Mainland China’s ‘transformation’ nothing to shout about

Unlike across the border, Hong Kong has made a big change from a manufacturing to a services centre

PUBLISHED : Saturday, 07 October, 2017, 10:39pm
UPDATED : Sunday, 08 October, 2017, 2:03am

“In the past decade there was this huge surge in the Chinese economy, and the Hong Kong economy failed to benefit with the exception of the tourism sector. By missing this window, Hong Kong missed an opportunity for economic transformation ...”

Tao Dong, Credit Suisse

Business, October 5

I don’t normally bother much with this sort of China-good-Hong-Kong-bad talk, but its persistence does fool some people into thinking it might be true. Let’s set things straight.

As the chart shows, over the past 30 years Hong Kong has made a huge economic transformation from a manufacturing into a services centre.

For the avoidance of doubt, I have excluded tourism from these figures on net services trade. I have only included those sectors in which Mr Tao says we failed to benefit. Some failure.

The mainland never made such a transformation. The hi-tech successes of which you hear so many boast are mostly anomalies. The huge majority of mainland economic production always was, and continues to be, based on low-tech drudgery.

This includes most digital devices, by the way. They are hi-tech in design but low-tech in assembly, which is what the mainland mostly does and one reason it has to pay the rest of the world a fast-rising

US$27 billion a year in intellectual property royalties.

Beijing tries to win over entrepreneurs with praise and promises

Nor do we in Hong Kong exploit 150 million or so of our own people with trifling wages and wretched living conditions because they do not have official registrations for the places they work.

In consequence, we also do not have entire villages of children whose parents have abandoned them to go to work.

And when you hear it said that the mainland is racing ahead of us, bear in mind that we have an economy with a gross domestic product per capita of US$44,800. The equivalent on the mainland is

US$8,300.

Yes, they have come a long way in the past 30 years. So have we. Over the past five years, we have added to our GDP by about US$460 per capita a year. The equivalent figure for the mainland is

US$115.

They don’t tot it up that way across the border, of course. They rather express it in growth terms as they start from a lower base that way and thus get a higher figure for percentage change. But what would you rather be richer by, US$460 or US$115?

The disparity is even greater when you measure it by consumer spending. For all the talk of how the consumer is the coming thing in the mainland, household consumption expenditure per capita in Hong Kong of about US$30,000 a year is 10 times the equivalent across the border.

It is growing faster, too. In US dollar terms, there was actually a decline on this measure in the last reported quarter in the mainland. Bit embarrassing that. Let’s talk about something else.

What about the fact that Hong Kong University has just been rated No 4 in the world because of its high research standards and that a Hong Kong researcher contributed crucial design elements to the equipment that has made a breakthrough discovery of gravitational waves.

What about our rating as the world’s freest economy, our splendid fiscal standing, while Beijing plunges into record debt. What about the hundreds of other ways this town stands out.

Blow harder, you blowhards.