• Sat
  • Jul 26, 2014
  • Updated: 12:45am
CommentInsight & Opinion
LEADER

Rule of law is Hong Kong's trump card as Shanghai develops free-trade zone

PUBLISHED : Sunday, 14 July, 2013, 12:00am
UPDATED : Sunday, 14 July, 2013, 1:50am

The rule of law is fundamental to Hong Kong's success. The latest steps taken to help Shanghai fulfil its ambition of becoming a global financial centre serve to reinforce the importance to our city's future of the rule of law. The State Council this month endorsed Shanghai's plan to open the mainland's first free-trade zone as a testing ground for reforms that would free up cross-border commodity and capital flows - until now one of Hong Kong's main contributions to the national economy. The government is expected soon to unveil policies covering areas from financial services to transport. Until now, Shanghai's ambition has led to more talk than action. However, the new leadership under President Xi Jinping is seen as being more reformist and supportive of Shanghai's growth as a global hub. After a meeting chaired by Premier Li Keqiang , the council said the Shanghai zone would be a snapshot of an "upgraded Chinese economy" - in other words a pioneer of reforms needed to sustain healthy economic growth.

Initially, officials said later, Shanghai would expand its existing bonded areas until they formed a large free-trade territory set for financial liberalisation. Li is also reported to have approved a plan to allow foreign banks to set up subsidiaries in the free trade zone, and to have signed off on a plan to allow foreign commodities exchanges to set up their own futures delivery warehouses there, which would save costs for domestic commodities buyers. This is good news for HKEx and its new subsidiary London Metal Exchange. Otherwise, the Shanghai zone poses a real, if not imminent threat to Hong Kong's position as a leading financial centre.

However, while there may be positives in the plan for a range of businesses, there is still something missing that is to Hong Kong's advantage - the rule of law and the certainty of contract enforcement. The mainland has no legal system comparable with ours. Hong Kong cannot, of course, sit back and rely on this advantage to retain its competitiveness. Its renowned capacity for innovation and adaptation, a can-do ethic and hard work will also be called upon. Shanghai officials are said to be taking a long view and have started drawing up a blueprint for the city's development between next year and 2049. This is a chance for Hong Kong to consider what other competitive strengths and advantages are worth consolidating in the next decade or two to help defend the city's position.

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This article is now closed to comments

lucifer
Its the country that has the rule of law - and its a given that it exists, otherwidse the Financial Centres woudl not have been established there.
goncalo
No one said the rule of law is the only thing HK can be proud nowadays - it is just one of many things, in fact.
johnyuan

No question about it. Hong Kong has a better rule of law culture. When comes for Shanghai’s free-trade zone, it should emulate Hong Kong in its success in execution and enforcement of contract law. Without such rule of law as foundation in contract, efficient and reliable businesses are unattainable. Shanghai’s free-trade zone after its teething period will be increasing as a real threat that can make financial and business sectors in Hong Kong – what remains in the city, obsolete (Dr. Marc Faber’s doom city). To differentiate Hong Kong from Shanghai, Hong Kong must improve its rule of law that goes beyond contract law but permeates throughout all aspects of life – especially in business creation opportunities for everyone. Expand business possibilities and for everyone where can-do spirit can be rekindled and applied.

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