Banks' Hong Kong ties may make Taiwan vulnerable to China: Scholar

Washington, Sept. 18 (CNA) Many Taiwanese banks have expanded their operations in Hong Kong, but those close ties could backfire in the event of a cross-strait conflict, a scholar at an American thinktank warned Thursday.

"In peacetime, Hong Kong serves as Beijing's global engine for capital. In wartime, it transforms into a financial fortress for the Chinese Communist Party," said Sunny Cheung (張崑陽), a fellow for China Studies at the Jamestown Foundation, during a roundtable in Washington.

Cheung noted that Hong Kong has outpaced any other market to become Taiwan's most profitable offshore center, accounting for about US$700 million -- or 45 percent -- of Taiwanese lenders' total overseas profits in the first half of 2025.

Those assets could become hostages in a cross-strait crisis, he cautioned, if Beijing were to freeze outbound remittances or divert capital to fund military operations or stabilize Chinese markets.

Describing Hong Kong as a "financial aircraft carrier" for Beijing, able to project power beyond China's borders, Cheung emphasized the city's increasingly important global role, noting that it is projected to surpass Switzerland as the world's largest wealth-management hub.

Although Hong Kong retains a separate membership in the World Trade Organization (WTO) and was long viewed as autonomous after the 1997 handover, "Beijing has systematically shaped Hong Kong into its international hub for capital and influence" over the past two decades, he said.

"This allows China to maintain access to global markets even when international scrutiny closes in."

In 2025, nine out of every 10 Initial Public Offering (IPO) dollars raised in Hong Kong came from Chinese firms, and 62 of 71 new listings were mainland enterprises, he said. When the U.S. delists a company, Beijing simply reroutes it through Hong Kong.

According to Cheung, Washington and its allies should reassess the city's economic status and even consider revoking its WTO membership.

He called for mechanisms to be established to track U.S. capital flows, saying that Washington must develop a strategy to counter the renminbi (RMB) internationalization before a Taiwan crisis forces it into a reactive position.

"The next geopolitical financial crisis will not necessarily begin on Wall Street, in London, or even in Shanghai -- it could begin in Hong Kong," he said.