Opinion: At an financial crossroads, Hong Kong wants a proactive technique

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In his price range, Chan forecast the economic system to develop between 3.5 and 5.5 per cent this 12 months, driving on expectations of post-Covid “revenge” consumption and inbound tourism, whereas assuming a robust rebound on the mainland.

In August, the forecast was revised to 4-5 per cent. Now, given the lacklustre efficiency in exports and investments, precise progress is prone to be decrease.

Hong Kong is at an financial crossroads. Town faces the double whammy of a sluggish international economic system and a setback on the mainland, with the bursting of its actual property bubble.

A disproportionate share of worldwide progress in 2023 – round 70 per cent – will come from Asia. Asia additionally receives the most important share of worldwide funding – 44 per cent, based on McKinsey World Institute. China’s economic system is crawling again up on a bumpy street, pushed largely by consumption.

Hong Kong’s outlook is at finest blended. Inbound tourism is steadily choosing up, so are retail gross sales and client spending, with unemployment at a four-year low of 2.8 per cent. Nonetheless, each the property and inventory markets are performing poorly.

The preliminary public providing market may hit its lowest fundraising stage in 11 years, based on Deloitte China. Overseas direct funding inflows have slackened.

Between 2018 and this 12 months, the worldwide gross home product grew by 13 per cent in actual phrases. Mainland China grew by 27 per cent and Singapore by 11 per cent, however Hong Kong’s determine is detrimental 0.9 per cent. Placing apart the pandemic disruptions skilled by all economies, Hong Kong has additionally suffered immensely from the 2019 unrest and its political aftermath.

Structurally, Hong Kong faces a provide bottleneck in land, labour and capital. Whereas funding from the general public sector in equipment, tools and mental property merchandise has doubled over the previous decade, that of the non-public sector has been on regular decline particularly since 2019, with the 2022 stage at solely 40 per cent of 2012.

At this vital juncture, alternatives and challenges are two sides of the identical coin.

Hong Kong’s future lies in a rising China and a rising Asia. The mainland is now the primary provider of capital and expertise. As the town’s finance turns into depending on mainland companies and their efficiency, it’s more and more uncovered to dangers and twists and turns within the mainland economic system.

Such dependence may additionally imply much less effort made to draw worldwide capital and an additional distancing from Western economies, with which Hong Kong used to take pleasure in sturdy connections.

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Whereas the Larger Bay Space, and Asia on a bigger scale, will present a relaunch pad for the native economic system, regional competitors has turn out to be fiercer. Town can not afford to be only a passive participant adapting to paths outlined by others. A proactive regional technique is critical.

In fostering an innovation and tech hub, Hong Kong should associate with different cities within the Larger Bay Space and study to raised leverage its current strengths in finance {and professional} experience, in addition to its hub standing and international connectivity.

Its world-class universities usually are not wanting top-notch researchers in science and know-how. But native corporations have lengthy thrived in commerce, actual property and finance as an alternative.

A view of the HKU Business School Shenzhen campus in Futian district, Shenzhen. In fostering an innovation and tech hub, Hong Kong must partner with other cities in the Greater Bay Area. Photo: Xiaomei Chen — A view of the HKU Enterprise Faculty Shenzhen campus in Futian district, Shenzhen. In fostering an innovation and tech hub, Hong Kong should associate with different cities within the Larger Bay Space. Photograph: Xiaomei Chen

Re-industrialisation requires a paradigm shift and transformative reskilling on the a part of each enterprises and authorities businesses. Innovation ought to be a potent drive of change in all components of society, together with industries, public providers and social innovation.

Opening a number of routes for expertise from all over the world is certainly important. Invoice Gates as soon as stated that cutting-edge firms base their location choices on the supply of expertise and a tradition for innovation, quite than tax coverage. Therefore retaining expertise is as essential as recruiting new expertise.

Hong Kong is seeing a gradual mind drain partly because of political causes. It has drawn expertise from the mainland however appears much less enticing to overseas expertise, particularly from developed international locations, other than ethnic Chinese language scientists relocating from a much less welcoming America.

As of early this 12 months, 95 per cent of accredited candidates for the High Expertise Cross Scheme are from the mainland.

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Hong Kong’s fast problem is financial, which additionally impacts the town’s public funds and skill to put money into infrastructure and human capital. The response technique can not lose sight of politics.

As conspiracy theories abound, primarily in regards to the nationwide safety regulation and patriots-only administration, native anxieties in regards to the future and worldwide doubts breed uncertainty over the economic system.

Intense US-China rivalry defines the brand new regular. Hong Kong must map out a workable path and re-conceptualise its middleman position in order that it will possibly nonetheless purposefully serve China and the world. The onus is on it to underscore its willpower to stay a metropolis of pluralism, prospects and finest practices regardless of all odds.

Anthony Cheung is a former secretary for transport and housing

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