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Despite significant growth over the past 15 years, Hong Kong faces the challenge of redefining itself in the context of a more integrated Asia and an evolving Chinese mainland. “The whole region (grew) in the past 15 years at a reasonably high spee
Author: Alfred Romann

Despite significant growth over the past 15 years, Hong Kong faces the challenge of redefining itself in the context of a more integrated Asia and an evolving Chinese mainland.

“The whole region (grew) in the past 15 years at a reasonably high speed,” said Prof Edward K.Y. Chen, distinguished fellow at the Centre of Asian Studies, University of Hong Kong.

While gross domestic product growth in most Asian countries averaged 5 to 6 percent, the Chinese mainland had been growing at close to 10 percent. Hong Kong averaged 3.6 percent growth.

“But accompanying economic growth in the region we also observe instability and growing inequality, with maybe two exceptions,” Chen added. “China is always stable and also growing very fast. The other exception is Japan, very stable but growing very slowly.”

Instability is hard to avoid. The Asian financial crisis in 1997 created much of it. When the IT bubble burst in 2000, it led to more instability. The global financial crisis in 2008 was also a reason of instability.

“Instability cannot be avoided,” Chen continued. “Of greater concern is increasing inequality… Hong Kong is not the only case.”

Across Asia, the Gini Coefficient, that measures inequality, increased from about .4 to nearly .46 in the past 15 years. On the Chinese mainland, the measure rose from about .32 to almost .46. In Hong Kong, the coefficient has risen from an already high .48 to .533.

“Asian governments are not only concerned with removing absolute poverty, they (also) want to narrow the gap between rich and poor,” said Chen.

Chen was speaking at the Asian Leadership Roundtable held as part of a series of events to mark the 15th anniversary of China Daily’s Hong Kong edition on Oct 8. He was one of nine top executives and intellectuals who gathered at the Hong Kong Convention and Exhibition Centre to discuss the path the city has taken since 1997 and the road ahead.

“Hong Kong, The Road Ahead” was the latest in a series of roundtables launched two years ago to “discuss topics and issues of importance to regional development in Hong Kong, the mainland and the whole region”, said Zhou Li, publisher and editor-in-chief, China Daily’s Hong Kong edition.

One area in which lack of government intervention has cost Hong Kong dearly is the development of science and technology. The city’s economy is not very diversified outside of finance, trading and service industries, said Prof Wong Yuk-Shan, vice-president, Hong Kong University of Science and Technology.

“The element of science and technology in the Hong Kong economy is very minimal when compared with (other) economies in Southeast Asia, like South Korea, Taiwan and Singapore,” said Wong. “We need to have new economic driving engines to provide enough jobs to our young generation and maintain economic sustainability.”

Although Hong Kong has good universities, with four ranked in the top 200 in the world, most of them are involved in basic research that does not translate into actual economic growth.

“I believe there is a second chance for the development of science and technology,” said Wong.

He suggested this can be done through the six local universities and thousands of qualified professors and researchers, the links with the Pearl River Delta and its visibly larger resources for research and development, and the growing number of research institutes that Hong Kong universities have set up in the southern part of the Chinese mainland.

“We should pick up this second chance and aim at developing (science and technology) as another economic driver for Hong Kong,” said Wong.

The contrast between the development of Hong Kong in science and technology and in other areas, such as finance and even luxury consumer retail, is remarkable.

The Hong Kong luxury retail space has grown from a market that held two or three standalone luxury brand boutiques to a city that can sustain almost 10 luxury brands, said Dinesh Tandon, CEO for Asia Pacific North at Bally GC Retail.

“This is much more than cities like London or Milan.”

Though rents have gone through the roof, making Hong Kong one of the most expensive real estate markets in the world, on the other hand, sales per square foot along Canton Road, where many luxury brands are located, are among the highest in the world.

“Some brands have a waiting list of almost a year for certain luxury products,” said Tandon. “At the core of this development (is) the (Chinese) mainland customer... At least 60 percent of the business for luxury brands comes from mainland Chinese customers.”

For the luxury shopper, Hong Kong is visibly cheaper. Its status as a free port means similar products are 15 to 20 percent cheaper in Hong Kong than on the mainland or other countries in the region, like Indonesia, Malaysia or Thailand, that have much higher duties.

Another challenging area for Hong Kong is the environment. Air quality, in particular, has grown worse. The most visible case is roadside pollution, said Simon K. W. Ng, head of transport and sustainability research at Civic Exchange, a Hong Kong think tank.

“We should be able to do better. We should be able to adopt a tighter standard in order to protect public health,” said Ng.

The Hong Kong air pollution index is published daily but is often misunderstood. Better indexes, possibly linked directly to health, would help.

“We need everyone to care about air quality before the government can put in place effective measures to control the air quality in Hong Kong,” said Ng.

As the city changed and evolved considerably over the last 15 years, three events had a significant impact on the development, said Dr Eddy C. Fong, chairman, Securities and Futures Commission.

The first was the 1997 Asian financial crisis, the second the outbreak of Severe Acute Respiratory Syndrome in 2003, and the most recent the global financial crisis in 2008.

All three triggered significant changes, including the creation of a Closer Economic Partnership Agreement between Hong Kong, Macao and a dozen southern provinces on the mainland.

Now the numbers speak for themselves. The Hang Seng Index has grown from about 10700 in 1997 to 21000 today, even after the impact of the global financial crisis.

The number of companies listed on the Hong Kong Stock Exchange has risen from 658 to 1,533 with a market capitalization of HK$19.6 trillion ($2.5 trillion) this year, up more than 514 percent on HK$3.2 trillion in 1997.

Daily turnover on the stock exchange has also risen more than 240 percent from about HK$15 billion in 1997 to nearly HK$53 billion this year.

Hong Kong’s media industry has also evolved considerably. Newspapers, radio and television stations and websites all have had to adapt to a rapidly changing environment. Publishers face higher requirements for more sophisticated content, which is also socially responsible.

“The biggest challenge over the next decade or so, in such a customer-liberated environment, is how to find an equilibrium,” said Dr William Wing-Yan Lo, vice-chairman of the South China Media Group.

The film industry is also facing change and could benefit from the evolution of Hong Kong and the growing integration with the much larger market in the southern part of the Chinese mainland, said Ko Chi Sum, CEO and producer at Spring-Time Stage. The similarity of tastes between Hong Kong movie-goers and their peers in Guangdong, for example, opens up opportunities for local filmmakers, said Ko, a well-known director and industry executive.

One of the great things about Hong Kong, said Dr Raymond K.F. Ch’ien, chairman of the MTR Corporation that operates the city’s mass transit system, is the opportunities it provides for expansion.

Before 2007, the year MTR merged with the Kowloon-Canton Railway Corporation, it managed a network of less than 95 kilometers and moved less than 3 million passengers every day. Today, the company manages a network of almost 1,000 km and moves some 9 million passengers in operations in Hong Kong, Beijing, Shenzhen, London and Stockholm, and will soon open a service in Hangzhou.

Ch’ien believes Hong Kong should be a leader for the country, not only in areas like infrastructure but also in education, healthcare delivery.

Greater integration with the Chinese mainland and increased participation in the global economy are the hallmarks of Hong Kong’s development not only over the last decade and a half but going forward. The challenge over the next decades, said Joe Ngai, managing partner at McKinsey & Company in Hong Kong, will revolve around Hong Kong’s role as a hub and its ability to continue leveraging this strength while addressing challenges such as education, the environment and inequality.

“We have to be very proud of our ability as a hub,” said Ngai. “At the end of the day, we should be proud of having a much bigger impact than what we are ourselves.”

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