Following paragraphs are extracted from the news story by Financial Times on 22 April, 2022. Wells Fargo plans to shift

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Following Paragraphs Are Extracted From The News Story By Financial Times On 22 April 2022 Wells Fargo Plans To Shift 1 (148.38 KiB) Viewed 12 times

Following paragraphs are extracted from the news story by Financial Times on 22 April, 2022. Wells Fargo plans to shift Asian hub from Hong Kong to Singapore Wells Fargo, America's fourth-largest bank by assets, has been quietly working on a plan to move its Asian regional hub from Hong Kong to Singapore as part of wider restructuring efforts. The plan is motivated by saving money from reducing Wells Fargo's exposure to Hong Kong's expensive real estate market, and by geopolitical uncertainty in the city and fears over whether this will lead to more onerous compliance issues, according to two of the people with knowledge of the plan. Singapore, a growing centre for start-ups and technology companies, has been seen as a beneficiary of the tensions arising from the new security law, due to its relative political stability and proximity to Hong Kong. Questions 1. Suppose that the "expensive real estate market" and "geopolitical uncertainty" increase the operating cost of financial service much more than other business (i.e. financial service is more sensitive to rental expenditure and geopolitical uncertainty). How would this affect the status of Hong Kong as an international financial centre according to the theories based on comparative advantage such as Ricardian Model and Heckscher-Ohlin Model. (1 mark) 2. Ignoring the discussion in question 1. Suppose that the "expensive real estate market" and "geopolitical uncertainty" significantly increase the operating cost of financial service, but it also has a strong external economies of scale. How would this affect the status of Hong Kong as an international financial centre? (2 marks)