Much of the discussion and debate about Hong Kong’s future in recent years has come back to one pessimistic assumption: the city’s best days are over. This assumption feeds into the uncertainty and distrust we see in the community today.
If we look at GDP growth and unemployment levels, we can see that many people and industries in Hong Kong are doing well. But we all know that some individuals, social groups and business sectors are not.
We see this in the growing wealth gap and the slowdown in growth in median incomes. But it is not simply about ‘haves’ versus ‘have-nots’ in terms of current wealth. It is about some parts of the community having hope and optimism, while others see a gloomy future with few opportunities. The danger is that the former become more defensive, selfish or resistant to change, while the latter become more hostile or radical.
Hong Kong is not alone in seeing growing economic and social divisions. These trends have affected other developed economies and led to a rise in populism, reflected in the Brexit referendum result in the UK and the victory of Donald trump in the US.
These trends in Hong Kong are linked with the rapid development of the Mainland, globalization and the technological changes that have transformed the world in the last few decades. Hong Kong’s flexible and adaptable economy helped us make the most of opportunities in the past. Can the city do the same in the future?
A small group of academics and researchers has produced a report for the Our Hong Kong Foundation called “Yes, Hong Kong Can!” The report questions the whole idea that our best days are over. Indeed, it suggests that we have significant potential for future growth that would take us past New York and London as a financial and business center.
History gives an idea of Hong Kong’s ability to grasp opportunities. From 1961 to 1980, the Hong Kong economy quadrupled in size in real terms – a growth rate of 8.5 percent a year. In the following 35 years up to 2015, the economy still expanded at an annualized rate of 4.6 percent.
Such growth – in a small territory with no natural resources – inevitably required significant economic transition. Hong Kong reinvented itself over roughly half a century from a trading port to a manufacturing center to provider of capital and expertise. That is how our per capita GDP went from less than US$4,000 in the early 1960s to over US$42,000 today in real terms.
The “Yes, Hong Kong Can!” report makes some important basic points.
One is that economic growth will be the main key to reversing and solving our gap in incomes. The report asks whether we can find ways to ensure that the benefits of future growth are tilted in favor of the lower-income groups.
Another point is a reminder that Hong Kong’s future lies in serving the surrounding region and the broader international economy. Few economies in the world are self-sufficient, and a small territory like Hong Kong has no hope of following an isolationist or protectionist course.
The key issue for many people is what sort of economic activities Hong Kong should specialize in if it is to continue its past strong growth.
The report offers some familiar broad ideas, like creative industries and innovation, and specific activities like offshore renminbi business and international arbitration services.
But the researchers stress that we must adapt to changes in the external environment. This is probably a key point: we cannot pick and choose what those changes will be.
For example, the internationalizing of the renminbi offers us major opportunities. But the timing and pace of the change are difficult to forecast precisely.
China’s growth model will undergo major transformation in the coming years. It will rely less on growth in capital investment, labor and export of manufactured goods. It will shift towards research and development and other forms of innovation, economies of scale and other ways to enhance productivity.
It will be gradual, and it could affect some regions or sectors sooner than others. This makes it difficult to predict the exact impact on Hong Kong industries like logistics or trading, which might see declines. It also makes it hard to forecast the impact on high-end services in finance or law, which could see growing demand. Some of the best opportunities may come in forms that we do not yet even envisage.
It all keeps coming back to one core feature of Hong Kong that remains constant: we must above all retain our flexibility. Enabling and maintaining our ability to adapt to change should be one of the government’s top economic endeavors.
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