Reforming Hong Kong for the better: Economics and finance

April 12, 2022 09:50
Hong Kong skyline (photo: Reuters)

The past few years have been extraordinarily treacherous for Hong Kong. The 2019 anti-extradition bill protests exacerbated long-standing grievances and divergences between the mainland and Hong Kong, and culminated at seismic transformations to the political order in the city. With the introduction of legislation designed to ‘restore order and balance’ to the city, some suggest that the city’s financial and economic infrastructure is no longer intact, and that we fundamentally are living in a city that is creeping into its dying days. The party, and the Halcyon Days it stands for, is over for Hong Kong – or so they claim.

With Beijing’s concerns over Hong Kong’s security taking the foreground, and continuous retaliative economic sanctions implemented by the West against China (including Hong Kong), a spectre haunts Hong Kong’s prospects as an international nexus – especially in the financial and economic spheres. Coupled with the city’s flip-flopping, confusing, and despair-inducing approach to COVID-19 that we saw in last two years, serious doubts have been cast over this what once was called the Asia’s world city, as to whether Hong Kong could rebound from the crisis and live up to its brand name. On the other hand, Singapore as a bilingual international city is opting for an open border strategy to all-vaccinated travellers and ready to attract the exodus of firms and talents from Hong Kong, offering similar business and regulatory environment as Hong Kong,

Over the next series of articles, we hope to shed some insight into how reforming Hong Kong remains possible, and that restoring the mojo of the Hong Kong that once was, is a moral prerogative by which all responsible and conscientious agents must and should act.

Let us begin with the economic and financial question. Notwithstanding the aforementioned hardships, there remains much ground for Hong Kong to be confident in its software and hardware, and much room in its potentially utilising these advantages to further its key competitiveness in enhancing China’s global and international standing. A recent Global Financial Centres Index published by Z/Yen and the China Development Institute still ranked Hong Kong as third overall, behind New York and London and ahead of Shanghai. Hong Kong ranked amongst the top in business environment, human capital, infrastructure and general reputation. This is an encouraging news despite the overly poignant views.

Infrastructurally, Hong Kong should seek to use its world-class transportation and aviation system to engage the world, where it champions efficiency in public transport such as the MTR and as a major international aviation and flight-logistics hub. As we are seeing a clearer roadmap to reopen its borders, we need an exit strategy to give forward guidance and signalling effects to the world, that Hong Kong is ready to continue its function as a global and regional business hub.

Powered by a pool of talented and largely English-speaking professionals, the financial service sector contributes almost a quarter of Hong Kong’s economy, that employs 7.5 per cent of labour force in 2020. Whilst we are witnessing an exodus and potential brain drain, absconding during the latest changing political environment and COVID-zero strategy, Hong Kong must be committed to breeding local talents and offering attractive remuneration packages to international talents to enable Hong Kong’s future success in financial services.

In the same report as aforementioned, Hong Kong’s financial sector development was ranked outside of top 10. This means that despite Hong Kong being one of the world’s most active markets for initial public offerings (IPO), with US$51 billion raised in 2020., it needs to continue developing its financial service sector, particularly in financial technology.

In this still overly cash-driven society, the new administration should strive to articulate a clearer vision in its FinTech development within the city, despite the growing popularity of Fast Payment System and PayMe during the pandemic. Its invention of the Octopus Card which dated back in the late 1990s was a hype then, but has yet to see significant wider adoption, particularly among the SMEs and boutique stalls, a sharp contrast to its border city Shenzhen, where cash is rarely used. Additionally, Hong Kong may experiment to develop regulated cryptocurrency experimentation to restore confidence in its international, liberal and laissez-faire financial status, so as to position it as the only safe and regulated place on Chinese soil.

Moreover, Hong Kong must not overlook its strategic location and close proximity to China. Multi-national companies set up their headquarters here and leverage it as a gateway to China, and being able to reach half of the population within a five-hour flight. With the city’s mature legal and financial services, Hong Kong should lead in these aspects – to provide a trusted system for dispute resolution, mediation, international arbitration and court procedures, to facilitate trade financing and cross-border resource flow. Whilst Hong Kong does not have control over capital movement, capital gains and dividend income tax, it can and ought to leverage these advantages and synergise with China to help foster the internationalisation of the RMB, yet remain an open door to attract foreign direct investment.

Hong Kong once again is at a crossroads. Yet we must with all our might and candid devotion, step forth to renew and reform our city financially and economically.

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Brian YS Wong is the Founding Editor-in-Chief of the Oxford Political Review. Neville Lai is the Vice Curator-elect of Global Shapers Community Hong Kong Hub.

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