'Hexis' Sparks Concern... Domestic Finance and Industry Watch Closely

Strategy Revision Inevitable When Global Companies Begin to Withdraw in Earnest

Hong Kong pro-democracy protesters condemned the passage of the Hong Kong National Security Law by the Standing Committee of the National People's Congress of China at a shopping mall in the Central district on the 30th of last month. (Photo by Yonhap News)

[Asia Economy Reporters Kim Hyo-jin and Lee Chang-hwan] As the United States takes a tough stance by revoking Hong Kong's special status following China's enactment of the Hong Kong National Security Law, the domestic financial and industrial sectors are on high alert. In particular, the financial sector is cautiously monitoring future developments while keeping in mind the possibility of having to inevitably participate in Hexit (Hong Kong + Exit) due to this measure.

According to related industries as of the end of the first quarter, there are a total of 24 financial firms operating in Hong Kong. Hong Kong has attracted investment funds worth approximately 1 trillion dollars (about 1,200 trillion won) based on the dollar peg system, which maintains the currency value within the range of 7.75 to 7.85 Hong Kong dollars per US dollar, and US visa privileges. The Hong Kong stock market competes with the New York Stock Exchange for the top spot in IPO fundraising. This status is based on the special privileges granted to Hong Kong by the US in areas such as tariffs, investment, trade, and visas.

However, with the passage of the Hong Kong National Security Law and the revocation of its special status as a global financial hub, Korean companies operating in Hong Kong are closely monitoring the situation. While the prevailing view is that there will be no immediate major changes, strategic shifts will be inevitable if global companies begin to leave Hong Kong in earnest and problems arise in fundraising.

A senior official at a commercial bank with a branch in Hong Kong said, "It is too early to have full and concrete discussions about revising business strategies in Hong Kong, but we are taking the situation very seriously." Another commercial bank official explained, "Due to the long-standing democratic protests and unrest in Hong Kong, there is some learning effect regarding political instability, and the fact that the Hong Kong stock market has not changed drastically is evidence of this adaptability."

Financial authorities also view the impact as limited. As of the end of last month, the exposure of domestic financial firms to Hong Kong stands at 6 billion dollars, accounting for only 2% of total external exposure. A financial authority official stated, "Overall, the impact on our financial sector, especially financial firms operating locally in Hong Kong, will be limited," adding, "No particular unrest has been detected on the ground."

The official analyzed, "There is talk of a 'Singapore alternative,' but Hong Kong specializes in stocks and bonds, while Singapore focuses on foreign exchange and commodities, so the possibility is low due to clear specialization differences."

The industrial sector, centered on semiconductors and petrochemicals, is also on high alert. According to the Korea International Trade Association, South Korea's exports to Hong Kong last year amounted to about 31.9 billion dollars, ranking fourth after China, the United States, and Vietnam.

Among exports to Hong Kong, semiconductors accounted for 22.3 billion dollars, or 70% of the total. It is known that 90% of this 22.3 billion dollars is re-exported to China. Since the US has not imposed regulations on Korean products exported to Hong Kong, the semiconductor industry expects no immediate damage. If exports to Hong Kong are blocked, direct exports to China are also possible.

However, if the US-China trade conflict intensifies, it would be accompanied by economic downturns, so the biggest concern is a reduction in semiconductor exports themselves. Additionally, the extra logistics costs associated with direct exports to China are also a burden.

A semiconductor industry official said, "Semiconductors are globally traded without tariffs, and since the US has not imposed regulations on Korean semiconductors going to Hong Kong, there is no immediate damage," but added, "We are cautious about potential export volume reductions due to escalating US-China conflicts." The recent halt in the rise of semiconductor prices has already increased performance burdens, and the added Hong Kong risk is also a concern for the industry.

The petrochemical industry situation is similar. Korean petroleum products exported to Hong Kong amounted to about 1.1 billion dollars last year, ranking second after semiconductors. It is estimated that 60% of petrochemical products exported via Hong Kong are destined for China. The atmosphere is one of concern over long-term industry downturns rather than short-term damage.

Moon Byung-gi, senior researcher at the Korea International Trade Association's International Trade Research Institute, explained, "Even if there is no immediate major damage, if trade conflicts prolong, it will undoubtedly be negative for our economy, including semiconductors, petrochemicals, other industries, and finance," adding, "We need to consider not only direct exports but also alternative export routes such as Singapore and Taiwan."

This content was produced with the assistance of AI translation services.