Urban planning

Hong Kong’s competitiveness fades with record home prices, while New York keeps its allure

Hong Kong’s ranking slips six spots to 12th place in the United Nations survey of 1,007 global cities with a Chinese think tank, compared with a previous, smaller, CASS study. Shenzhen came from nowhere to become the world’s sixth-most competitive city, according to the new survey.

PUBLISHED : Monday, 30 October, 2017, 12:15pm
UPDATED : Tuesday, 31 October, 2017, 1:19am

New York is the most competitive city on earth, taking into account its technological innovation, housing cost, global connectivity, productivity with its population size, according to a collaborative report by the United Nations (UN) with China’ foremost think tank.

Five of the world’s 10 most competitive cities are in the United States, according to the UN’s survey of 1,007 cities with the Chinese Academy of Social Sciences (CASS). The highest-placed Chinese city is Shenzhen at sixth spot, while Hong Kong’s ranking fell six places to 12th, undermined by its record property prices.

The UN-CASS survey, using a broader measure than conventional business competitiveness studies, underscores the challenges that Asian cities must confront – especially in building the infrastructure and environment for technological innovation to take root – to attract investments.

“Technology development influences a city’s economic output and its competitiveness, “ said Ni Pengfei, director of the Centre for City & Competitiveness at CASS, and a co-author of the report. “Half of the most competitive cities are American, which shows how far ahead the US is in terms of science and technology.”

The survey comes on the heels of the think tank establishing its first offshore branch, known as the Chinese Institute of Hong Kong, to promote research on a range of subjects relevant to the city, from border disputes to Hong Kong literature to urban studies and global trade.

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Shenzhen, the home base of the world’s biggest telecommunications equipment maker Huawei Technologies and China’s dominant mobile games publisher Tencent Holdings, is the sole Chinese city among the world’s top 10. Singapore is in third place while Tokyo is in seventh spot.

The prominence of Shenzhen – the city was nowhere in the top 10 in the 2013 survey – underscores the speed of its development. A little known fishing village until it was hand-picked by the Chinese government in 1980 as a test bed for capitalism, Shenzhen is now China’s foremost technology hub. Its 2016 economy expanded 9 per cent, putting Shenzhen on track to surpass Hong Kong by next year with US$350 billion in output, according to a forecast by Sanford C. Bernstein & Co.

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The critical role of technology in enhancing competitiveness also underpins the Chinese government’s push to transform the nation from the planet’s factory into the world’s laboratory for scientific discovery and technological innovation. Innovation is the primary force driving development, and the strategic foundation for building a modern economy, Chinese President Xi Jinping said during his keynote address to the ruling Communist Party’s most important meeting in five years a fortnight ago.

“Hong Kong can improve, if the city focuses more on technology and innovation development,” Ni said in an interview with the South China Morning Post. “More cities in China are consistently growing, and are developing faster than other regions such as Europe.”

The clout of technology brands matters in reshaping how cities compete, as it reflects the changing dynamics of the business world amid the rise of technology in the past decade, making it sensible to be used to “identify new global cities,” the UN-CASS report said.

New York, Beijing and Paris are home to the most valuable brands among the world’s top 10 cities, while Shenzhen came in at number eight by that measure.

“The number of valuable brands owned by traditional global cities such as London, Paris, and Tokyo is declining, whereas the number of brands owned by such cities as San Jose, Shenzhen, and Beijing is increasing sharply,” the report said.

Infographics: Supply and demand in Hong Kong’s housing

The median of the index lies between Mianyang in Sichuan at 502nd spot and Semarang in Indonesia at 503rd place. Cities above the median reside mostly in North America and Europe, while the majority of cities below the median are in Africa, South America and the Caribbean.

Among the 50 most competitive, Tianjin ranks the 23rd. Hangzhou, home of Alibaba Group Holding, comes in at 74th. Alibaba, the world’s largest online shopping platform, also owns the South China Morning Post.

The report also has the global sustainable competitiveness index to evaluate the future potential of urban centres after considering their talent pool, economic vitality, environmental quality and business environment.

A tale of two cities: how home prices affect Hong Kong and Shanghai’s competitiveness

New York tops this sustainable index, followed by London in second and Tokyo in third. Shenzhen is at 35th place by this measure, while Hong Kong is at 13th place.

The year’s edition highlights the relationship between home prices and the city’s competitiveness.

Normally, a city’s per capita income will increase in line with the house price growth, but when the home price-to-income ratio hits a certain point, elevated housing price will turn out to be a negative force, the report added. The competitiveness of Hong Kong, the planet’s most expensive urban centre for owning a home, had been undermined by its property cost, the report said.

“The old hierarchy of cities driven largely by size and gross domestic product has most definitely broken down with the onset of internet-based business,” said Rosemary Feenan, JLL’s head of global research programme, adding that there’s an increasing need for global cities to “go smart” and innovative in the new world order.