23 February 2019
Hong Kong's stagnation vis-à-vis the formidable rise of neighboring competitors has prompted some observers to call the city's economic clout "purely past tense". Photo: Bloomberg
Hong Kong's stagnation vis-à-vis the formidable rise of neighboring competitors has prompted some observers to call the city's economic clout "purely past tense". Photo: Bloomberg

The 2047 endgame? It’s the economy, stupid

When the political situation gets complicated, people have a tendency to lose touch with fundamentals.

We struggle to attain genuine democracy and autonomy, but in the meantime, our beloved city’s competitiveness and economic status are on the decline.

Our progressive neighbors like Singapore and Shanghai are giving us a good run for our money.

Hong Kong is not making the kind of progress it deserves.

All this offers some food for thought: we must strive to maintain and sharpen our competitive edge, for the sake of our own political future and continuity post 2047.

The reason Beijing was willing to accord the territory with a “high degree of autonomy” when it was laying down its policy for the special administrative region was because Hong Kong’s economy and standard of living were way ahead that of China back in the 1980s.

The city was just like a first-world jewel sitting at the edge of a massive, forsaken backwater.

Make no mistake, Beijing could just have reclaimed Hong Kong without having to bother with the cumbersome process of consultation and diplomatic tug-of-war, if the territory was nothing more than some barren islet in the wilderness of the south.

What forced the despotic communist cadres to sit down on the negotiation table and go to great lengths to strike a deal with Hongkongers in the 1980s was the city’s economic triumphs and freewheeling capitalism that dwarfed the economic status of the sleepy Middle Kingdom.

Prior to the 1997 handover, according to World Bank data, the gross domestic product of Hong Kong, a miniature territory of some 1,100 square kilometers, was more than a quarter of the economic output of China, a vast nation of 9.6 million square kilometers.

Beijing was handed a gleaming “trophy” on a silver platter on the night of June 30, 1997.

‘Past tense’

Fast-forward to almost two decades later, and Hong Kong’s slackening growth, if not stagnation, compares poorly with the stellar rise of mainland cities that have multiplied their economic heft.

In 2011, Shanghai became the first mainland city to surpass Hong Kong in terms of GDP, followed by Beijing in 2013, Guangzhou in 2015 and very likely Shenzhen this year.

Shanghai’s 2015 output, 2.53 trillion yuan (HK$2.86 trillion), expanding 6.8 percent year on year, is almost 20 percent larger than Hong Kong’s corresponding figure (HK$2.4 trillion), which grew by 2.4 percent.

Tianjin, Chongqing, Suzhou, Wuhan, Chengdu and Nanjing are also set to overtake Hong Kong one after another in the next three to five years, and by then Hong Kong may be eased out of China’s top 10 cities in terms of GDP.

Such a dire forecast has prompted some mainland observers to call Hong Kong’s economic clout “purely past tense”.

On the global scoreboard of leading urban centers, Hong Kong’s GDP (US$309 billion) is also among the smallest: a fraction of the economic size of other metropolises and financial centers like Tokyo (US$1,520 billion in 2015) and New York City (US$1,210 billion), and around half of that of Los Angeles (US$789.7 billion), London (US$731 billion), Paris (US$669 billion) and Chicago (US$524.6 billion), according to Brookings Institution and Finances Online statistics.

Hong Kong also trails Seoul, Osaka, Moscow, Mexico City, Sao Paulo, Buenos Aires, and many other global cities.

The territory’s overall competitiveness slid two spots to the ninth place on the latest ranking of 138 economies worldwide by the World Economic Forum, triggering concern that it may be kicked out from the world’s elite league of top 10 next year.

Singapore, meanwhile, remains second overall for the sixth year running.

Another aspect of this sad tale is the demise of Hong Kong’s shipping hub status.

Gantry cranes in Hong Kong once handled more containers than any other port in the world for the better part of 1990s, but the city lost the crown of being the planet’s busiest cargo port to Singapore in 2004 and is also lagging behind Shanghai, Shenzhen, Ningbo, Qingdao and Busan in the first half of 2016 as measured by container throughput.

Hong Kong’s total volume of merchandise trade contracted 3 percent in 2015 to US$981 billion, and the downturn continued in the first three quarters this year.

Hong Kong can still leverage its core strengths in finance, yet its limitations are all too obvious.

It has a relatively small domestic economy with excessive reliance on equity and property markets.

Its stock listings mostly belong to the “old economy”. The turnover of its local bourse is tiny compared to Shanghai and Shenzhen.

It continues to struggle in the fields of foreign exchange, fixed income, commodities, private banking and alternative investment.

Red tape is stifling the development of its fintech sector – it’s been reported that Standard Chartered had to go through lengthy approval procedures with the city’s monetary authority for simply adding fingerprint login to its mobile banking app.

Before it’s too late

The only reason that Hong Kong’s constitutional framework and liberty have hitherto been in existence is because the territory remains useful to Beijing, particularly in finance and trade.

That said, the shifting of gravity northward vis-à-vis the string of not-so-heartening developments to Hong Kong’s own standing is consequential and will ultimately affect how the territory’s future will play out.

A more jingoistic Beijing thinks that Hong Kong’s growth story was a strange quirk of history, and, when the city’s prominence is fast diminishing, Hong Kong is becoming less relevant to the nation, already the world’s second largest economy.

Beijing can only become more hegemonic with the slow decline of Hong Kong in the run-up to the 2047 endpoint.

Once the bargaining power is gone and the city retreats into an economic backwoods, the odds will be stacked against Hongkongers when they seek to maintain or even advance the rights and special status guaranteed under “one country, two systems”.

By then Beijing may declare the entire arrangement has reached its use-by date and scrap it altogether.

– Contact us at [email protected]


Read more:

Economics of autonomy: How HK people are administering HK

Why Shanghai will not gain if Hong Kong stumbles

Wistful but powerful challenge from Singapore

While fighting for genuine democracy and autonomy, Hongkongers must strive to further boost the economy and competitiveness for the sake of 2047. Photo: Bloomberg

EJ Insight writer

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