We're not really concerned on either point, instead seeing the western media consistently casting Beijing in a far-worse light than the facts warrant. Nor are investors overly concerned, judging by the Hang Seng performance relative to its Asian neighbors. There are pressing uncertainties related to the changeover, of course, and topping our list is the question of taxes. This is the critical point raised by L. Gordon Crovitz, editor of the Hong-Kong based Far Eastern Economic Review , on the June 27 Wall Street Journal editorial page. Crovitz, a prot g of WSJ editor Robert L. Bartley, is one of the most respected analysts in the region, his June 27 essay the best we have seen on the subject.
Tax rates are perhaps the most crucial, yet still unresolved, issue pertaining to re-unification.
Low income and corporate tax rates are the absolute cornerstone of Hong Kong's prosperity. Widely disparate tax systems are probably untenable in one sovereign nation, which leads to fears that Hong Kong rates will be forced up to the mainland's. This would not only drive down the value of Hong Kong assets. It would also give a commercial advantage to Singapore at Hong Kong's expense. This would not only reduce the economic risks of unification, it also would accelerate the rate of capital formation on the mainland.