Amid the aggravating political sentiment between US and China over the imposition of Hong Kong‘s security law, South Korean conglomerates with overseas branches in Hong Kong can possibly seek to relocate their offices to different cities, a report said Friday. 

On Thursday, US lawmakers unanimously approved new Hong Kong-related sanctions that would penalize banks which do business with Chinese officials, after the Chinese government imposed a security law that has been widely condemned around the world. 

According to local corporate tracker Korea CXO Institute, about 49 percent or 83 out of 170 South Korean overseas branches located in Hong Kong are owned by 64 South Korean conglomerates with assets above 5 trillion won. 

Among the top 64 South Korean firms, groups that operate more than 10 overseas branches in Hong Kong were SK Group (44 branches), Lotte (18 branches), CJ (17 branches) and Samsung (13 branches).

The report from CXO Institute said that those branches in Hong Kong were established for investment management and financial business purposes, instead of for manufacturing or sales operations. 

Thirty out of the 44 branches that SK Group operate were special purpose corporations such as for investment management. Half of the 18 branches that Lotte operate in Hong Kong were also finance or management related companies. 

Financial conglomerates like IMM Invest and Mirae Asset operate five and four overseas branches in Hong Kong, respectively. 

Considering that the South Korean conglomerates have been leveraging their Hong Kong branches as an opportunity to expand their overseas business, the CXO report said that the current political turmoil can possibly influence the Korean firms to leave Hong Kong. 

“Although it is a wait-and-see situation for now, or in the short-term, with the US and China conflict growing, there will be fewer reasons for Korean firms to have their branches in Hong Kong and consider relocating to other countries,” said Oh Il-sun, director at CXO Institute, adding that relocations will also influence the firm’s corporate governance structures. 

By Kim Da-sol (ddd@heraldcorp.com)