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Breakingviews - Hong Kong softens the G in ESG

An office worker rides up on an escalator inside the 88-story Two IFC in Hong Kong November 28, 2007. Hong Kong's economic growth slowed to 1.7 percent in the third quarter, weaker than expected, as the strongest private consumption in four years was offset by weak government spending and exports.

HONG KONG (Reuters Breakingviews) - There soon may be a little less sunlight in Hong Kong. A new government proposal would curb public access to details about company directors. The idea goes firmly against a worldwide push from investors for better governance and disclosure, and only stands to taint the Asian financial hub’s business standing.

The plan published on Wednesday is set to go before the city’s legislative council next month. It would give companies an immediate option to withhold information about directors, such as their addresses or passport numbers. A second phase would hide all documents containing such information from public view.

Couched as a data privacy issue, it might sound reasonable. In a region with easily confused names and labyrinthine corporate structures, however, losing access to unique identifiers will make it harder for businesses to be certain about who they’re dealing with. Investors and banks, meanwhile, could struggle to carry out proper due diligence.

Rendering Chinese names in English is not always done consistently. Wu in some documents could be written as Woo in others, for example. Likewise, the same characters can be spelled in different ways in Cantonese and Mandarin. Cross-referencing information accurately was instrumental in uncovering the questionable business ties of one high-ranking government official who was subsequently jailed.

The current registry system is already lacking. Unlike the UK’s Companies House, where most information is freely readable online, accessing Hong Kong documents carries a small fee. What’s accessible is limited to basics such as director names, company addresses and liens over corporate assets.

The new law also would limit the reasons for granting access. No option for researchers or journalists is planned. A free press is in the best interest of companies and investors alike. Local authorities are already prosecuting a freelance reporter for searching a car licence database for an investigative story. There was no option to declare it as journalistic work.

Hong Kong tried introducing similar data limitations a decade ago. Advocates for openness successfully blocked the attempt partly by saying it would damage the city’s position as a financial centre. Beijing’s growing shadow over Hong Kong only strengthens that argument today.

Breakingviews

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