European leaders are more willing to cooperate with China as a counterbalance because the continent’s political and business communities are increasingly concerned about Russia’s power in Europe, according to Adriel Chan, a trustee of The Better Hong Kong Foundation, one of the city’s preeminent private think tanks.
“I was surprised at how existentially scared even the French and the Germans are about the conflict in Ukraine,” Chan said, reflecting on discussions during an early May visit to Europe as head of a delegation organised by the foundation. “Sitting here in Asia, I would never think that there’s any chance that Russia would try to move the war into western Europe.”
“The surprise on the upside was how they are level-headed about Europe and China relations,” Chan said in his first interview since becoming chairman. “They recognise that China is an integral and important part of not just the world economy but their economies, so they want to continue to engage.”
The delegation organised by the privately funded, non-profit foundation visited France and Germany to meet with local business leaders, senior government officials and think tanks. The goal was “not to change the global capital flows overnight, but inform and educate those in decision-making positions about situations in Hong Kong”, Chan said.
The Better Hong Kong Foundation was established in 1995 by influential Hong Kong business and community leaders. Real estate tycoons like Li Ka-shing, Li Shau-kee and Pansy Ho Chiu-king are trustees of its board.
However, they feel they need to wait for the Ukraine conflict and other tensions, including the conflict in Gaza, to end before committing to major new investments, according to Chan.
“They worry about the two wars, and they are also concerned about the political shifts domestically to the right all across Europe,” he said. “They are very concerned with their own economic policies and employment, especially in the context of China.
“It’s really their own competitiveness. They need to take care of their own issues before they can really be open, more ready to invest in a big way externally.”
Beijing has threatened through state media and business channels to retaliate for such duties.
Large companies, including car manufacturers and makers of fast-moving consumer goods, have made a lot of money in mainland China over the years, so they know the importance of the market, according to Chan.
“Large corporates are still very happy to be working in China, even if they see a slight slowdown in domestic consumption,” he said. “They all still want to be there. They are asking [us] where are the geographic locations they should be expanding in mainland China.”
Following an overall rebound last year, China’s luxury market is expected to grow at a pace in the mid single digits in 2024, according to Bain & Company’s latest China Luxury Report in January.
Big luxury brands recognise that there is a hangover from the post Covid-19 explosion, but the slowdown is considered natural.
“I don’t think that they are unhappy with the way that China is performing,” Chan said. “Everybody that we spoke with recognises that the Chinese economy is encountering a macro cycle, looking at everything holistically, and they don’t expect the slowdown to be permanent.”
Stakeholders realised over the last several weeks that the mainland China and Hong Kong stock markets had hit rock bottom, with “enormous” discounts on stocks signalling that it was time to reconsider Chinese stocks.
“This was literally happening as we were going around Europe, where people started to reinvest in Chinese stocks, mostly large caps and technology,” Chan said. “That being said, I don’t think we’ve started that avalanche yet. But hopefully, we [are going] in the right direction.”
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