Hong Kong must cement its special status in line with China’s next five-year development plan, Fang Zhou, director of the One Country Two Systems Research Institute, wrote in the Hong Kong Economic Journal.
The former British colony has four key roles to play that should help it strengthen its edge during the mainland’s 13th Five-Year Plan period, which runs through 2016 to 2020, even as some mainland cities step up competition, Fang wrote in a column Monday.
First, Hong Kong can act as a test-bed for China’s service trade liberalization as Beijing pushes industrial upgrade and modern service development, he wrote, adding that the Closer Economic Partnership Arrangement (CEPA) between the two sides will continue to deepen and widen.
CEPA will open up more service businesses in the mainland to Hong Kong firms. A “negative list” model will be adopted for some sectors with restricted access, which will help lower the entry threshold for Hong Kong service firms relative to other overseas entities.
The negative list model is expected in sectors such as tourism, logistics, exhibition, trade and freight forwarding, according to Fang.
Second, Hong Kong has a key role to play as China seeks to improve and open up its financial sector.
The city is a major offshore renminbi centre, having total renminbi capital pool of over 1 trillion yuan. The Hong Kong government should study more ways to channel this capital back into the mainland market. Authorities should expand and widen the channels and scale of renminbi capital flowing back to mainland on the basis of the trial program in Shenzhen’s Qianhai economic zone.
Moreover, Hong Kong should attract more foreign nations, like Russia and Brazil, to issue offshore renminbi bonds and help push the yuan internalization, Fang wrote.
Third, Hong Kong can assist Chinese firms that seek to invest or expand overseas. The central government has outlined a “go-out” strategy, which should prompt more mainland firms to venture overseas.
China’s foreign direct investment overseas hit a record high of US$107.8 billion last year, up 22.8 percent compared to the previous year, while foreign investment into China reached US$117.6 billion. The country was ranked as the world’s third largest investor.
In 2014, China’s outward investment is expected to exceed the inbound investment. The country has been enhancing efforts to revive growth along the Silk Road and the so-called Maritime Silk Road. Therefore, Hong Kong should strengthen its platform for China’s outward investment, Fang wrote.
Hong Kong has already acted as a “gateway” for Guangdong-based companies that seek a global presence, and has also served as a key platform for raising funds and in offshore asset management.
Given this record, Hong Kong must build itself as the overseas operational centre for mainland companies and attract more firms to set up overseas headquarters in the city by leveraging the ‘one country, two systems’, Fang wrote.
And lastly, Hong Kong can help China realize its urbanization mission.
Hong Kong has accumulated extensive experience in city development and management. The special administrative region, for instance, has connected with neighboring cities in the Pearl River Delta and built up a successful transport-oriented development model.
Such model can be exported to other mainland cities or even other countries, Fang wrote.
One Country Two Systems Research Institute is a private non-profit policy research organization based in Hong Kong.
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