• Thu
  • Dec 25, 2014
  • Updated: 6:24pm
Mr. Shangkong
PUBLISHED : Monday, 08 July, 2013, 2:02am
UPDATED : Friday, 06 September, 2013, 8:06am

Shanghai's free-trade zone puts Hong Kong's future in the spotlight

Hong Kong needs to assess what strengths can help maintain its financial hub status, as the rival mainland city bids to usurp it with its latest deal

BIO

George Chen is the Financial Editor and Mr. Shangkong Columnist at the South China Morning Post. George has covered China's political and economic changes since 2002. George is the author of two books -- This is Hong Kong I Know (2014) and Foreign Banks in China (2011). George has been named a 2014 Yale World Fellow. More about George: www.mrshangkong.com
 

Will the new Shanghai free-trade zone be a game changer?

This question popped up in my mind when I read the breaking news on Wednesday evening about Beijing’s landmark approval to set up a free-trade zone in Shanghai.

To my surprise, when I looked for related reports the following day, the news about Shanghai’s latest victory in winning policy support from the central government had not made it to the front pages of any major Chinese-language newspapers in Hong Kong.

“Is Hong Kong too self-confident or too self-centred?” I asked my colleagues.

For Shanghai, things moved quickly after Premier Li Keqiang visited the Pudong New Area and trade and port facilities in the city in late March. By the end of June, Li had made his decision, and on July 3, state broadcaster CCTV said the State Council had issued an announcement after a meeting chaired by Li that the free-trade zone in Shanghai would be a snapshot of an “upgraded Chinese economy”.

Shanghai’s ambitions to become the nation’s economic engine, leapfrogging Hong Kong as the dominant financial hub in the region, are already an open secret. Shanghai mayor Yang Xiong said after the announcement that the city’s future hinged on the free-trade zone, which could give it a leg up over rivals.

Rivals? Who? Yang did not name any.

To be more realistic, the new free-trade deal for Shanghai, which the cabinet wants to be run on a trial basis in the first phase and then see if such a special zone model can be expanded or copied to other mainland cities, would not immediately threaten Hong Kong’s leading position as one of the world’s most important financial centre cities and also one of the busiest ports.

But in the long run, the Hong Kong government must ask itself what competitive strengths and advantages are unique to the city; and whether these can be kept for the next decade or two. If not, then how can Hong Kong stay competitive, rather than becoming just another mainland city, lagging behind top-tier cities like Shanghai.

The central government is keen to use the free-trade zone in Shanghai as a testing ground for more financial liberalisation, as it supports the city’s ambition to grow into one of the world’s three most important financial centres – on a par with New York and London – by 2020.

Qianhai, just an hour’s drive from Hong Kong, has already been picked by Beijing to explore the possibilities of full convertibility of the yuan, which the government wants to turn into a global currency. Purely from an economic perspective, the time left for Hong Kong to rethink its future is obviously quite limited.

On Wednesday evening, before the news about Shanghai came out, I was watching television at home. I saw Chief Secretary Carrie Lam Cheng Yuet-ngor talking again about budget issues for the West Kowloon arts project.

Time is money, and we spend way too much time just talking about things like West Kowloon when other cities are already taking action and know with crystal clarity what they want to achieve.

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This article is now closed to comments

kittychan1978
I don't understand all these comparisons between hk v shanghai after 97 or hk v Singapore before 97. each city has its own uniqueness and strengths. look at the states do people compare about nyc v philly? or boston v nyc? geez George, if you think shanghai is so great then why don't you go back and earn your big buck there? this sort of discussion annoys hell out of me as if there ain't already ill feelings on all sorts of levels between hk and china.
blue
"Your support citing Hong Kong being chosen as a place for business disputes (adjucating) can’t convince me that rule of law is not partial and equitable to all who live under the ‘rule of law’. You must think and look beyond trade disputes. I wish someone can come up a better concept to replace such unreliable piece of rock to rely on. Incidentally, by profession I am an architect."

The rule of law anywhere isn't perfect. But the common law system as it is practiced in HK is at least consistent since courts can refer to past case law, even case law from British and other common law courts. Sure the rich can exploit the laws in their favor, but they can't literally get away with neither murder nor negligence.

