Constitutional Finance: The Role of the Hong Kong Basic Law during the Global Financial Crisis

Abstract

The global financial crisis of 2007–2009 inflicted an unprecedented catastrophe on Hong Kong amongst many other economies. And yet the constitutional framework set out in the Basic Law performed quite satisfactorily in supporting financial stability. The collapse of multiple financial institutions and the domino effect which it threatened in the United States, the United Kingdom and continental Europe did not overtake Hong Kong or resulted in any permanent loss of gross domestic product or required a rehabilitation of the financial or macroeconomic infrastructure of the former British dependency. The crisis left the Basic Law completely intact as well: not a single provision had to be amended in consequence. Hong Kong’s aggressive regulation in times of emergency was part and parcel of its constitutional ideology of “positive non-interventionism”. That stability, however, hinges on widespread beliefs held by all the interested parties about the uncompromisingness of the government’s commitment to private property protection and contract enforcement, its self-interest in conserving Hong Kong’s status as an international financial centre and China’s aversion to the breakdown of the Basic Law paradigm, all of which together constituted a self-fulfilling prophecy, that of a self-enforcing economic constitution.