By the best of the West, Mao adds, he is not merely referring to the city's long-established use of the global lingua franca. Rather, that having directed theatre abroad, he recognises Hongkongers can live up to the highest of international standards.

DON'T MISS: Fredric Mao's interview and some images from his past productions

Mao - whose latest role in the city casts him as chair of the newly established Chinese opera school at the Academy for Performing Arts - believes that by drawing more on the city's unique heritage and traditional art forms, these strengths could create a powerful performing arts culture.

Furthermore, he believes the city's artists have an abundance of Hong Kong stories to tell that the world would want to hear. Again, he speaks from experience. "I have taken shows to Shanghai, Beijing, Shenzhen … Toronto and New York City," Mao says, citing plays rich in cultural heritage, such as (2002), a stage adaptation of Eileen Chang's classic short story of the same name; and (2010) inspired by Cantonese opera .

Now, he has . Its runaway success may have something to do with his attitude to his audience. He knows they are a sophisticated bunch, and wanted to make sure the piece evoked the commercial world they live in rather than merely present a nostalgic tale about a nightclub - Tonnochy was an infamous Wan Chai nightclub that had its heyday in the 1970s.

He wants to see government policies that reflect this sophistication. "We need to have policies to support us, to promote and understand us," says Mao.

Hong Kong needs a new way of looking at performing arts, he says, rather than sticking to the same "outdated policies just to subsidise the theatre".

That means engaging those on the ground, the ones rolling up their sleeves and getting down to work. "There has been this consensus of fostering creative industries, but there are not enough communications with professionals and the community."

He adds: "We must recognise ourselves [and] the uniqueness of our positioning. If not, we will lose our edge."

And Hong Kong needs to get its act together - around the world, the economic and cultural benefits of strong creative industries are being reaped thanks to policies set in motion years ago.

Elsewhere in Asia, a rich flow of resources and inventive policies have helped arts and cultural productions showcase economies' soft power on the international stage - bringing in foreign exchange through cultural exports. South Korea is a prime example.

In Hong Kong, the figures show the performing arts scene is far from stagnating.

A survey by the Arts Development Council revealed audience numbers overall, from theatre and dance to Chinese classical music and Western pop, went up from 2.9 million in the year from April 2007 to March 2008 to 3.4 million in 2011/12.

The number of performances went up from 5,766 in 2007/08 to 7,958 in 2011/12. Box office takings rose from HK$388 million to HK$455 million over the same period.

The government channels its support for the arts through various funding schemes under the Home Affairs Bureau. But, Mao says, these fall short of developing a self-sustaining industry.

Mao cites his experience with It was initially backed by the Hong Kong Arts Festival. In 2011, the show was invited to perform at the prestigious Beijing People's Art Theatre, yet it was on the verge of being cancelled as it needed support to cover the HK$2 million costs. Following repeated pleas, the bureau eventually handed over HK$500,000 at the last minute.

has taken HK$15 million at the box office.

Mao said the production, whose third run at the Lyric, in Wan Chai's Academy for Performing Arts ended this month, was a crystallisation of the city's creative talent.

The cast includes award-winning stars Carina Lau Kar-ling, Tony Leung Ka-fai and Tse Kwan-ho. The script was written by 36-year-old Candace Chong Mui-ngam who is fast becoming an international name; Oscar-nominated William Chang Suk-ping was art director and created the flamboyant costumes; dance sequences were choreographed by Yuri Ng; and Leon Ko Sai-tseung wrote the music.

But the truth is this kind of blockbuster does not come along often. To change this, the theatre industry has been counting on the new venues in the West Kowloon Cultural District which will be able to host long-running theatre and musical productions like those in Broadway in New York and West End in London.

Only this has been beset by delays, and now problems with the express railway link to the site mean venues located on top of the terminal will take even longer to build.

To meet the needs of the performing arts sector, sources say West Kowloon would amend the design of its Lyric Theatre.

Originally a 1,200-seat venue dedicated to dance, it would be expanded into a larger, multi-purpose venue with three auditoriums. However, the theatre won't be ready until after 2020 - the same year the East Kowloon Cultural Centre, which will have a 1,200-seat auditorium and a 550-seat theatre, is due to open.

For now, performances in the city are restricted to the existing Lyric Theatre at the Academy for Performing Arts and some 16 venues run by the government, which Mao has previously criticised for their inflexible management system - bookings need to be made one year in advance and their use is not restricted to the performing arts.

This hits experience and experimentation in the arts sector.

"We need this kind of practice," says Mao, a board member of the West Kowloon arts hub. "How else can we get people really interested [in our works], and people to invest in our development?"

Joyce Cheung Pui-wah, a theatre producer and chairwoman of the Academy for Performing Arts Alumni Association, says the academy had produced more than 8,000 graduates over the past 30 years, including artists, musicians and backstage professionals. But the lack of venues is stopping them from reaching their full potential.

"We can only shape the show and fine-tune it on stage facing a real audience. But most of the time we can only do six shows maximum at government venues. Many of the shows are under-rehearsed," Cheung adds.

Art critic Damian Cheng agrees with Mao that a global perspective on Hong Kong's cultural efforts is key to the competitiveness of the city's arts sector. He also hailed the quality of talent that has emerged in the city, citing the success of Edward Lam Yik-wah, who is now a sought-after playwright and director in Taiwan and on the mainland.

Mao believes in the power of the arts to tell the city's story and help unify its people - and to turn the city into a leading cultural centre, a beacon of the arts that glides comfortably between East and West.

"If we can maintain our standards and disciplines while creating the kind of works that tell Hong Kong stories … we can do it."

Biography of Hong Kong director Fredric Mao

Born in Shanghai and raised in Hong Kong, Fredric Mao Chun-fai studied at the then Baptist College before earning a Master of Fine Arts degree in theatre arts at the University of Iowa in the United States.

He went on to develop a career in theatre in the US, becoming the artistic director of the Napa Valley Theatre Company in California at the age of 27. In 1976, he made his Broadway debut in the musical .

Mao returned to Hong Kong in 1985, joining the then newly established Academy for Performing Arts as head of acting in its school of drama.

He served as the artistic director of the Hong Kong Repertory Theatre from 2001 to 2008, producing many acclaimed titles, including , and .

A five-time best director winner at the Hong Kong Drama Awards, Mao was awarded the Bronze Bauhinia Star for his contributions to the arts in Hong Kong.

The 67-year-old is currently the chair of the School of Chinese Opera at the Academy for Performing Arts, which is based in Wan Chai's Gloucester.

He is also a member of the board of the West Kowloon Cultural District Authority and convenor of the Hong Kong-Taiwan Cultural Cooperation Committee.