Every few generations, Hong Kong transforms itself, evolving from a swampy fishing village to a colonial port in the 19th century, to a capitalist outpost and factory following the Chinese Revolution in 1949, to a financial center of the 21st century.
As the former British colony celebrates the 25th anniversary of its return to China, Hong Kong leaders say it is time for another transformation. They say the city should become a leader in technology, relying more on connections to nearby Chinese factory cities than on global trade.
The government of Chief Executive-designate John Lee is under pressure to create new sources of economic growth, in addition to the Covid-19 outbreak and anti-virus controls that have disrupted tourism and commerce, as well as cracked down on the city’s pro-democracy movement Uncertainty in the post-legal environment.
During his campaign in April, Lee pledged to “open a new chapter” for the city known for being Asia’s busiest port and one of the largest stock markets, and to “strengthen its competition in technology and innovation, as well as trade and finance. force”.
Li gave no details but mentioned the Guangdong-Hong Kong-Macao Greater Bay Area, the Chinese government’s move to link Hong Kong with neighboring mainland cities, including Shenzhen’s tech and financial hubs and manufacturing powerhouses of Dongguan and Foshan.
“There are many great opportunities in the Greater Bay Area that have yet to materialize,” said David Graham, executive director of the British Chamber of Commerce in Hong Kong. “It’s a huge opportunity for Hong Kong and it’s hard to replicate in other cities like Singapore or Dubai.”
Business groups say executives disappointed by Hong Kong’s travel controls are leaving the city amid increased urgency over Lee Kuan Yew’s long-term strategy. Some companies are moving to Singapore, Bangkok, Dubai or other business centers.
“Hong Kong’s strength as a global connector has been greatly diminished,” said Joseph Armas, chairman of the American Chamber of Commerce in Hong Kong. Executives have traveled to cities “where they can travel.”
Armas called on Lee to develop a “concrete roadmap” to reinvigorate Hong Kong, which, like mainland China and Taiwan, remains one of the few places that still requires mandatory quarantine for incoming travelers.
For Michael Chen, who manages his fashion-goods manufacturing business, the restrictions have extended travel to factories in Bangladesh or China over the past week to a month or two, because weeks of quarantine for short-term work are pointless travel.
Chen had considered temporarily moving to Singapore, where regulations are far more relaxed.
“When I meet government officials, I often have to meet them face-to-face and talk about things,” said Chen, who has been quarantined several times. “It’s not like in the US, I can only use Zoom for video calls.”
Hong Kong will lose nearly 90,000 people out of a population of 7.5 million by 2021, government figures show. More than 100,000 people left during the city’s worst COVID waves in February and March.
Sally Wong, chief executive of the Hong Kong Investment Funds Association, said concerns over travel restrictions in Hong Kong “provide others with access to our talent pool”.
Activists and foreign governments have complained that the ruling Communist Party is undermining the 50 years of autonomy that Beijing promised after 1997. The freedom and autonomy that Hong Kong gives to Hong Kong has helped it maintain its status as the hub of the global headquarters in Asia. Even as rent and other costs soar to record levels, inequality is growing.
Hong Kong still has a skilled workforce, an efficient port and a Western-style legal system that is considered fair and reliable.
But its status as a global center for trade and commerce is waning.
The chamber reported in January that 1 out of 20 companies surveyed by the American Chamber of Commerce in Hong Kong planned to move its global or regional headquarters out of Hong Kong. It said half unsure whether to go or not.
Some businesses are watching how law enforcement and the free flow of information and people, vital to business and finance, may change. Two-fifths of companies surveyed said they were concerned they would lose free internet access, which is critical for trading hubs that rely on the flow of information.
“Foreign businesses are perceived to be less popular,” the report said. “More than half of respondents felt the government was ‘indifferent’ or ‘dismissive’ to business issues.”
Hong Kong has so far been largely free of mainland censorship, with the ruling party using an internet barrier known as the “Great Firewall” to prevent the Chinese public from seeing foreign websites run by news organisations, the government and human rights activists. But Hong Kong’s leading pro-democracy newspaper Apple Daily was shut down during the crackdown, and its publisher, Jimmy Lai, was jailed.
Kurt Tong, a former U.S. consul general in Hong Kong and managing partner of the consulting firm Asia Group, said that so far, Hong Kong’s national security law, while used to stifle dissent, has had little impact on business and finance.
But he said the effect of the law and Beijing’s reforms to Hong Kong’s political system deserve attention.
“People who care about Hong Kong’s financial system need to consider this,” Tang said.
For decades, Hong Kong flourished as a trade gateway to China, but in 2000 it was overtaken by mainland Chinese facilities as the world’s busiest container port. Twenty years later, the Hong Kong port’s cargo volume is only 10% higher than its 2000 level, ranking 8th in the world. Shanghai, Shenzhen and three other Chinese ports are larger.
The Hong Kong stock market, once the largest in Asia outside Japan, has also grown steadily but has lagged regional rivals.
The total market capitalization of Hong Kong-listed companies is US$5.4 trillion, compared with US$8.2 trillion on the Shanghai Stock Exchange. Companies on China’s second Shenzhen exchange are worth $6.2 trillion, according to the World Federation of Exchanges.
Tang is one of those who think Hong Kong’s recent setbacks are only temporary.
“The current situation is that Hong Kong is a very important global center, one of the most important in the world, and plays a unique and critical role in connecting the Chinese economy with the rest of the world and guiding finance in both directions,” Tong said. .
At the same time, the city is nurturing its role as an innovation hub, building research centers that help incubate dozens of startups.
Rocky S. Tuan, vice president of the Chinese University of Hong Kong, noted that medical and biotechnology research is one of the city’s lesser-known strengths. “Hong Kong can provide capital, expertise, global regulatory recognition of its clinical trial data, and a network of world-class universities,” he wrote in the South China Morning Post.
This could give the city an edge over regional rivals.
“Other cities in the region, especially Singapore, may be more of an Asian hub or a Southeast Asian hub,” said Tommy Wu of Oxford Economics. “Hong Kong’s business will be mainly concentrated in Greater China.”