China Development Institute analysts expect the next five years to see Hong Kong losing ground to Shanghai as an international financial and logistics hub. Hong Kong is being held back by the high cost of doing business and an expected shortage of skilled labour. 'Hong Kong will have a painful experience if there is no immediate improvement in these areas,' China Development Institute assistant secretary Liu Zhanjin said. The institute develops planning strategies for Shenzhen on behalf of the mainland Government. Mr Liu told a business conference in Hong Kong that China's membership of the World Trade Organisation would force dramatic improvements in mainland financial services and logistics. This was especially so in Shanghai. Infrastructure, particularly in the logistics sector, had been greatly improved in recent years. Mr Liu said the cost of doing business in Hong Kong remained prohibitively high by comparison. It could also face a brain drain in the near future as professionals and foreign experts relocated to the mainland. David Li, associate director of the Hong Kong University of Science and Technology Economic Development Centre, said Hong Kong had a history of seven-year to 10-year economic cycles during which it faced shortages of skilled labour. In previous economic cycles the Government's laissez-faire economic policies and Hong Kong's high standard of living had ensured a flow of talented business people to Hong Kong from around the world. But economic success and improving living standards on the mainland meant a growing number of overseas graduates were opting to work for mainland companies rather than local employers, he said.