Entering The Cafe Royal Hotel, one is overwhelmed with historic sentiment.
For the last 150 years, it has been a staple – the place to be seen – in the upper echelons of London society. Today I’m seeing Dr Johnny Hon in the Oscar Suite, presumably named after an erstwhile regular, Mr Wilde, who was famously advised to drop his charge of criminal libel against the Marquess of Queensberry in the cafe downstairs. We all know how that ended up.
Coincidentally, history is what we’re talking about today. Interviewers before me have written volumes about Hon’s firm, The Global Group, as they have his personal investments, philanthropy, entrepreneurship and stage productions. Not to mention his diplomatic and political projects, and myriad business and government appointments.
So today we’re talking about his native Hong Kong, 20 years on from the British Handover.
One country, two systems
Hon praised the principle of One Country, Two Systems – that China is one country, but distinct regions such as Hong Kong and Macau retain their own capitalist economic and political systems – on these very pages, a couple of weeks ago. But why?
“For the people of Hong Kong it wasn’t easy. Imagine if you live in London and overnight the whole city becomes another country. But I think the business is going well – most things are functioning better than before because of technology, and the rule of law has been maintained. So I think there’s proof that this new concept has worked.”
Hon is a fan of Margaret Thatcher – even having met her once in 2006. She signed the Sino-British Joint Declaration in 1984, that guaranteed Hong Kong’s way of life would remain unchanged for a period of 50 years. Just two weeks ago, China announced the declaration was “now history” and no longer had “any practical significance nor any binding force”. Void, for want of a better word. Does this concern Hon?
“It has not been voided,” he says. “It’s just that the interpretation of it has been different. It’s a difficult situation. When they say One Country, Two Systems, that in itself is an ambitious thing, because for China, it’s very important to have one country. So one country will always come first.”
“It has not been voided, it’s just that the interpretation of it has been different.
Concerns have been raised about the terms of the handover – many feel that China is disregarding its obligations and imposing itself on one of the two systems. Will One Country, Two Systems last?
“I think it’s changing, it’s a very difficult thing. Hong Kong has a free press, there’s freedom of speech. I would say that largely, most people in Hong Kong are happy with the current situation though, with the changeover, with the money coming to the region. But there are people, especially the young, who feel marginalised, like they can never afford a property, wages are coming down – that sort of thing.”
Reverting back to his meeting with Thatcher (“a very kind lady”), Hon says that she told him the most important thing for Hong Kong-China relations was maintaining the rule of law. There’s no such thing as a perfect society in which everybody is happy with the government – something he says that the UK is presently experiencing more than usual.
“If you look at Hong Kong generally, people are happy, the judicial system is functioning, it’s robust. I think some blame the Chinese government, but it’s not everybody – there will always be unhappy people. What I’m trying to say is that, whoever runs Hong Kong, like now, you will have problems.”
Hon has previously written that investors should be “looking east” in the future, and can’t afford to ignore the Chinese market when building products and services. The liberalisation of capital markets has lifted hundreds of millions of people out of poverty, birthing a burgeoning, prosperous middle class with disposable income. But entering the market is certainly no easy task.
“There’s a lot of local competitors – the whole environment favours local companies. Investing in China is very difficult unless you really know what you’re doing. For a young entrepreneur wanting to open up in China, it’s a very hostile environment to do business.”
He says that the UK is such a desirable place for the Chinese to set up shop for these reasons. The focus on cottage industries and local business means many in China lack international experience – in branding, management, intellectual property and creativity.
“But what is interesting now,” he says, “is that Beijing is encouraging Chinese investors and companies, both state and private, to invest overseas under the Belt and Road initiative. And that makes a big difference. China is a very politically-driven place – there’s lots of patriotic feelings – people are proud of what we have achieved. Beforehand, foreign investment would have been viewed as disloyalty. But now the government is encouraging it.”
Interestingly – and due mostly to sheer scale – there is mass investment from China to the UK in property, technology and startups. But conversely, in the opposite direction we run massive trade and investment deficits. I suggest that China today is repositioning itself on the world stage as Donald Trump’s protectionism becomes a reality, which might put investors off. What does the Chinese business world think of Trump’s accusations of currency fixing and unfair trade practices?
“It’s no doubt that there are more restrictions; in China the government has much more power to control things. But most people in the business side see that as a good thing. When your economy just suddenly blows up like China’s has, you have tonnes and tonnes of different problems to deal with, and the Chinese leadership believes that it is trying to maintain stability, and adjust slowly so they find the right track.”
Hon tells me that were it not for the stranglehold China’s government has on its economy, it would not have “achieved what it has today.” He is undeniably a capitalist at heart – The Global Group is testament to that. I think I know the answer, but ask whether the liberalisation of markets and closer ties are positive. He brings up a question I had asked earlier, about why he thinks China and Hong Kong need each other:
“The reason why Hong Kong is so important to China is that the former has strong rule of law – laws that protect assets – and strong international financial markets. So it’s a place where the Chinese can model all their market reforms and financial regulations. That way they already have a developed place they can learn from.”
On that note, I add that the China-US detente does seem to have ended no sooner than it began. Nonetheless, Trump’s remarks on the campaign trail still reverberate. Do the Chinese hold the US President in the same low regard as the rest of the world?
“You see, the Chinese leadership is extremely conservative in the way they handle things. If you talk to any senior politician in China, they need to think about the pressures beforehand – they wouldn’t just speak out – everything is so cautious. Whereas, the current American President just reacts to things with comments. America is still a strong economy, there’s still a lot of money, a lot of innovation. The protectionism comes from the top, but generally, they’re still open for business.”
Elliott Haworth is business features writer at City A.M.