So, there has been yet another twist in the saga over which city - Hong Kong or Shanghai - will be China's premier international financial and shipping centre. Last week, the central government announced that Shanghai would earn that title by 2020, but gave few details.
Hong Kong officials supplied the politically correct response: Shanghai can serve eastern China, while Hong Kong will continue to serve the south. This can certainly happen for port-related services, especially if we include Shenzhen, which in the longer term will become the dominant container port in the south. Even so, policymakers have as yet been unwilling to consider the benefits of allowing Hong Kong to handle the business side of international shipping, while letting Shenzhen take over the physical movement of goods.
However, the issue of international finance is different. Market size determines liquidity, and this is what draws people to a particular place. Hong Kong is undoubtedly China's international financial centre today. It can raise international capital, it has a range of professional support services, the regulatory foundations are in place, and there are plenty of people using the city as a service centre for non-Hong Kong or non-mainland financial transactions. But, there are different views as to whether Hong Kong can maintain this position beyond 2020.
Executive councillor and Chinese People's Political Consultative Conference member Leung Chun-ying believes Beijing is somehow uneasy with the dominance of overseas financial institutions in Hong Kong, where much local talent works for foreign firms. Shanghai's advantage is that Chinese financial firms would prefer to build their businesses there, not here.
National People's Congress Hong Kong deputy Lau Pui-king notes that, while Hong Kong's legal system still gives it an edge today, Shanghai will be the 'big brother in the long run as it will develop markets in bonds and derivatives, leaving Hong Kong [as] the younger brother'. Meanwhile, many of the international players believe Shanghai will come out on top because Beijing wants it to trump Hong Kong. In other words, it's all politics in the end.
There is some truth to each of those perspectives. Underlying them is whether Hong Kong can build up its financial business without political backing from Beijing. If mainlanders can invest here, and mainland financial service providers can operate from Hong Kong, then that will help expand Hong Kong's market size. That has started to happen in the past few years, but Beijing is cautious about liberalisation. The statement about Shanghai has rekindled Hong Kong's fears of being marginalised.