In June last year, Beijing also earmarked Qianhai, in western Shenzhen, as a testing ground for freer transfer of the yuan. It is offering tax and other incentives to attract Hong Kong and international firms and talent.

Hong Kong Institute of Directors chairman Kelvin Wong said Hong Kong would face pressure from both Qianhai and Shanghai. "If Beijing grants a lot of special incentives for international firms to go and set up in Qianhai or Shanghai, some companies may consider they would be better off to invest in the two cities to enjoy the incentives," he said.

Wong said that when international investors had more choice of cities in which to invest, they would inevitably reduce their investment in Hong Kong.

"It is not just the international investors but Hong Kong businessmen may also go north to invest in these special economic zones to capture the growing opportunities," he said. "This will be a double blow if Hong Kong receives less international investment inflow while more local entrepreneurs leave the city to invest in Qianhai or Shanghai."

Hong Kong has enjoyed a competitive advantage thus far due to the mainland's restrictions on the flow of yuan in and out of the country, with many international firms choosing to base themselves in Hong Kong, where such restrictions do not exist, and international investors opting to invest in mainland companies through the Hong Kong market's H shares.

But Wong said the new challenges meant Hong Kong needed to come up with a survival strategy, or it would lose out.

"The rules of the game have changed and Hong Kong cannot maintain the status quo," he said. "The government should think of ways to make sure Hong Kong has a good connection with Shanghai and Qianhai in their reforms, such as allowing mainland companies to invest more easily in Hong Kong and making it easier for talent from the two cities to work in Hong Kong. This would provide a good linkage between the three markets."

One Hong Kong-based fund manager, who did not want to be named, also warned of competition from Qianhai.

"For example, if fund companies that set up in Qianhai are allowed to sell products to all investors in the country, companies that set up there would look more attractive than those set up in Hong Kong," he said. "China relies a lot on the Hong Kong market as a capital fund-raising centre via stock listings or arranging bank loans. If the Qianhai project succeeds, it may well be as a Plan B for Hong Kong or as a replacement for Hong Kong."

He said Qianhai was the bigger threat to Hong Kong.

"Shanghai is several hours by plane from Hong Kong while Qianhai is only one hour away by car," he said. "Foreign firms may set up offices in both Shanghai and Hong Kong as they are quite far apart and have different client bases. But companies setting up office in Qianhai may not consider setting up office in Hong Kong because they are so close."

Gregg Li Ka-lok, vice-chairman of the Business and Professionals Federation, said Hong Kong had to prepare itself for competition from special economic zones on the mainland.

"It is true that there will be competitive pressures from special economic zones such as Qianhai," he said. "However, Hong Kong will still have a role to play and will not be replaced by Qianhai any time soon."

Li said that even if Beijing allowed companies based in Qianhai to sell their financial products across the country, the firms involved would still worry about whether they could take the money out of the market easily. Even though freer capital transfer was being promised, there might still be some controls, in marked contrast to Hong Kong, where fund houses, insurers and brokers could transfer money in and out whenever they wanted.

In addition, Li said, the mainland had many restrictions on access to internet information, meaning that analysts and brokers based in Qianhai might not be able to get the latest international news quickly. If they were based in Hong Kong, they could get such information readily and use it in their research, which was important for many international investment firms, he said.

"Hong Kong has had a good track record and system in banking, insurance, funds and the broking industry for decades," he said. "Big international players have confidence that their money invested in Hong Kong can be freely taken out of the city at any time. Hong Kong has a good track record in terms of the free flow of capital and information, which is something not easily replaced by Qianhai."

Another advantage for Hong Kong in competing with Qianhai or Shanghai, he said, was the city's rule of law. In the case of any financial disputes between overseas firms and their clients, Hong Kong's rule of law allowed foreign investors to feel comfortable they would have a fair trial in court. While Qianhai had said it would follow Hong Kong's financial regulations, it had yet to prove that foreign investors' interests would be well protected, Li said.

Other analysts warn Hong Kong against complacency, especially as Shanghai focuses on financial services in its free-trade zone.

"Although Hong Kong is still a world-class financial centre, it must not put all its eggs in one basket and focus merely on the renminbi business," said Peter Lee, Greater China divisional president for CPA Australia.

"For Hong Kong to maintain its world financial hub status, it must be able to sustain its ability to attract foreign capital. This can be achieved by further development in the asset-management industry and wealth management industry."