisive 60%. Three years later, the divide remains. The Conservatives, who have promised swift completion of the Brexit process, lead the polls nationally. But they lag in London where two-thirds back Labour, which is more ambivalent about Brexit, or the Liberal Democrats and Greens, who oppose Brexit altogether, according to a poll by YouGov.
Britain relies heavily on exports of services such as financial and legal advice, and London contributes nearly half. If Britain leaves the EU without a new deal, services could face new regulatory and licensing barriers, whereas goods would be partially protected by British membership in the World Trade Organization.
Financial-service companies could lose the “passporting rights” that allow them to offer services throughout the EU from their base in London. As the EU’s digital single market rolls out common standards on internet taxes, copyright and privacy, London’s thriving digital industry could face new barriers. An end to freedom of movement between Britain and the EU is another threat to services: Other Europeans account for 10% of London’s information technology, professional and scientific workers; 12% of its financial workers; and 32% of accommodation and food-service workers, according to Centre for London, a think tank.
Hong Kong’s challenges are starker. When it was returned to China in 1997 it was both freer and wealthier than the mainland. The wealth gap has since narrowed, and Shanghai and Shenzhen are now thriving financial centers. But the freedom gap has, if anything, widened as China turns more authoritarian under President Xi Jinping. A bill in Hong Kong this year to allow the extradition of suspects to China’s opaque legal system looked to many Hong Kongers like an effort by China to encroach on its freedoms. It has sparked months of massive and at times violent demonstrations.
While the bill has since been withdrawn, the conflict has accentuated the divide between the cosmopolitan, Westernized city and stridently nationalist Chinese Communist Party. Indeed, some of the protesters have looked to the U.S. and Britain for support while China has lashed out at “foreign forces” that it says are fanning the unrest.
Hong Kong remains China’s pre-eminent financial center. But its appeal is bound to diminish with the prospect of further discord, a heavier hand from Beijing and possible U.S. sanctions if Washington concludes it is no longer autonomous.
More broadly, the U.S. and China are slowly decoupling, which diminishes Hong Kong’s value as an intermediary. Bloomberg columnist David Fickling noted Shanghai was Asia’s financial capital until the Communist takeover in the 1940s sent many residents fleeing to Hong Kong: “Locals are now asking whether something similar could happen to Hong Kong itself,” he writes.
New York’s challenges are more economic than political. Unlike London, financial-industry employment has never returned to its precrisis peak. Social media and technology have filled that gap. But the city’s competitive appeal has dimmed. Its population is shrinking for the first time in a decade as foreign immigration diminishes and domestic out-migration rises.
Some is the city’s own doing: Its housing is among the country’s most expensive and its taxes among the highest. But it is also on the losing end of some of President Trump’s policies. The tax cut he signed into law in 2017 limited deductions for state and local tax, penalizing high-tax cities and states such as New York, which are predominantly Democratic.
In New York state, 29% of the richest 1% of households pay more tax under the law, while in Texas just 5% do, according to a study by the Urban Institute, a think tank. Estimates for New York City aren’t available. Whatever other benefits the wealthy reap from the law, it makes New York a less attractive place to work or locate a business. Mr. Trump made that point by changing his residence from New York to Florida.
London, Hong Kong and New York aren’t headed for stagnation or decline. Around the world innovation and productivity are gravitating to cities with high concentrations of talent, skills and amenities, which they have in abundance. But these three stood out because of their uniquely global character. They might not in the future.
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