Hong Kong Safer Than China for Investors

RiskMetrics Group found that there are more potential risks for minority investors in China than Hong Kong due largely to differences in business ownership, according to a new study.

One cause is said to be the ownership status of companies in the two destinations: in China, companies are majority-owned by the state, while the Hong Kong market is characterized by family-controlled entities, the study said.

The study also emphasized the importance of “not relying too much on board members to uphold minority rights.”

The author, David Smith, said that “investors should apply special scrutiny on related-party dealings in the absence of independent boards.” He added that while China has “moved forward on governance reforms,” the study found that these improvements have largely been untested.