Finance
How Alternative Financial Centers In Asia Fizzled Out
TOKYO, JAPAN – Tokyo has been one of the cities vying to become a financial center of Asia, but the … [+]
Not so long ago, when Hong Kong was struggling with the impact of civil unrest and strict Covid-19 controls, other cities in Asia sensed an opportunity to bolster their respective financial center credentials. Not Singapore, which is already an established Asian financial center – and has grown in recent years – but cites such as Tokyo and Taipei.
While some lofty announcements were made, and ambitious plans unveiled, the result has been underwhelming. No other cities in Asia have been able to seriously position themselves as international financial centers, or even regional ones.
This holds true for all sectors of financial services, including cryptocurrency, where once again it is a two-city contest in Asia between Hong Kong and Singapore.
The Curious Case Of Tokyo
Tokyo has been the most ambitious of any Asian city in promoting itself as a financial center. In theory, the idea makes sense. Tokyo is undoubtedly the paramount financial center of Japan, the world’s No. 3 economy, while its stock market has performed extraordinarily well in the past few years. Foreign-direct investment in Japan is at a 15-year high.
Tokyo has enacted certain policies to boost its prospects as a financial center. These include simplified registration procedures for fund managers focusing on overseas investors, exemption in inheritance tax on overseas assets of foreigners under certain conditions, and an expansion of the scope of companies that can claim performance-based compensation paid to executives as a deductible expense.
However, the reality is that Tokyo is still subject to the Japanese tax system, which is high in comparison to Hong Kong and Singapore. Income taxes in Japan can reach a maximum 55%, compared to 16% in Hong Kong and 22% in Singapore.
”For Tokyo to become a hub of asset management business, I do strongly believe that we do need to change tax treatment for individual people,” Monex founder Oki Matsumoto told Bloomberg TV in a recent interview.
Another issue is that English is not widely spoken in Japan, despite increasing government efforts to promote use of the language. Most international financial professionals want to work and live in an environment where English can be used regularly.
Taipei: Imagining Itself As A Financial Center
During the early days of the coronavirus pandemic, the financial policy community in Taiwan was deliberating over the potential for Taipei to become a financial center in Asia. While the Taiwanese government had mooted this idea in the past, this time it seemed like a real opportunity, given the challenges Hong Kong was facing as well as all the positive press Taiwan was getting for its then-stellar containment of Covid-19.
We were present for several of these brainstorming sessions with financial professionals and researchers at think tanks. It became evident quickly that while the Taiwanese government very much liked the idea of Taipei gaining prominence for something besides being a technology hub, it was not prepared to make changes to laws and regulations that would increase the city’s competitiveness as a financial center. High income tax relative to Hong Kong and Singapore was one issue (a maximum of 45%), but arguably more important were the restrictions on certain financial products and onerous requirements for setting up a company.
One idea that emerged from these discussions was trying to establish a financial research hub in Taipei as some hedge funds at the time were reducing headcount in Hong Kong and considering where to send their research teams. From a regulatory standpoint, financial research is not subject to the same tight controls as other aspects of the industry. Taipei is also much less expensive than Hong Kong in almost every respect.
Yet ultimately, the Taiwanese government decided to shelve its financial center idea and redouble its efforts in familiar territory: technology hardware, and especially semiconductors. Perhaps it was for the best: On May 13, the Taiwan Stock Exchange’s main board hit a new high of more than US$2 trillion, the gains driven by Taiwan Semiconductor Manufacturing Co.’s (TSMC) strong sales performance.
And Then There Were Two
The growth of the digital assets sector in Asia primarily in Hong Kong and Singapore illustrates how these two cities remain the region’s paramount financial hubs. Though some competition exists between the two cities, thus far, their efforts are mostly complementary. Singapore is more focused on cultivating a market for institutional investors, while Hong Kong would like to also serve retail investors (though it is discovering how difficult that will be).
To be sure, Japan has an abiding interest in digital assets, and continues to enact legislation broadly supportive of the sector. It has been a leader in adopting regulations for stablecoins and in February, its cabinet approved a bill that adds crypto to the list of assets Japanese investment funds and venture capital firms can acquire. However, the same tax issues are relevant for the cryptocurrency industry as other financial services segments.
In Hong Kong’s case, it will be imperative to follow developments affecting its legal system as its integrity is foundational for a thriving financial services sector. Three foreign judges have announced their departure from Hong Kong’s top court this month, which follows the passage of a new national security law in March.
