Betting Hong Kong can go 'extra mile'

Hong Kong can no longer afford the luxury of ignoring other markets and relying on China's 1.3 billion people

PUBLISHED : Thursday, 16 January, 2014, 2:36am
UPDATED : Thursday, 16 January, 2014, 2:36am

Understanding Hong Kong's competitive strengths and weaknesses deserves dedicated study.

The city has repeatedly topped the Heritage Foundation's rankings of the world's most competitive economies for the last 20 years - exactly the length of time I have been buried in the policy research to figure out what makes it so.

But as so much has changed in the last two decades in this city - much of it not for the better - the obvious question is whether Hong Kong still deserves the accolade?

Do economies like Shenzhen, Shanghai or Singapore, that have always been biting at Hong Kong's heels, today constitute a bigger or more serious threat?

In the coming months, this is likely to be a theme I will return to.

As I spend an increasing amount of time taking Hong Kong's business community concerns into the Asia-Pacific Economic Co-operation (Apec) group, which is made up of 21 economies that circle the Pacific Ocean, it becomes easy to see why Hong Kong is so much more flexible and dynamic than so many other regional economies.

But it is also easy to see the scleroses that has put in jeopardy a leadership position that we in Hong Kong have come to take for granted.

The first big change is of course China.

While the mainland remained closed, and even through the first couple of decades of opening up, Hong Kong sat cozily on an unassailable location monopoly of access to and from China.

The creation of the colossal export processing economy - much of it driven by Hong Kong entrepreneurs who formed the first generation of export processers based in the Pearl River Delta - only amplified this geographical monopoly. It made the city rich and indispensable on a scale that even early colonial opium traders would surely have envied.

That geographical advantage is now in the process of being unravelled.

As China relies increasingly on the growth of domestic spending by millions of emerging middle class consumers, other centres across China can become drivers of this growth.

As more mainland enterprises develop the scale and experience to engage global markets directly, they are no longer locked into dependency on Hong Kong as a conduit to world markets.

Hong Kong may succeed in retaining its competitive advantages in linking China's markets with those of the rest of the world, but if it succeeds this success will need to be fiercely fought for. This competitive advantage no longer sits unassailably in our lap.

As China's markets become more massive, and hundreds of millions move into new cities to create China's future urban middle class, the centripetal pull of China will get stronger. This is already putting in jeopardy Hong Kong's international, outward-looking focus.

In the past, Hong Kong had no choice but to look outward. Today, the tantalising opportunities of a 1.3 billion consumer market have the power of a Pied Piper to draw us away from the rest of the world.

China may be awesomely big, but Asean, with 630 million people, is no minnow and we ignore opportunities there at our peril.

The benign autocracy of British colonial government up to 1997 has been replaced by a dysfunctional political hybrid that starves our leaders of any mandate or decision-making power. As a result, the admired efficiencies of Hong Kong have been brought into doubt.

As Chief Executive C.Y. Leung said in his policy address yesterday: "Our attitude determines our future. If the people of Hong Kong adopt a positive attitude and strive to achieve more, and if everyone is willing to walk an extra mile and do more, we will have the economic strength to support the needy and let the youth flourish.

"We will be able to unleash Hong Kong's potential and enable our seven million people to live a better life," Leung said.

I could not have put it better myself. The crux, of course, is in the "if". Scan Hong Kong's current political horizon, and those positive attitudes, or the willingness to "walk the extra mile", are strikingly absent.

I and other fans of the Hong Kong economy have often reminded naysayers that anyone who has ever bet against Hong Kong has lost.

For the past 35 years, we have been right.

But the naysayers are still around, and are still willing to bet against Hong Kong.

Last night I went to my first Happy Valley race night of the new year. I was still betting on Hong Kong. And I won.

I am not taking it for granted that I will always win, and our government would be well advised to do the same.

David Dodwell is executive director of the Hong Kong Apec Trade Policy Group