Sunday, 7 March 2010
Dual personality
Some commentators like to say that Hong Kong is suffering from an identity crisis. They ask: Is Hong Kong international or Chinese? The thought that Hong Kong is becoming “just another Chinese city” is a worrying proposition. We have always been both international and Chinese, and we will continue to prosper only if we remain so.
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Dual personality
Should Hong Kong regard itself as an international city or Chinese? It is both and must remain so
Alex Fong
06 March 2010
Some commentators like to say that Hong Kong is suffering from an identity crisis. They ask: Is Hong Kong international or Chinese? The thought that Hong Kong is becoming “just another Chinese city” is a worrying proposition. We have always been both international and Chinese, and we will continue to prosper only if we remain so.
The mainland’s decision makers are finalising the 12th five-year plan, covering the country’s development in 2011-2015. In 2006, under the 11th plan, Hong Kong was included for the first time in this economic exercise. It emphasised the importance of maintaining Hong Kong’s position as an international centre for finance, trade and logistics, and the need for closer co-operation between Hong Kong and the mainland. This plan is of great significance, as it reflected the city’s crucial role in the national strategy and the importance Beijing attaches to Hong Kong.
In view of the rapidly changing external economic environment and the quick recovery of China’s economy, Hong Kong needs to seize the opportunity to carve out a new role in the nation’s strategic development under the 12th five-year plan.
Over the past 30 years, we have deepened our integration with the mainland, in a largely market-driven process. Hong Kong businesses have moved practically their entire manufacturing base to the mainland, mainly to the Pearl River Delta, which has established itself as a major economic driver in the mainland’s economy. This migration was motivated by commercial reasons, but it did make a significant contribution to the writing of China’s amazing story of becoming “the world’s factory”. Hong Kong also benefited through growth in our trade-related services, which allowed us to prosper together with the delta and indeed the whole country.
This model has served us well, but as the launch of the new five-year plan nears, we need to be prepared to take on our new role. As the mainland’s export-led economy is transforming to one driven more by domestic demand and services, we will no longer be able to simply continue operating according to the long-standing, two-pronged approach of running our factories in the delta and servicing exports.
As China moves to develop its high-end service industries, we need to make the best use of our unique competitive advantage in the service industry. Our service sector, which generates more than 90 per cent of our gross domestic product, is highly developed and competitive. In comparison, services constitute only 42 per cent of the mainland economy. We therefore have much to offer in helping develop the mainland’s service sector.
By expanding the Hong Kong service industry’s presence in the mainland market under the Closer Economic Partnership Arrangement (Cepa), the city will be able to help propel the mainland’s service industry to higher levels through our international network, quality assurance and best practices.
Much has been said about the problems of implementing Cepa at local levels, a phenomenon sometimes described as “small doors remaining closed despite the opening of the big door”.
It is important to reap the full benefits from Cepa, which requires rigorous promotion and implementation at local levels. A joint national-level, mainland-Hong Kong administrative body could be formed specifically for the task.
It would be a big boost if Hong Kong were designated in the next five-year plan as a “service sector knowledge-transfer centre”.
Under the new economic plan, Hong Kong should strengthen its role as China’s most international financial centre - and we have to rise above the tired argument about whether Hong Kong will be overtaken by Shanghai and, if so, when. We need to note that this is not a zero-sum game. We should ask a different question: how can we co-operate with Shanghai, and also Shenzhen, to create a national competitive advantage?
International scholars have begun to recognise how competitive a unit the Hong Kong-Shanghai partnership could be, as the shift of financial gravity to the East unfolds in the wake of the Lehman-triggered global crisis. Professor Jeffrey Garten of the Yale School of Management coined the term “Shangkong” to describe the partnership.
Based on this partnership, Hong Kong is in a position to facilitate the yuan’s internationalisation by providing a testing ground for new measures and operating as a hub for offshore, yuan-related businesses.
Our ability to play a strategic role - and hopefully act as a first mover - in the internationalisation of what is expected to become one of the most important currencies in the world is a testimony to our strengths. It is yet another clear manifestation of Hong Kong’s dual Chinese and international characteristics, which enable us to play such a role.
The listing of a firm and the processes that follow the floating of its stock on the market in Hong Kong allow mainland companies to gear up to reach international standards in financial management and corporate governance. Hong Kong also provides a platform for mainland companies to improve their corporate branding and international recognition.
Overall, our professional services can help mainland companies based in Hong Kong to manage the risks entailed in going public. In short, mainland companies pursuing initial public offerings in Hong Kong are effectively paving the way to setting up their regional or global operations in an international business environment.
Hong Kong’s dual characteristics are part of its competitive edge. We must maintain our international environment and high standards while bolstering our mainland connectivity. There should be no confusion about Hong Kong being international or Chinese: We are both. We should celebrate, and derive maximum benefit from, that fact.
Alex Fong is chief executive of the Hong Kong General Chamber of Commerce
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