What difference did a decade make? A noticeable one is the whopping 216 per cent increase in home prices over the past 10 years. Another one is that the Hong Kong dollar slipped below parity with the yuan.
But arguably, the most prominent change is the reversal of trends in cross-border shopping, living and investing.
In 2003, the local economy was under the threat that the mainland would hollow out Hong Kong. At that time, a lot of local entrepreneurs had long since shifted their focus to north of the border. What's more, a lot of Hongkongers liked shopping and spending in Guangdong.
Adding insult to injury, cheap home prices on the mainland attracted an increasing number of Hongkongers to reside there. According to government data, 214,000 Hong Kong households owned or rented residential properties on the mainland in 2003, up 13.5 per cent over just two years. Back then, there was even a growing fear of a mass exodus of home buyers.
Ten years later, the flow between Hong Kong and the mainland has long since turned around. No longer suffering from a drain to the north, Hong Kong's economy and property market have benefited from the closer integration with the mainland, and these cross-border economic activities are destined to grow and provide strong support for the local economy.
For a start, consumption by mainland visitors to Hong Kong increased 226 per cent over the period from 2003 to 2011, dwarfing the spending of Hongkongers on the mainland. The strong spending power of the mainland tourists has enticed top brands like the Gap and Abercrombie & Fitch to open stores in Hong Kong, strengthening its role as a shopping paradise.
Surely, the costs of this invasion of visitors cannot be ignored, as it has resulted in a shortage of daily necessities like powdered milk. But the benefits cannot be underestimated either. Indeed, the recent gain from the integration with the mainland is in stark contrast to the pain from a decade ago.
Next, the narrowing of the difference in home prices between Hong Kong and the mainland has discouraged moves to the north. In 2003, average property prices in the northwestern New Territories were 298 per cent higher than in Shenzhen. But as this price gap shrank to about 9 per cent in 2007, the number of Hong Kong households that owned or rented properties over the border fell by a third to 142,600.
We have also seen the number of wealthy and educated mainlanders eligible to stay in Hong Kong under various schemes increase, from less than 2,000 in 2003 to over 28,000 in 2011. They too have contributed to the growth of property prices.
More importantly, mainland enterprises securing listing status in Hong Kong have also helped cement its status as a regional financial hub. The vigorous development of the financial industry is in part attributed to the 73 per cent increase in the number of expatriates working here over the past 15 years.
Indeed, we have seen a variety of mainland companies expanding their footprint in Hong Kong. For instance, Suning acquired Citicall while Citic Securities bought CLSA.
Mainland developers have also started participating in the city's property development. Last month, Vanke, teaming up with New World, paid a higher-than-expected price for a piece of premium land in Tsuen Wan. As a leading developer on the mainland, Vanke has an advantage in marketing its projects to people there.
Some mainland banks have also geared up their investments in Hong Kong. Agricultural Bank of China and China Construction Bank have been splashing billions of dollars on office-block transactions. Harvest Capital and China Asset Management (Hong Kong) have also built a foothold in Hong Kong. And with its success in securing the lion's share of the home-mortgage market last year, Bank of China International will help draw other mainland lenders across the border for business opportunities.
It is highly likely that this trend of mainland enterprises establishing or expanding operations in Hong Kong will persist. Hence, the demand for office buildings is expected to grow. And these mainland firms will also bring staff who will help build solid demand for residential properties.
True, the buyer's stamp duty and the recent measures to increase it in some cases have made property investment less appetising for mainlanders, cooling off red-hot property sale prices. Now we may see those with real housing needs shift their focus to the leasing market instead. This could boost rents and therefore provide genuine support for the property market.
Now that China has become the world's second-largest economy, increasing integration with the mainland can only stimulate economic and job growth in Hong Kong. It would definitely be an economic disaster if the clock was turned back to 2003.
However, our small city must deal with the problem of limited capacity. The crowding at Ocean Park that led to a temporary halt in ticket sales is just one typical example. And it must be admitted that Hong Kong is still short of property in both the residential and commercial sectors.
Fortunately, the government has already started putting more effort into increasing supply. Even more encouragingly, it has taken the initiative to build a new central business district in Kowloon East. In his recent policy address, Chief Executive Leung Chun-ying announced that the government would explore the possibility of increasing office and housing supply in the Kai Tai Development Area.
Further increases in the property supply can help sustain the integration between Hong Kong and the mainland. A decade from now, it is highly likely that there will be a lot of grade A buildings bearing the names of mainland enterprises.
Angela Wong is the deputy chairman of Midland Holdings