By Alun John

HONG KONG (Reuters), Despite the fact that financial institutions expect business conditions to worsen in Hong Kong, mainland China, in the future, they still plan on investing in both countries, according to a study by an industry association.

These results indicate that banks and asset managers are worried about the sweeping regulatory changes this year associated with President Xi Jinping’s “common prosperity” policy. However, rules for financial institutions have largely remained the same.

Asifma, which represents major global financial institutions and is a member of the Asia Securities Industry and Financial Markets Association (Asifma), published Wednesday’s survey showing that 46% of its members expect Hong Kong’s regulatory and operating environments to become more complex over the next three year. Only 37% predicted the same regarding mainland China.

The only Asian markets in which more people expected problems than improvements were these ones.

Yet, 84% stated that they planned to expand their operations in the mainland while 54% indicated that they would be expanding operations in Hong Kong.

Asifma members recognize that there are many positives in China when it comes market development. But, common prosperity is creating more challenges. Mark Austen (the group’s chief executive) said that data is an example of what is going on in the real estate market.

Financial firms looking to merge their global and Chinese businesses are facing new challenges as authorities tighten the rules that govern how they handle customer data.

Austen said, “This extends beyond financial services. However, they are collateral damages.”

Asifma mentioned Hong Kong’s and China’s restrictive quarantine policies and visa restrictions, as well as their zero COVID policies, as additional obstacles.

Austen stated that financial companies in Hong Kong also fear legislation that could penalise them for violating foreign sanctions.

It was not clear how the National Security Law Beijing placed on Hong Kong in 2011 would impact financial services.