Diffusion Effects of Hong Kong Situation in Ownership Networks

Abstract

Corporates may be under the control of foreign governments or shareholders through global ownership chains. For instance, the government of China arguably exerts indirect influence over foreign power companies and port authorities via Chinese state-owned companies. In the previous conference, we presented the concept and algorithm of the Network power index (NPI) to quantify the indirect influence. In this presentation, we focus on how the change in ownership structure affects NPIs. In particular, we investigate hypothetical scenarios in which China has full control over companies in Hong Kong and Hong Kong completely blocks China's direct control. Because NPI is derived from the distribution of vote shares, political disputes between China and Hong Kong might diffuse impacts among third-party countries. From our simulations, we find which countries gain and lose their influence for each scenario. Interestingly, Japan loses its NPI, whether Hong Kong becomes independent or under the control of China.