The challenge of thinking big

A common belief about Hong Kong is that people are only concerned about making money and spending it. It's a place for doers, not thinkers. It's the trader and tycoon who get respect, not the theorist. But Victor Fung Kwok-king and Andrew Sheng, powerhouse leaders as iconoclastic as they are successful, see Hong Kong as more than a centre for commerce. They believe it can be an important hub for ideas. And they hope to prove it with the think tank they have established. 'If you are interested in history, the great fear is that if the rest of the world moves away from globalisation towards an inward-looking face and protectionism arises, Hong Kong will be the first to be hurt,' said Sheng, president of the new Fung Global Institute. 'It is very important that Hong Kong espouses multilateralism, free trade and globalisation.' The non-profit institute, started in August at Cyberport in Pok Fu Lam, aims to produce new thinking and research on some of the biggest problems facing the world and the greatest trends shaping the global economy. Its founders see Hong Kong - with its telecommunications facilities, free flow of information and historic role as an international crossroads - as its natural home. 'Hong Kong has a lot to contribute to the world because there is a lot of talent here. Now we need to engage with the rest of the world,' Sheng said. Fung, chairman of the global-sourcing firm Li & Fung, first raised the idea of setting up a think tank with Sheng, former chairman of the Hong Kong Securities and Futures Commission, in late 2009. Sheng had already been thinking that Asia should have an independent think tank that reflected Asian views and was based in Hong Kong, selfdescribed as 'Asia's world city'. The institute was set up with a US$15 million endowment fund that will eventually increase to US$100 million. Its strategic partners include Harvard University Asia Centre, Swiss business school IMD and the University of Hong Kong's faculty of business and economics. Sheng noted that Asia already hosted several influential think tanks, such as the Lee Kuan Yew School of Public Policy in Singapore, but their focus was mainly on international relations and the role of their own countries. 'We are much more concerned with global issues other than foreign policy and national security that are not Hong Kong's purview,' he said. He expects continuing changes in global politics and economics in light of the dramatic emergence of Asian nations, led by China and India, as growth engines. The Asian Development Bank's Report on Asia 2050, released in May, estimates that the continent's economic output will account for more than half the world's total by 2050. By that year, seven Asian economies, including China, India, Japan and Korea, will account for 45 per cent of global gross domestic product. It means Asia will have a greater say in world affairs and will shoulder greater responsibilities. 'This is a true megatrend that, as we know now, Asia itself has not thought enough about,' Sheng said. 'And I don't think the West has fully digested what it means.' The institute has decided to focus on four broad research projects: the global supply chain, including international trade and jobs; global governance; new growth models of China and India; and global growth and sustainability. Regarding the global supply chain, Sheng said Japan started to build the Asian global supply chain in the late 1970s. It included the four Asian dragons (Hong Kong, Singapore, South Korea and Taiwan), Malaysia, Indonesia and China. 'The supply chain was built to provide manufactured goods to the West,' he said. 'Today there are increasing signs it will change because the West will now supply more to Asia as the continent of Asia is putting more focus on domestic consumption as an engine of growth.' Sheng, who is chief adviser to the China Banking Regulatory Commission, said research on the new growth models of China and India would explore how the two countries planned to move from export-led economies to internal growth in the next five years. 'Their new growth strategy seeks to deal with problems such as income and wealth disparity, and ecological sustainability,' he said. 'There is a lot of concern about the speed of urbanisation and the need to build the right infrastructure.' Noting that government intervention in the market is strong in China and India, Sheng said the institute planned to compare and contrast the two countries' new five-year plans. By doing that, 'we will be able to examine what is the right balance between state and the market, as well as which model is more successful'. Sheng considers the project on global growth and sustainability the most important study. 'When I was invited to give a lecture in India in 2008, fellow speaker Larry Summers, US Treasury secretary under Bill Clinton, talked about global warming,' he said. 'He said the West was responsible for most carbon emissions but the future growth would come from Asia, which would have to care about the issue. I think if every Indian, Chinese and people in emerging markets consumed like the average American and European do, there will be no natural resources left for mankind.' As deputy chief executive of the Hong Kong Monetary Authority from 1993 to 1998, Sheng was a first-hand witness to the Asian financial crisis. In 2009, he published From Asian to Global Financial Crisis, in which he analysed the 1997-98 Asian crisis and current global difficulties. Sheng sees two crises going on at the same time: the unfolding financial crisis and global warming. 'Asians will have to find their own model of growth, in which we discard GDP fever - the mad rush for fast growth - and look for a more sustainable pace of growth that provides employment without destroying our environment,' he said. Professor Michael Spence, the Nobel Prize economics laureate in 2001 and the institute's academic board chairman, will be responsible for this project. Spence, a world authority on growth in developing countries and the convergence of advanced and developing economies, is a professor of economics at the Stern School of Business at New York University. Spence has said that growth patterns and strategies in India and China - the trade-offs and choices they make regarding lifestyle, urbanisation, the environment and energy efficiency - will largely determine whether their economies can complete the long transition to advanced-income levels. Sheng, who was born in Shanghai, said the biggest challenge for social stability in the world was the challenge of jobs for Gen Y, or the 'millennium generation', people born around the turn of the century. 'In the next 15 years, more than 700 million young people will enter the labour force, of whom 300 million will come from Asia,' he said. 'The International Labour Organisation estimates that there are roughly 100 million unemployed people in Asia. If we cannot create enough jobs despite massive fiscal deficits and industrial restructuring, expect more social disruption from the new generation.' Sheng has set high goals for the institute. 'We are still a new baby in the world of think tanks but we benchmark ourselves with global think tanks worldwide,' he said. 'I will be disappointed if we fail to emerge as one of the top 10 global think tanks as soon as we can. We have to aim high to do better.'