Do Beijing’s Capital Controls Bind Hong Kong? Reality or Illusion

Abstract The ongoing impact of COVID-19 on global economic growth is likely to result in a retreat from financial globalization, including restrictions on capital movements. This concern arises from the experience of short-term capital control policies being implemented by countries in past financial crisis. This trend, together with China’s long history of using capital controls, has further sparked fears in Hong Kong regarding the extent to which the capital control restrictions from Beijing could impact Hong Kong’s open financial policy on capital transfers. With this context, this article evaluates situations where concerns have been raised and seeks to ascertain whether Hong Kong could be legally liable for the implementation of capital controls in Beijing.