If there’s anything more worrisome for Hong Kong than surrendering a round in its fight for more democracy, it’s losing competitiveness as a world economy.
We already know the outcome of its political development after Beijing handed down an election reform package that gives it the right to vet Hong Kong’s next leader through a loyalist screening committee.
The increasingly heated political atmosphere is sucking the air out of an ongoing debate about Hong Kong’s economic future.
And the fact is that the issue isn’t going away any time soon.
Trigger Trend, a Guangzhou-based market research firm, examined Hong Kong’s political and economic developments and came out with dire conclusions on both counts.
China no longer considers Hong Kong a political priority and the plan for the 2017 chief executive election is a somber reminder of that, although it probably still sees Hong Kong as a model for rule of law, clean governance and financial innovation, according to Trigger Trend.
Also, Hong Kong people will have to get used to their fair city sliding from a global financial hub to a regional player.
In a recent competitiveness report, the China Institute of City Competitiveness, an unofficial think tank, put Hong Kong in sixth place behind Guangdong, Jiangsu, Shandong, Zhejiang and Shanghai.
That’s broadly in line with the Trigger Trend study which predicted Hong Kong’s economic output will be surpassed by Guangzhou, Shenzhen, Tianjin, Suzhou, Chongqing, Chengdu and Wuhan.
These mainland cities could sustain an average growth rate well above 7 percent. Hong Kong’s economy grew a meager 2.9 percent last year.
Shanghai and Beijing overtook Hong Kong by gross domestic product (GDP) in 2010 and 2011, respectively.
Hong Kong’s shipping industry also reflects the shifting economic landscape. The city’s container throughput, once among the world’s highest, shrank below that of Shanghai in 2007 and Shenzhen in 2013.
The study also painted a gloomy picture for Hong Kong’s financial sector when China completes reform of the banking system and fully liberalises its capital account.
For the time being, Hong Kong is the largest offshore yuan hub, offering huge trading opportunities.
But when the yuan becomes fully convertible in a few years’ time, China and the rest of the world may no longer need Hong Kong as a middleman in facilitating the flow of capital, according to analysts at the Chinese Academy of Social Sciences, a government think tank.
China’s first pilot free trade zone in Shanghai has been making steady progress since it was launched last year, giving investors another gateway to the Chinese heartland.
When it’s replicated in other Chinese cities, Hong Kong will come under increased competitive pressure.
Still, the conclusions in these reports are far from accurate.
For instance, these did not factor in a substantial appreciation in the renminbi in recent years.
Also, there was no mention of Hong Kong’s per capita GDP (US$38,102) compared with that of, say, Beijing (US$15,176) or Shanghai (US$14,775).
Hong Kong is ranked fourth in global competitiveness by the International Institute for Management Development and seventh by the World Economic Forum this year.
The Trigger Trend report did point out some key issues worthy of consideration by Hong Kong policymakers.
It cited Singapore’s stellar GDP growth powered by liberal immigration and labor policies that have brought in 1.5 million workers to ensure sufficient labor supply for its infrastructure projects.
In Hong Kong, imported labor is a sensitive issue. Much of its population growth comes from poorly educated mainland women who come on one-way visas for family reunions.
Industrial diversification is another area in which Hong Kong can learn from. Singapore’s industrial output contributed to more than 26 percent of GDP last year while the figure for Hong Kong was a paltry 7 percent, according to the research.
Hong Kong’s tendency to use quick economic fixes — such as increasing welfare benefits and redistributing wealth to improve livelihood — is at odds with the principles of a free economy and its long tradition of positive non-interventionism.
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