Hong Kong CNN Business  — 

A Chinese beverage giant just went public in Hong Kong with a bang, another sign of the shifting financial fortunes of the city as Beijing tightens its grip.

Nongfu Spring — which means “farmers’ spring water” in Pinyin, a romanized Chinese system — soared as much as 85% on its first day of trading. Shares ended up 54%. The company raised $1.1 billion in its initial public offering, after hot demand allowed it to price its shares at the upper end of expectations.

Tuesday’s share surge has made the company’s founder one of China’s richest people.

Zhong Shanshan, who established the company in 1996, owns Nongfu Spring shares worth $40 billion. Adding in his shareholdings in a Beijing pharmacy firm, Zhong is worth about $50 billion, making him China’s third richest man after Alibaba (BABA) founder Jack Ma and Tencent (TCEHY)founder Pony Ma, according to Bloomberg Billionaires Index.

Nongfu’s blockbuster IPO provides further evidence of how Hong Kong is evolving rapidly as a business hub.

Its role as a global financial center has been shaken in recent months by tensions between the United States and China, which have intensified as Beijing moves to assert its authority in the city.

The souring relations between Beijing and Washington have prompted many Chinese firms to return from overseas exchanges, wanting to protect themselves from the geopolitical tensions. This has helped trigger a boom in activity on the Hong Kong Stock Exchange.

Hong Kong is the world’s second most popular venue for stock market listings so far this year, behind only the tech-heavy Nasdaq. By Monday, Hong Kong IPOs and secondary listings had raised a combined $22.5 billion, up 109% from a year ago, according to data provider Refinitiv.

“The declining US-Sino relationship seems to be driving the evolution of Hong Kong’s business model,” said Brock Silvers, a veteran investor focused on China and former chief investment officer for Adamas Asset Management.

“Hong Kong’s modern prosperity has significantly resulted from its role as the West’s window into China, but Hong Kong is now operating more as China’s window to the West.”

Hong Kong itself is also trying to shore up its role as a gateway for China’s tech industry to the world.

The city added more tech stocks to its benchmark Hang Seng (HSI) Index earlier this week, including Alibaba and Xiaomi. In July, the city’s index compiler launched a new Nasdaq-like technology index, which tracks the 30 largest tech firms that trade in Hong Kong, citing “overwhelming” market support for the move.

Financial hub’s status shaken

The Asian financial hub’s future has been cast into doubt in recent months after China’s imposition of a sweeping national security law, which critics say stripped the city of the autonomy that Beijing promised when Britain handed the territory back in 1997.

A man wearing a Voting Is A Right costome stand off with riot police during an anti-government protest on September 6, 2020 in Hong Kong, China.

The law has stoked fears of Beijing’s tighter grip on the city and a clampdown on its political freedoms and civil liberties, which are considered crucial to Hong Kong’s success as a global business hub. The imposition of the law even triggered the Trump administration’s decision to revoke Hong Kong’s special trade status.

Fears are growing among foreign business executives about the city’s future.

In a July survey by the American Chamber of Commerce in Hong Kong, 68% of respondents said they were “more concerned” about the national security law than a month earlier, when China had just announced the law.

Nearly 46% were worried it could be a “game-changer” for Hong Kong as a financial center. Some said the potential for arbitrary application of the law is “frightening” and the uncertainty could hinder business investments and talent flows to the city.

The other side of the coin

But Hong Kong has also become increasingly attractive to Chinese companies that fear their business prospects in the United States may be in jeopardy.

Alibaba, NetEase (NTES) and JD.com (JD)— all of which trade in New York — have held secondary listings in recent months.

Yum! China (YUMC) — which operates the KFC, Taco Bell and Pizza Hut fast food chains in China — is also set to start trading in Hong Kong on Thursday. The company, which already trades in New York, is seeking to raise $2.2 billion from its secondary listing.

And Ant Group, the company behind the Chinese mobile payments business Alipay, is gearing up for an IPO that could reportedly raise $30 billion — an amount that would make it the largest in history.

Thanks to the IPO surge, Hong Kong has seen massive capital inflows.

A key barometer of banking liquidity soared to a three-year high of more than $26 billion Monday, figures from Hong Kong Monetary Authority showed. That was almost four times the level in April.

HKMA’s chief executive Eddie Yue said in July that the Hong Kong dollar had remained strong as net inflows since April had reached close to $14 billion.

Fund flows from mainland China were particularly strong. For the first eight months, net flows from China to Hong Kong stocks via the Hong Kong Stock Exchange surged to more than $55 billion, up nearly 190% from a year ago, according to estimates by China Galaxy Securities.

“The capital inflows are genuinely due to the vibrancy of Hong Kong’s stock market,” Raymond Yeung, chief economist for Greater China at ANZ Research, said in a research report last month.

“Ultimately, the desire to hold Hong Kong dollars is underpinned by investment demand for Chinese assets” listed in the city, he said.