There has been much heated discussion about Hong Kong’s economy and its status as an international financial centre. A viral social media post last year describing Hong Kong as a “ruin” of a global hub and a recent op-ed pronouncing it to be “over” sparked much angst about the city’s future.
Though many experts and scholars have had their say, the debate so far has missed the core issue of what Hong Kong must do to retain its global status. We believe that by maintaining and even strengthening seven of its competitive advantages, Hong Kong will never be “over”.
First, Hong Kong should maintain financial stability and strengthen the five pillars of its financial sector – namely the stock market, the bond market, banking, insurance and asset management. Hong Kong has world-class regulatory systems in the banking, security and insurance sectors. These strengths, together with our effective linked exchange rate system, helped mitigate the impact of the 2008 global financial crisis on the city.
While the stock market’s performance has been disappointing – the Hang Seng Index is now back to its 1997 level – the city has done very well in the other four pillars. Bonds issued in the first three quarters of 2023 reached US$507 billion, a 7 per cent growth year on year.
In the banking sector, about 70 of the world’s top 100 banks established subsidiaries in Hong Kong. Bank deposits grew by 5.1 per cent last year, recording a net inflow of funds.
In the insurance sector, Hong Kong’s new policy premiums for long-term business in the first three quarters of 2023 amounted to US$19 billion, a 31 per cent year-on-year growth.
In terms of asset management, about 70 of the world’s top 100 asset management companies have offices in Hong Kong. The city currently has US$4 trillion in assets under management, which has grown 143 per cent over the past decade. The Greater Bay Area, Middle East and Southeast Asia all are potential sources for new clients.
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Hong Kong’s finance chief seeks new investment in Middle East as part of bid to revive the economy
Hong Kong’s finance chief seeks new investment in Middle East as part of bid to revive the economy
Second, Hong Kong should maintain its independent judicial system based on common law. Judicial independence is crucial to Hong Kong’s friendly and efficient business environment. Dispute resolution, litigation and property rights protection have been effective.
However, to maintain its legal institutional advantage, Hong Kong needs to continue its cooperation with the international community to ensure it follows international best practices, and employ foreign judges from different countries to maintain its position as a regional legal and dispute resolution centre.
Third, Hong Kong should maintain its efficient and clean government to ensure a fair and stable business environment. The city has consistently ranked high in the Corruption Perceptions Index, coming in at 12th in 2022. According to the World Competitiveness Yearbook, published by the Swiss-based International Institute for Management Development each year, the SAR government is currently ranked second in efficiency.
Hong Kong should continue to improve its anti-corruption institutions, strengthen the capabilities of its regulatory and enforcement agencies, and increase government transparency. Concurrently, business registration procedures should be simplified and public services for businesses streamlined.
Fourth, Hong Kong should maintain a free flow of capital and personnel. As a special administrative region of China without foreign exchange and capital controls, Hong Kong has become an important gateway for the country’s renminbi internationalisation and financial reforms.
The free movement of people into and out of Hong Kong is also one of its competitive advantages. Hong Kong should continue to provide convenient entry and exit procedures and simplify visa procedures to attract foreign talent to Hong Kong and also the Greater Bay Area.
Fifth, Hong Kong should maintain an unregulated internet. Easy access to information from around the world makes Hong Kong a preferred regional headquarters location for multinationals and international organisations. Imposing controls would hinder people’s ability to stay abreast of global trends, and adversely affect activities such as academic research and business decision-making.
Sixth, Hong Kong should continue to develop its excellent tertiary and public education. It has five universities consistently ranked among the top 100 globally. Besides nurturing talent, they have produced much frontier research that boosts the city’s role in the regional innovation ecosystem. Closer ties between academia, industry and the government need to be developed to transfer knowledge to society and create value for the economy.
The government also needs to ensure inclusive access to education for all and strengthen STEM and English-language education in public schools.
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The University of Hong Kong beats Singapore’s National University in influential Asia ranking
The University of Hong Kong beats Singapore’s National University in influential Asia ranking
Seventh, Hong Kong should establish a pool of diverse talent. In recent years, the government has implemented various programmes, including the Top Talent Pass Scheme. In total, over 200,000 applications have been received, with over 80,000 of them already arrived in Hong Kong. These encouraging figures show Hong Kong remains an appealing city.
A recent study by researchers from the HKU Business School based on LinkedIn data also found that, since the pandemic, the people who moved to Hong Kong were younger and have stronger educational backgrounds than those who departed.
Old Hong Kong has no future? Good, merge it with Shenzhen
Old Hong Kong has no future? Good, merge it with Shenzhen
During his meeting with business representatives last month, Xia Baolong, director of the Hong Kong and Macau Affairs Office, echoed President Xi Jinping’s assurance to Hong Kong last year that the “one country, two systems” principle will stay for the long term. Business investments in Hong Kong will continue to be well protected.
Besides support from the central government, people in Hong Kong must have a strong sense of crisis, given the turbulent geopolitical environment. The city needs to proactively reinvent itself to tackle new challenges. Hong Kong has overcome every crisis of confidence by creating an economic miracle. With the “Lion Rock” spirit, we believe Hong Kong can reach new heights again.
Fred Ma is honorary professor of HKU Business School and a former secretary for commerce and economic development in the Hong Kong government
Heiwai Tang is Victor and William Fung Professor in Economics of HKU Business School and director of the Asia Global Institute
