Singapore is the leading financial center in Asia, having wrested that title away from Hong Kong in the last year, new research shows, while No. 1 New York and then No. 2 London lead the world.
Hong Kong has slipped from No. 3 to No. 4 behind Singapore, part of a pattern of decline for Chinese financial centers. U.S. cities, meanwhile, moved up in the ranking.
The Global Financial Centres Index has just been released by Z/Yen Partners, a London-based commercial think tank that developed the index for the City of London in conjunction with the China Development Institute. You can find the report here.
For this latest instalment, the 33rd edition of the index, the compilers surveyed 10,252 respondents as well as considering 153 quantitative measures from data sources such as the World Bank and United Nations. That helped it rank 120 financial centers around the world.
In the latest edition, Chicago, Boston and Seoul all moved up the ranking and into the top 10, replacing Paris, Shenzhen and Beijing. San Francisco and Los Angeles are already among the top 10, meaning half of that top tier of cities are American.
Singapore surpassed Hong Kong last year and remains above it. Factors such as the rule of law play into the equation, and on that front Hong Kong has lost significant ground. Hong Kong's legal system was once-prized, but Beijing has decided that it has the power to overrule any decision made by the Court of Final Appeal, Hong Kong's equivalent of the Supreme Court, meaning its decisions are not final at all.
If all else fails, the Hong Kong government can appeal to Beijing to "interpret" the Hong Kong constitution, the Basic Law, in any way it wants. That process was used against pro-democracy publisher Jimmy Lai, who wanted to hire a foreign lawyer from London to represent him against the government in a National Security Law case. The Hong Kong Court of Final Appeal ruled Lai could hire a London lawyer if he wants. But with the Hong Kong government clearly terrified they wouldn't be able to control a foreign lawyer, who might therefore mount a decent defense, Hong Kong's leader reached out to Beijing to "reinterpret" the law, and Beijing conveniently decided the Hong Kong leader could veto that decision if he wants.
The political oppression in Hong Kong, therefore, spills over into concerns about its viability as a financial center. Can analysts use the city as a base if they want to write reports critical of how the Chinese economy is managed, or even how Chinese state-owned enterprises are run? Hong Kong's freedom of speech was also vaunted but has evaporated, with pro-democracy newspapers put out of business, any political opposition put in prison or forced into exile, and even critical artworks censored.
A video installation called No Rioters in Hong Kong's equivalent of New York's Times Square was taken down at the request of the authorities because the creator inserted the names, ages and sentences of those doing time for political demonstrations - all in a city that claims to welcome art and free speech, and that is currently hosting the Asian edition of the Art Basel art fair.
"It was too much watching Art Week in Hong Kong pretend the Chinese government didn't crush a democracy and turn Hong Kong into a vassal surveillance state ... because it's a convenient location for a good market," the Los Angeles-based creator of No Rioters, Patrick Amadon, told The Guardian, explaining why he created the work in solidarity with Hong Kong's political prisoners.
New York, meanwhile, moved into first place five years ago and has held that position. It remains to be seen whether the bank failures among U.S. and European institutions will hurt the status of cities in those regions, with the war in the Ukraine already factoring into some of the quantitative measures.
The compilers note that there have been predictions that London will lose its place as the leading European financial center after Brexit. That the British capital held steady in the No. 2 slot suggests that, so far, those fears are misplaced. However, Brexit only kicked in at the start of 2020. So the long-term impact of relocations to Paris and Frankfurt remains to be seen.
Overall, average performance fell around the world since the last survey. The performance was particularly poor at the top, with 31 of the 40 leading financial centers declining in quality. That overall performance wasn't worse is explained by the outperformance of lesser-ranked cities - half the centers in the bottom half of the index gained ground. So the good are getting worse and the bad are getting better.
The survey looked separately at the relevance of cities as fintech hubs. New York again leads the world as No. 1 in that capacity, although San Francisco ranks No. 2, ahead of No. 3 London and, in the No. 4 slot, the "Silicon Valley of China," Shenzhen.
Los Angeles, Boston and Chicago also rate highly as fintech centers, alongside Shanghai. Singapore, which has actively courted fintech businesses through incentives, leapfrogged Hong Kong in that capacity.
In terms of regional rivalries, the world is fairly evenly split. The mean ratings for the top five financial centers in North America, Western Europe and the Asia Pacific are neck and neck, the American centers now with a very narrow edge. But Asian centers were leading for several years until the study at this time in 2022.
When respondents were asked which cities they believe will gain in significance over the next two to three years, seven of the 15 cities identified are in Asia. Seoul and Singapore top the list of financial centers that are expected to gain in importance.