The seven-week military conflict in the Middle East will redefine Hong Kong’s role as a global financial centre, positioning the city as a safe harbour for capital and investments.
Anecdotal evidence suggested that more banks had turned to Hong Kong to protect their businesses and committed themselves to expanding their presence in the city. At the same time, inquiries about adding allocations of mainland Chinese assets among global investors had recently increased, potentially enlarging the customer base for the city’s asset-management industry and family offices and driving demand for offshore yuan-linked financial products.
For years, Hong Kong’s status as a financial centre in the Asia-Pacific region has been challenged by Dubai, which has risen to prominence as a gateway linking Asia and Europe in capital flows, transport and logistics. With the war destabilising the Middle East – at one point forcing the closure of the Dubai International Airport and sending stocks in the Gulf region plunging – Hong Kong has re-emerged due to its geographical location, a pegged exchange rate, free capital flows and support from China’s economic strength.
“In that context, China and Hong Kong are attracting renewed attention,” said Gary Dugan, CEO of The Global CIO Office in Dubai, which advises family offices and ultra-high-net-worth individuals globally. “There is growing interest among some clients in increasing exposure to China and Hong Kong. It is less a simple flight to safety and more a reassessment of where investors see relative value, policy consistency and long-term strategic opportunity.”
Dubai now relies on trade, tourism and finance as the pillars of its economy, reflecting the success of its four-decade diversification away from oil for sustained growth. The United Arab Emirates city is home to Jebel Ali Free Zone, the biggest free-trade zone in the Middle East, and the second-largest stock market in the region, with combined market values of US$1.01 trillion. The city, also a global hub for gold trading, has a population of 4 million, about 80 per cent of which are foreign expatriates. Dubai’s economy grew by 4.7 per cent in the January-to-September period last year.
Before seeking a new referendum MPS needs to rebuild trust in the community through completing state audits, putting in place controls to prevent overspending and routine reports to the public.
For MPS Superintendent Brenda Cassellius, who just wrapped up her first year leading Milwaukee’s public school system, her tenure has been punctuated by some very big numbers.
The first is $252 million. That is the amount of new spending voters narrowly approved in an April 2024 referendum to support operations in Wisconsin’s largest school district. Just months later, MPS was rocked by revelations the district was months behind in filing key financial reports to the state, which led to former Superintendent Keith Posley’s resignation.
The second is $1 billion. MPS faces a deferred maintenance backlog exceeding $1 billion. The district’s enrollment has declined 30% over the last 30 years, leaving many schools at less than 50% full. That, in part, is driving a plan to close some schools and to improve others to help lower costs.
The final is $46 million, the deficit MPS was running for the 2024-25 school year, an unexpected shortfall which has led to hundreds of staff layoffs.
Getting the district’s accounting, budgeting and financial reporting back on track has dominated Cassellius’s first year at MPS. In an April 15 interview with the Journal Sentinel’s editorial board, she talked in detail about the challenges putting that into order and progress she sees in restoring transparency into its operations.
State funding and aging buildings create budget nightmares
Cassellius says state needs to keep up its share of school funding
In an interview with the Journal Sentinel editorial board, MPS leader Brenda Cassellius says budgets and buildings are her two top worries.
Cassellius said the on-going budget crisis is her top concern. She said the state’s failure to live up to its share of funding is exacerbating MPS’ budget woes. A group of school districts, teachers and parents filed suit against the state Legislature and its Joint Finance Committee claiming the current state funding system is unconstitutional and prevents schools from meeting students’ educational needs.
Funding for special education is especially critical. About 20% of MPS students have disabilities, almost twice the share of the city’s charter schools, and the average of 14% across Wisconsin.
“What’s keeping me up now, you know, is really just the budget crisis we’re in, with not only this year but multiple years going out without additional state aid, we’ve been not getting funding for what our needs are for our students, and particularly our students with special needs,” she said.
Although the state budget increased special education funding to a 42% reimbursement rate, the actual rate has been about 35%. Another component to the budget headache is the age of MPS buildings. The average age is 85 years-old compared to 45 across the nation.
“We have just kicked this can down the curb or kicked it down the street or whatever you call it for too long. And it’s time that we really take on a serious conversation about the conditions of the learning environments in which we send our children,” she said. “Particularly in Milwaukee Public Schools, we serve the most vulnerable children. Children who have language barriers, children who have disabilities, children in high-concentrated poverty.”
