Hong Kong at times suffers from Shanghai-phobia. We look at this giant, aggressive city and imagine its rise spells our demise. At other times, we shift perception and look at how the two cities complement each other. The two views - of competition and co-operation - are halves of the same picture. Businesses and investors can gain either way, as long as they play the game of spot the opportunity.
Shanghai Mayor Han Zheng and Hong Kong Chief Executive Tung Chee-hwa yesterday spoke about plans to increase co-operation between the two cities. The two leaders emphasised the areas in which Hong Kong and Shanghai are able to help each other develop. But there are also growing areas of competition - from port businesses to the race to be the premier financial market in China. The truth is that both competition and co-operation will be features of the relationship for years to come, and the two cities will have to manage both in tandem.
Hong Kong is a big source of investment capital for Shanghai and one of the reasons behind the latter's 13 straight years of double-digit growth. Our stock exchange has raised about US$94 billion in capital for mainland companies since 1986, and Shanghai has been a prominent beneficiary. This will continue to be the case as Hong Kong businesses pour capital into Shanghai projects and as mainland-based companies come to Hong Kong to raise financing. Now, through agreements such as those signed by Mr Han and Mr Tung yesterday, there will be increased emphasis on recruiting management and other skilled workers from Hong Kong to work in Shanghai.
But this is no one-way street. Hong Kong's pragmatic businesspeople would not be taking their capital and talent north unless the returns were attractive. Hong Kong, with limited natural resources to exploit aside from a deepwater port, has relied on a similar formula of investment in the Pearl River Delta for years. The result has been a strong Hong Kong economy, built on services and trade - and an economic miracle that has transformed southern China into the country's wealthiest and fastest-growing region. If Hong Kong capital and management expertise mobilise to the same effect in Shanghai and the Yangtze delta region, both sides will benefit.
None of this negates the undeniable and inevitable competition between the two cities. Tensions will grow as Shanghai seeks to recapture its glory days as an international port and financial centre. Naturally for a city on the rise, Shanghai is full of swagger and bravado. But Shanghai's revival should not spell Hong Kong's doom: it is a great opportunity. Nor is it the case that China cannot support two great commercial cities - or five, or 10.
That Shanghai seeks pre-eminence in areas where Hong Kong has long dominated should spark activity in Hong Kong, not insecurity. In many of the areas where Mr Han and Mr Tung (perhaps with some gentle nudging from the central government) promised co-operation - airport management, port development and stock market regulation, to name a few - Hong Kong has expertise that Shanghai covets and the race is still for Hong Kong to lose. Beyond these specific areas, Hong Kong's advantages include the rule of law, internationally recognised professional standards and an entrenched role in the global trading system.
