By Tu Haiming

Hong Kong’s economy is gradually recovering from the aftermath of the 2019-20 riots and the COVID-19 pandemic. However, the pace has been slower than anticipated, and the city has encountered new challenges brought about by external developments. Under such a background, some experts and commentators have depicted a gloomy picture for the city. Some even declared that Hong Kong’s role as an international financial center has become a thing of the past, noting that Singapore overtook Hong Kong as the third leading global financial center behind New York and London in the latest edition of the Global Financial Centres Index, published on March 21.

In reality, Hong Kong and Singapore each have their own advantages. During his recent promotional tours to Europe and the United States, Hong Kong Financial Secretary Paul Chan Mo-po pointed out the distinctions between the financial markets of the two cities. For instance, the market capitalization of Hong Kong’s stock market has reached HK$36 trillion ($4.6 trillion), with an average daily turnover exceeding HK$100 billion and more than 2,600 listed companies. Singapore’s stock market cap is less than HK$6 trillion, with an average daily turnover short of HK$10 billion.

The strong performance of HSBC Holdings in Hong Kong is another piece of evidence attesting to the city’s economic resilience. Earlier this year, HSBC CEO Noel Quinn announced a pretax profit of over $10 billion from its Hong Kong operations in 2023, which accounted for one-third of the group’s global pretax profits. Its clients in Hong Kong have also increased by 30 percent over the past three years. The city’s economic resilience bodes well for its role as an international financial center.

In the face of the shifting external environment amid intensifying geopolitical tensions, it is imperative for the business community to take the lead in promoting Hong Kong to the outside world by embracing new mindsets, new approaches, and new ways.

A recent survey conducted by Deloitte and commissioned by InvestHK revealed that there are 2,700 family offices in Hong Kong with assets under management totaling HK$30 trillion. In contrast, Singapore only has a little more than 1,400 family offices.

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Hong Kong’s robust financial market offers ample opportunities for many multinational companies to make huge profits, and for numerous affluent families to store and grow their wealth in the city. This corroborates the city’s allure to investors because of its excellent business environment underpinned by an esteemed legal landscape and low tax rates, among other factors.

Aside from the financial sector, other sectors are also not as dismal as what some Western media outlets have depicted. For example, in terms of investment, according to the figures from the United Nations Conference on Trade and Development, Hong Kong attracted $117.7 billion in foreign direct investment in 2022, ranking fourth globally; and the city made $103.6 billion worth of outward direct investment, ranking seventh in the world. Meanwhile, Hong Kong International Airport handled 4.3 million metric tons of cargo in 2023, and has been rated as the world’s busiest cargo airport since 2010.

No one knows, and is thus in a better position to comment on, Hong Kong’s economic conditions better than the local business sector. So it falls to the business sector to take the lead in telling the world the true story of the city’s economic conditions and its promising future.

Hong Kong is undoubtedly facing some difficulties, mainly because of three factors:

First, many economies, including Hong Kong, have fallen victim to continued interest rate hikes in the US in the recent years, which have lured global capital to the country.

Second, the intensifying geopolitical tension between China and the US has had an adverse impact on the Hong Kong Special Administrative Region. The Biden administration has doubled down on the trade war against China, which was initiated by the Trump administration in 2018, not only imposing sanctions on China but also rallying its allies to do the same. Washington’s containment policy against China has taken its toll on the HKSAR. For instance, the decline in Sino-US trade has resulted in a drop in Hong Kong’s reexport volume with the US.

Third, some of Hong Kong’s business sectors are too reliant on a single source of revenue, namely Chinese mainland visitors. After nearly three years of isolation from the rest of the world during the pandemic, the city is still counting on the return of mainland visitors to boost the local economy. Such “path dependence” characteristics are still common in sectors such as retail and tourism.

Given its small size and the export-oriented trait of its economy, Hong Kong is vulnerable to external shockwaves. Following an objective assessment of the challenges Hong Kong now faces, I can think of several potential solutions.

First, Hong Kong should take the initiative to expand its global reach. The city should leverage its distinguished global connectivity to promote itself to business circles in Western countries to dispel misunderstanding of the city. Chan has moved ahead in this regard, kicking off a trip to France and the US to promote Hong Kong in late May. Hong Kong’s business community should organize similar promotional tours to spread the true story of the city.

Second, Hong Kong should be more proactive in furthering its integration into national development, for example, by raising more constructive suggestions to the central government. The central government’s decision to add eight mainland cities to the Individual Visit Scheme for Hong Kong and Macao is in fact a response to the request of the governments of the two SARs. The business community, which is in a better position to know about problems or issues encountered in the integration process, should take the lead in raising more positive suggestions.

Third, more effort should be dedicated to building resource pools for Hong Kong. The HKSAR government’s campaigns to attract foreign talent and enterprises have been well-received so far, and its efforts in developing a mega-event economy are also bearing fruit. Meanwhile, it is working on attracting more family offices to Hong Kong. These initiatives warrant active involvement and input of the business sector so as to build up resource pools for Hong Kong.

In his opening remarks at this year’s National Security Education Day commemoration in Hong Kong, Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, emphasized the need for Hong Kong society to adopt a new mindset, and explore new ways and new approaches to facilitate the city’s economic transformation and industrial upgrading.

In the face of the shifting external environment amid intensifying geopolitical tensions, it is imperative for the business community to take the lead in promoting Hong Kong to the outside world by embracing new mindsets, new approaches, and new ways.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference and chairman of the Hong Kong New Era Development Thinktank.

The views do not necessarily reflect those of Bauhinia Magazine.

Source: ChinaDaily