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A construction site of a highway in Qianhai. Photo: Edward Wong

China's services push a challenge for Hong Kong

Jeffrey Lam says we must learn to work with, and beat, emerging cities

Qianhai
JEFFREY LAM

China's aggressive push to develop modern service industries as its primary economic growth engine is posing opportunities and challenges for Hong Kong.

In his political report delivered at the opening of the 18th Communist Party congress last month, President Hu Jintao said the country must develop its service industry, particularly its modern service industry.

His remark both established the importance of China's modern service industry as its primary growth engine and marked the end of China's growth model driven by exports and foreign investment.

The global economic downturn brought about by the financial crisis in the US and the debt crisis in the euro zone has forced China to rely increasingly on domestic consumption. The party congress set the goal of doubling both its gross domestic product and its people's incomes by 2020 compared with 2010. To do that, China will have to average 7.2 per cent of growth annually in the next eight years.

China's efforts to strongly develop its modern service industries - in the areas of finance, shipping, hi-tech innovation and leisure tourism - will bring fresh opportunities to Hong Kong companies, as the mainland needs our excellent service industries to help upgrade its industries.

Besides our proximity to the mainland, we also have the Closer Economic Partnership Arrangement (Cepa), covering 48 service areas, including legal services, conventions and exhibitions, as well as banking and accounting.

Under the pact, the Qianhai Development Plan has designated Qianhai - located within the Shenzhen special economic zone - as a modern service industry co-operation zone for Hong Kong and Guangdong where Hong Kong professionals will be allowed to work. If this co-operation works in Qianhai, it can then be expanded to other cities on the mainland.

However, just because Beijing has been supportive of Hong Kong does not mean it will be easier for us to do business on the mainland; we face competition from mainland cities whose service industries have made names for themselves in the international arena over the past 15 years.

Guangzhou's GDP reached 1.2 trillion yuan (HK$1.47 trillion) last year and its tertiary industries accounted for 61.5 per cent of that figure, with the Nansha New Area and the Guangzhou Knowledge City - a Sino-Singaporean project to develop an area of knowledge-based industries - being the two engines for development.

Shanghai, which has everything it takes to become an international financial centre, has moved to modern services as it accelerates its economic restructuring. Shanghai's GDP hit 1.92 trillion yuan last year, and its service sector accounted for 58 per cent of the city's total GDP.

Guangzhou and Shanghai are working hard to transform themselves - Guangzhou into an international gateway, and Shanghai as a world financial centre - challenging Hong Kong's status as a major international shipping and financial hub.

China is a crowded market, and local protectionism is not likely to disappear. Cepa has opened a door to Hong Kong entrepreneurs, but China's "small" doors - those to local cities - are closed. The Hong Kong government needs to build economic relationships with other mainland cities based on mutual benefits to offset those barriers.

To help build the foundation for a knowledge-based economy, the government should provide more assistance to small and medium-sized enterprises, such as hi-tech companies.

Hong Kong is no longer the world's only "door" to the mainland. We should keep abreast of the times and embrace new technology while maintaining a competitive edge in management and quality service. Hong Kong people must stand in solidarity to overcome the challenges, or cities on the mainland or abroad will surpass us.

This article appeared in the South China Morning Post print edition as: China's push to develop services a challenge for HK
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