A Glimpse into the Financial Landscape

In a striking warning, a scholar from the Jamestown Foundation has highlighted a potential vulnerability for Taiwan stemming from its financial connections with Hong Kong. As Taiwanese banks extend their reach into the bustling territory, the consequences could be dire in times of conflict with China.

Hong Kong: A Double-Edged Sword

Sunny Cheung, a prominent expert on China Studies, emphasized that while Hong Kong operates as Beijing's major engine for global capital during peaceful times, it could morph into a "financial fortress" for the Chinese Communist Party amid a crisis. This transformation poses a danger for Taiwan as tensions escalate.

Taipei's Profitable Connection

Remarkably, Hong Kong has emerged as Taiwan's primary offshore banking destination, raking in nearly $700 million — approximately 45% of Taiwanese banks' overseas profits in the first half of 2025. This profitable relationship could quickly turn perilous if Beijing seizes control over these assets, disrupting remittances or redirecting funds for military efforts.

A Financial Aircraft Carrier

Cheung described Hong Kong as a "financial aircraft carrier" that enhances Beijing's global influence, with projections showing it might surpass Switzerland as the leading wealth-management center worldwide. Despite retaining a separate WTO membership post-1997, Cheung pointed out that Beijing has meticulously transformed Hong Kong into a hub of capital and power.

Implications for Global Markets

With 90% of IPO funding in Hong Kong sourced from Chinese companies, and a significant portion of new listings belonging to mainland enterprises, Cheung noted that the city has become a critical pathway for Chinese firms seeking to avoid U.S. sanctions. When American investors pull out, China deftly reroutes companies through Hong Kong.

Calls for Strategic Reassessment

Amid these developments, Cheung urged Washington and its allies to reconsider Hong Kong's economic status, even suggesting the potential revocation of its WTO membership. He stressed the need for mechanisms to monitor U.S. capital flows and called for a robust strategy to counter the internationalization of the renminbi (RMB) before Taiwan faces a crisis.

A New Geopolitical Flashpoint?

"The next geopolitical financial crisis might not ignite in traditional hotspots like Wall Street or London; instead, it could very well start in Hong Kong," Cheung warned, emphasizing the pressing need for vigilance as global dynamics shift.