Hong Kong Manages Money Only for the Very Rich

Hong Kong is branding itself as a global wealth-management hub. The government doesn’t levy any capital gain. It’s offering generous tax breaks to family offices that want to set up in the city. Recently, Wealth Management Connect, a program that allows mainland Chinese in Guangdong province to the north to invest directly cross-border, had its investment quota raised. Banks such as HSBC Holdings Plc and Standard Chartered Plc were quick to roll out new products.

But if one looks carefully at the city’s track record, the score card is not great, especially for the middle class. While Hong Kong is a tax haven and the cost of borrowing has been low, an overly cautious government skeptical of people’s ability to understand and manage risk resulted in excessively tight regulations. As such, residents have largely missed out on the regulatory light-touch and the sizable returns enjoyed by the wealthy.