The View | Hong Kong needs to reinvent itself in globalised world

Bankers and business people reacted with scepticism and disbelief over my previous column on the scenario of an exodus of financial institutions from Hong Kong to the mainland. The subject represents a great concern not only to finance professionals and regulators based in Hong Kong, but to local graduates with their employment hopes. What can Hong Kong do to reinvent itself?

Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, told an economic summit and the South China Morning Post on December 1: "Some people believe Hong Kong is on borrowed time, that our golden time was in the 1980s and 1990s when the city was acting as the sole gateway between China and the international world."

He also rejected arguments that Beijing wanted another mainland city, such as Shanghai with its free-trade zone, to replace Hong Kong. "Hong Kong is no longer the sole agent for China, but we still have a role to play as long as we can position ourselves to capture the growing opportunities in China."

Unfortunately, Chan does not fully comprehend the non-political, but inexorable technological and socioeconomic forces that already conspire against Hong Kong and its financial services industry.

The city is a victim of global trends that are driven by technology, which has accelerated globalisation. Very low communication, execution and transaction costs have transformed the world into a much closer, single, huge global market for labour and capital. Even though labour is not fully mobile, the other factors such as technology and capital increasingly are.

As a result, the various components of global business chains can easily move to the location of labour and clients with little friction or cost. Banks' information and processing systems are more mobile than ever, thanks to cloud technology. Tradeable services such as asset management, corporate or technology consulting are increasingly large components of advanced economies, which depend on mobile talent and knowledge.

Perhaps a deep and experienced Hong Kong fund management industry would be in a stronger position to innovate more yuan products. Instead, the city is not contributing a full range of asset management talent to the mainland. Its asset management industry is dominated by expatriates who usually return home after a rotation or when emerging markets turn down and funds flow out of the city.