Hong Kong CNN Business  — 

Hong Kong has long been a conduit between China and global business and finance. Now that unique status could be under threat from the gradual erosion of political freedoms.

The annual march to mark the anniversary of Britain handing Hong Kong back to China is expected to draw huge numbers on Monday. It follows weeks of mass protests against a controversial extradition law that has now been shelved.

The turmoil has exacerbated worries among Hong Kong businesses and international executives about the threat to the rule of law and freedom of expression. “The credibility of Hong Kong is now on the line,” Tara Joseph, president of the American Chamber of Commerce, said earlier this month.

The events have also raised new questions about how China views Hong Kong: Does Beijing still need the city, and if so, will it back away from confrontation that could drive business and investors away?

For multinationals, the appeal of Hong Kong has been the security offered by its semi-autonomous status.

By some measures, Hong Kong is much less important to China than it was in 1997, the year it was handed back by the British. Back then, Hong Kong’s GDP was about 20% of the size of the mainland economy, according to the World Bank. It has shrunk to about 3% today.

The relative contraction has coincided with the rise of cities like Shanghai and Shenzhen in China, and the gradual development of financial markets on the mainland.

Hong Kong, however, continues to play a “crucial role in the development for China,” according to Zhiwu Chen, finance professor with Hong Kong University.

Years ago, there was a lot of talk about Shanghai taking over Hong Kong as the global financial center in Asia. That hasn’t happened yet.

“If anything … over the last few years, there’s been a reversal, with Hong Kong playing a bigger and more visible role in finance and other service sectors,” Chen said.

Hong Kong has played a pivotal role in the opening up of China’s markets by establishing connections with stock markets in Shanghai in 2014 and Shenzhen in 2016. Those links allow international investors to trade shares in both markets through brokers licensed by the Hong Kong Stock Exchange. They also give Chinese investors a way to trade Hong Kong stocks.

Beyond those programs, Hong Kong continues to be an attractive place for Chinese companies to find new sources of funds.

Last year, Chinese companies raised nearly $35 billion through initial public offerings in Hong Kong, versus about $21 billion on mainland exchanges, according to Dealogic.

Chinese tech giant Alibaba (BABA), which went public in the world’s biggest ever IPO in New York in 2014, is now mulling a $20 billion secondary listing in Hong Kong, rather than Shanghai or Shenzhen. That fact alone, “is very telling by itself, already,” said Chen.

In the next two decades, China is expected to invest trillions of dollars globally and Hong Kong will play a more important role than ever, Charles Li, CEO of the Hong Kong Stock Exchange, wrote in a blog post in 2017, commemorating the 20-year anniversary of the city’s handover to China.

Hong Kong was in the best position to become China’s global wealth management center, helping rich Chinese invest abroad and diversity their portfolios, and would likely become a place where the price of the Chinese yuan — which is still not fully convertible — could be reliably determined, according to Li.

China does not have the best reputation on the international stage right now.

It has been accused of violating international trade norms and taking other liberties that helped its economy become the world’s second largest. Some international companies have accused Beijing of stealing their intellectual property, and business groups have frequently complained about restricted access to China’s vast market.

“The great China market that was promised… it turns out not to be so attractive to a number of foreign brands, so you can’t write off Hong Kong,” said Philippe Le Corre, senior fellow at the Harvard Kennedy School.

But Le Corre is less optimistic about Hong Kong’s long term prospects, saying the city’s power as a financial hub was “diluted” when China included it in a plan to create a megalopolis with eight other Chinese cities and Macau.

The so-called Greater Bay Area is a region Beijing hopes will grow to rival San Francisco, New York and Tokyo in terms of technological innovation and economic success. The official narrative is that greater regional integration will drive economic growth.

Opponents see the region, and the bridges and roads built to connect the cities, as a way for Beijing to force assimilation and exert control.

For Hong Kong, that represents “a slow death,” Le Corre said.