Hong Kong in 2015. A high-end city with little demand for low-end housing - an economy geared toward specialised financial services and a marketplace dominated by mainland businesses. Labour would move freely between the mainland and Hong Kong in a bid to solve employment problems posed by those in Hong Kong who could not find work amid fast-moving economic advancements. On the flipside, the mainland's educated would be brought in to live in Hong Kong. According to HSBC economist George Leung Siu-kei, this is what Hong Kong could look like in 15 to 20 years. Under such a scenario, Hong Kong would be to the mainland like New York is to the United States, or major European cities are to the European Union. Mainland companies would largely constitute the Hang Seng Index. Property developers would see a return to grace as a more educated and richer Hong Kong would mean more private home ownership and less public housing. However, the construction industry would be dwarfed by the financial services industry as Hong Kong became a major centre for raising corporate finance. Consumption patterns would favour luxury goods as an affluent culture dominated. In other words, the ones who cannot keep up with the advances move out and the experienced brains will move in. While Government officials are trying to create a new face for Hong Kong, primarily as Asia's high-technology centre, Mr Leung is taking it a step further. '[The Government has] been struggling to find a direction,' Mr Leung said. 'Since the signing of the World Trade Organisation agreement [between Beijing and Washington], people are saying there will be more opportunities and challenges. 'What I am saying is that Hong Kong will be losing its advantage as a stepping stone or a gateway to China. 'In the future when it's fully opened up, you can just go to China,' although he added that Hong Kong's fully convertible currency and advanced regulatory structures will give it an advantage. Ultimately, however, Hong Kong needs to make some changes to ensure it maintains its edge, starting first with the freeing up of the labour market. The answer, Mr Leung said, is to have labour mobility between the communist-run mainland and Hong Kong, 'where people can move to that particular location to fill that role'. After all, one of the objectives of the EU was to facilitate free labour movement between European countries. 'If you put a strict boundary between Hong Kong and the mainland, you'll find that with economic advancement - with Hong Kong's three million workers, of which two million would be at the low level - one million or less workers would need to support the whole territory,' he said. 'You have to train the existing labour force, and provide better education, but this process is very long. It's not very easy.' Another, but controversial, solution would be for 'unskilled' people to move out of Hong Kong and allow 'much better skilled' people to come here. Considering the amount of mainlanders fleeing their country, why would Hong Kong residents choose to live there instead of taking advantage of medical and educational benefits in Hong Kong? First, the cost of living in Hong Kong is high, Mr Leung said. 'The advantages for them to stay in Hong Kong are the medical benefits . . . but as time goes on, I think there will be some sort of medical groups to provide services in the mainland. 'China is very different from 30 years ago.' Mr Leung said in a report that the economic take-off in the mainland provides an outlet for such workers, as their skill levels are still relatively higher than most in the mainland. He believes there are no restrictions on Hong Kong residents doing business in the mainland at present and most of those that would move there would be small business people - not potential state-owned factory workers. His report concluded that an increasing amount of Hong Kong residents are regularly in the mainland for work. In fact, the report states, in the past decade departure numbers have risen from about one million people per month to more than four million per month now. 'The increase obviously reflects more than just family gathering or leisure activities,' he said. 'Strong labour mobility across the border simply demonstrates the frequency of travel between work and home. 'As this is driven by economic forces, it is not difficult to foresee the eventual 24-hour opening of the border.' So far, the Government has only allowed the border opening hours to be extended during the peak holiday season. 'What I am seeing is not only expats from developed countries but also from China [coming in],' he said. 'If you compare New York and Hong Kong, New York has no border. Hong Kong will perform that same role. This is in 10-15 years' time.' Such a pattern of labour mobility or shifts in or out of Hong Kong would, Mr Leung said, change the face of the marketplace and have strong implications for consumption patterns. 'If this was to happen, Hong Kong would have a smaller proportion of lower-skilled workers and there will be less demand for low-end housing,' he said. 'Right now, a lot of people are focusing on the low-end property market as they think it's a lot easier to sell . . . but in the future, that will change. There may no longer be a focus on commercial lending, but on offshore lending, equity financing, bond trading and syndicated loans. 'Hong Kong will mostly perform these high-end services . . . the jobs here will be more specialised and in the financial services, the jobs will not be on the retail end of banking,' Mr Leung said. Graphic: res30gbz