That is a major improvement on how the legal system is practiced parts of the world where legal rulings do not look into past case law and are in fact totally arbitrary and subject to political manipulation. This makes outside investors nervous since they want to deal with a politically neutral judiciary. Hence that is why HK is used often to settle commercial legal disputes, even between mainland companies.

It is irrelevant that you are an architect. You clearly do not understand the HK legal system and why it is superior to other types of legal systems. It is not without its faults, but if you want to talk about how unfair the HK legal system is, then you should probably investigate how much worse it is in other jurisdictions.
blue
You didn't present anything of substance that convinces me that the rule of law is an outdated concept. You are just criticizing it without proposing a better alternative, and you accuse me of not thinking outside the box? In fact you are simply repeating yourself. You might think citing a case number is not thinking outside the box, but how else am I supposed to determine whether that court case you cited really had the ruling you claimed it did? I am hearing third hand information from you, and that is not reliable.

China doesn't have the rule of law yet, and its legal system is even more susceptible to hijacking by the rich and privileged than HK's system. China's system does not provide for judicial independence, and there have been many cases of judicial officials being bribed. Hong Kong does not have these problems.

Do I think there's room for improvement with HK's legal system? Absolutely. No legal system should stay in stasis. To the contrary, HK's legal system is always evolving and improving itself.

"I hope is still satisfactory in ruling never tried cases"

Doesn't the recent ruling on transsexual rights essentially prove your entire argument wrong with regards to HK's legal system? The courts protected a vulnerable minority and not the establishment. It proves that HK courts can and do uphold human rights. HK's track record on untested cases has been quite good actually. Do you think the mainland legal system has a better track record? Why?
pangkf
Actually, Shanghai is going to exceed New York and London, but not Hong Kong because most of the Shanghaiese think that they already exceeded Hong Kong. I don't think that Hong Kong people are too self-confident and self-centred after you know more about Shanghaiese. Anyway, I agree that our HK people need to be more ambitious and progressive.
johnyuan
I agree that rule of law is an outdated concept – people are ever more educated to discern. Hong Kong makes law to protect the powerful and privileged since its colonial days. So ask whose rule of law and who should obey them? For the law society, it is not their business to make law, it was the governor and now the legislators. So having judges, barristers or even solicitors do not equate rule of law is useful to all or even beneficial if you are poor, powerless and unprivileged – that is the majority in Hong Kong. If a bus jumps a curb and crashes you while you are happened in the store, you or your family won’t get any compensation. The judge will proclaim it is an accident. It happened a decade ago in Hong Kong. Please forgive me to pour cold water on the precious few merits Hong Kong love to sing.
blue
"It happened a decade ago in Hong Kong. Please forgive me to pour cold water on the precious few merits Hong Kong love to sing."

Could you kindly cite the case number so that we can look this court case up? Otherwise all you are telling us is hearsay. Companies can be liable for accidents too.
johnyuan
What case number? I am not a police or a lawyer. The incident was reported in one or all newspapers which I read (SCMP, Standard and imail). It should be in a year since 1997. I hope you find a copy and may be justice can be had.
blue
"What case number? I am not a police or a lawyer."

Clearly you have no idea what you're blabbing about. Case numbers are a matter of public record, and you don't need to be a lawyer to read a court case. If you're going to talk about a case, then please cite the court case. Otherwise you're just talking nonsense since we can't look into the source of your claims.

You did clearly demonstrate your ability of having a zero understanding of the rule of law though.
johnyuan
In order to satisfy you, any news reported of an outcome of a court ruling, case number should be cited. Furthermore, law discussion should be restricted to legal sector only. I am afraid you have an air of arrogance that pretty shutting seemingly your mind up to protect your territory? For my argument, I don’t even care what you do for a living. I will pour some cold water on my head to cool off a bit if I were you?
blue
What is your technical background? What did you study in university? I thought you also said you were an accountant.

Also sorry but I agree with brahardja; the rule of law is going to trump any free trade zone. Even when the business is done on the mainland, can you guess what Chinese Special Administrative Region is set as the venue for legal disputes?

Calling the rule of law an "outdated concept" pretty much proves to everyone how ignorant you really are.

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