Zhong Lun and Hong Kong: An overview with Clifford Ng

Date: 11 Jan 2023

Silvia Ricciardi

Citywealth interviewed Clifford Ng, Partner at Zhong Lun, to learn more about how Hong Kong has evolved in the private wealth management sector.

How has Hong Kong evolved in the private wealth management sector in the last year?

CN: Much has been written about the exodus of money and talent from Hong Kong. Hong Kong marches to its own beat and often in spite of policy directives. As travel restrictions are relaxed in Hong Kong and the Mainland, Hong Kong will find its footing as a banking centre for China.

Could you compare Hong Kong with Singapore?

CN: The main difference between Hong Kong and Singapore is that one is in China and the other isn’t. There are plusses and minuses to both.  As a result, Hong Kong and Singapore have become complementary and not competitive with each other.

Why should UHNW and HNW clients choose Hong Kong to do business?

CN:  3 things: low and simple taxes, free movement of capital and (with Covid19 travel restrictions almost all gone) free movement of people.

What general advice can you give to individuals and businesses who want to relocate to Hong Kong?

CN:  Do it now while real estate is relatively cheap!

ESG: Are your clients familiar with ESG? Are they behaving differently in the present scenario in Hong Kong?

CN:  Our clients are very familiar with ESG. No one is against it. Some elements can be value-laden so we have to separate substance from mere virtue-signalling and to what audience. The real question should be cost – and that is not just financial but personal in the displacement of workers, loss of livelihoods, etc. The answer is not as easy as three letters of the alphabet and some crazy glue on art.

Your practice deals with complex cross-border transactions, investments and private client matters. What are you working on at the moment?

CN:  Many of our mandates lately reflect the broader trends in the world generally:

Covid Ain’t Over. As I answer this, while most of the world is moving on, Hong Kong and China (as everyone knows from the news) are still unwinding from lockdowns, quarantines, endless tests and QR codes. Flights from mostly-open Hong Kong are still hard to book for some destinations. The extended closure drives two opposing forces. On the one hand, clients are making fewer investments anywhere outside China if they do not already have some infrastructure there. On the other hand, some have made the move out of Hong Kong and, to a lesser extent, China. The latter raises all of the tax, immigration and other legal issues in a change of residence or domicile.

Everything is Geopolitics. We are all grappling with the fast changing and very complicated global geopolitics.  With tariffs, trade restrictions and the prospect of sanctions, many clients have had to navigate tricky waters in their businesses; particularly those in manufacturing. Almost all clients will ask about sanctions in their planning. New investments and exits are now reviewed through the lens where the world is less China-friendly.

Great Reflection. The “Great Resignation” in the general workforce is the great reflection for high net worth clients. The pandemic has taken three years out of their lives and time is always running down. Many are reflecting on how they want to spend the rest of their lives – where they should live, doing what and with whom as well as succession plans for their businesses.

Monetary + Fiscal Shocks. After the many years or quantitative easing and outright cash handouts during the pandemic, clients deal with tightening monetary policy on the one side and governments replenishing their coffers with tax grabs on the other. The result will be an economic slowdown with clients waiting to see what happens next on the investment side and building defences on the tax side.

Peak Anarchy? The 2008 market turmoil killed trust in “experts” and whatever faith we had in governments and we turned to tech tycoons and “fxxx regulators”. I think this cycle has peaked with the data abuses by Meta/Facebook (among others), Elon’s foray with Twitter and SBF/FTX and we will turn back to governments and supra-government organizations (more EU than UN) for some much needed regulation and oversight. This may not bode well given the geopolitics and the inevitable regulation and tax overreach and “mis-reach”. What is humanity if we don’t lurch from one extreme to another?

Talk us through one of your most recent client cases.

CN:  My cases now inevitably involve all of the above issues to some degree depending on the particular client. In addition to the financial and business side, we have to advise on their family plans and dynamics of the family members amidst the unknowns in the family business and the greater world as noted above. It’s an interesting job.

What are the most common questions you usually receive from high-net-worth individuals who own estates with multi-jurisdictional assets? And what are your replies to these questions?

CN: Almost everything we do involves looking at our clients’ asset holding structure. These are often set up on the fly without much forethought into funding, efficiency, exits, management and control. Our first task is to make sense of the structure keeping in mind there could be tax or other costs to change it once set up. My reply to these is usually how we can make things right and keep it as simple as possible.   

What is the biggest challenge you and your firm are currently facing?

CN:  Like our clients, the 5 issues I mentioned also affect us as a firm and on a personal level. Many of us have never seen a world with inflation and detached from the IV drip of quantitative easing.  We will have to be more disciplined on the business side. To paraphrase Warren Buffett, I have practiced long enough to have the tide go out on me several times. We tightened our drawstrings and are well prepared.