What needs to happen before MPS seeks another referendum
Voters need to be comfortable MPS has made tough budget decisions
In an interview with Journal Sentinel editorial board, Brenda Cassellius said voters will need to see budget improvements before seeking more spending
Cassellius said MPS will definitely need to go back to voters for a new referendum in the future. In addition to the 2024 measure, voters approved an $87 million plan in 2020.
Before doing that, she said the district first needs to rebuild trust in the community through completing required state audits, putting into place controls to prevent overspending and routine reports to the school board and public about finances.
“I don’t think that the voters are going to want us to bring something forward until they feel comfortable that we have done the cleanup that is necessary,” she said. “And we’ve built the trust that we have the sufficient controls in place.”
In the interim, she’s hoping the state will meet its constitutional responsibility to adequately fund public schools.
“What the public expects is you know where the money is, you’re spending it as close as you can to children, you’re getting good on the promise around art, music, and PE, and the things the public said they wanted to fund,” Cassellius said. “And they want their kids to have so that they have a quality education and an excellent education in Milwaukee Public Schools, and that they had the right amount of staff that they actually need. In the school to be safe and to run a good operation.”
Rebuilding finance staff in wake of $46 million in overspending
MPS is rebuilding school finance staff in wake of reporting lapses
In an interview with the Journal Sentinel editorial board April 15, MPS superintendent discusses accountability for district’s financial problems.
The $46 million budget shortfall from the 2024-25 school year started coming into view last fall and was confirmed in mid-January. Cassellius noted that in addition to hiring a new superintendent, MPS also parted ways with its comptroller and CFO.
“We are really rebuilding the personnel and staff of the finance department. That is what’s critical, is having the right people in the right seats doing the work,” she said. “Also critical is making sure that you have the right controls in place. The audit findings found that we did not have proper controls in place and now we have those proper controls in place and when we find things we put new SOPs in place and that is what any business does.”
Identifying that shortfall, though painful, was the result of better accounting.
“Being three years behind in auditing means that you don’t have full sight on your actual revenues and expenditures. And so we have now full sight of our revenues and our expenditures and that’s why we were able to see this new deficit of $46 million,” she said. “And we still continue to work with DPI on those processes to make sure that every month we’re doing monthly to actuals and doing those accounting, reporting that to the board. In a way that is consumable to the public that they can understand.”
Jim Fitzhenry is the Ideas Lab Editor/Director of Community Engagement for the Milwaukee Journal Sentinel. Reach him at jfitzhen@gannett.com or 920-993-7154.
Property markets move in cycles, and with interest rates rising and other pressures like high fuel costs, some markets are clearly slowing down. Many first-home buyers who have only ever seen markets going up are conditioned to think that when purchasing, competition is always intense and decisions need to be made quickly.
In those times, buyers often feel they need to act fast, stretch their budget and secure a property at almost any cost. But things have definitely changed.
In a softer market, the dynamic shifts. Properties take longer to sell, competition thins, and it’s the vendors who begin to feel pressure.
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For buyers who understand how to navigate that change, the balance of power quickly moves in their favour. The opportunity is not simply to buy at a lower price. It is to negotiate from a position of strength.
If that’s you right now, these are the key skills first-home buyers need to take advantage of in softer market conditions.
The most important shift in a soft market is psychological. In a rising market, buyers often feel like they are competing for limited opportunities. In a softer market, the opposite is true. There are more properties available, fewer active buyers and less urgency overall. This gives buyers options.
When buyers understand that they are not competing with multiple parties on every property, their decision-making improves. They are more willing to walk away, compare opportunities and avoid overpaying. Negotiation strength comes from not needing to transact immediately. When that pressure is removed, buyers are able to engage more strategically.
One of the most common mistakes first-home buyers make is continuing to apply strategies that only work in rising markets. Auction urgency is a clear example. In strong markets, auctions often attract multiple bidders and create competitive tension. In softer conditions, properties are more likely to pass in, shifting the process away from a public bidding environment into a private negotiation.
This is where leverage increases.
Private negotiations allow buyers to introduce conditions that protect their position. These may include finance clauses, longer settlement periods or price adjustments based on due diligence. Opportunities that are rarely available in competitive markets become standard in softer ones.
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