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When Hong Kong Tops the World...
Hong Kong has emerged top in the World Economic Forum's index of financial market development, surpassing the United States and United Kingdom from the highest rankings for the first time, making it the first Asian financial center to lead the 60-country index, according to the Forum's fourth annual Financial Development Report released last week.
So that's great news for Hong Kong, the most developed financial market in the world. And implicitly, the most competitive? But Hong Kong should know better than to be complacent. No doubt the territory has benefited from the Big Brother in the north but I am, as usual, concerned. Here's one recent example.
I found myself dozing off at a conference in Zurich early last month, called “Hong Kong: China’s Global Financial Centre” hosted by the HKMA, InvestHK and the SFC primarily to promote Hong Kong as the premier offshore renminbi trading center and an international asset management center.
It may be a good way to promote Hong Kong. After all, Hong Kong is often dubbed the number one IPO center of the world, is fast becoming the leading financing market for world mineral and exploration companies and a major hedge fund center among other attributes listed in the glossy brochures given out at the conference.
Most important, Hong Kong is the first offshore renminbi business center to launch investment products denominated and cleared in the Chinese currency. Banks in Hong Kong handle more than 80 percent of the cross-border renminbi trade, tagged at RMB597 billion (or 10 percent of mainland China’s total merchandise trade) at the second quarter this year, on the backdrop of a fast expanding renminbi trade settlement scheme. Hong Kong is the also first city outside of mainland China that has developed a bond market denominated in the Chinese currency.
With such ammunition stacked to impress the roughly 100 financially-savvy Swiss in attendance at the Marriott Hotel in downtown Zurich, eager to get updates on the latest developments in Greater China, I would have bet my mortgage that it would have really got them moving. I was wrong.
From where I was sitting, at the back of the hall, I could see a very bored and restless audience. You couldn’t blame them. The panelists on stage were not only unable to capitalize on the territory’s strong points and impress the audience with the “Hong Kong advantage” but were so carried away that they literally talked among themselves and totally alienated the audience – those taking quick notes on the floor initially began taking more interest in their BlackBerrys and iPhones.
After the panel realized they had spoken too long amongst themselves, the audience dragged through the shortened question-and-answer session to the point of embarrassment for having no question asked. Somehow, three eventually came and one stood out.
The question goes something like: Has Hong Kong lost its competitiveness given that some Chinese mainland companies have recently chosen to list in Germany and Switzerland instead?
An anticipated and easy question to handle, I thought. Wrong again.
The panel struggled, exchanged looks with the head table searching for support and finally the answer came from one panelist on stage.
“Hong Kong is a free market” and you know the rest of the usual spin and unconvincing hot-air response.
I am still deeply disturbed by what I witnessed. Surely, there were several ways to handle this supposedly often-cited query but that wasn’t even the issue of the day.
The core underlying concern is that Hong Kong needs China and the support of Beijing. Hong Kong has been heavily reliant on mainland China, even though it has many indisputable and unparalleled advantages to showcase to the world. I bet this was obvious even to the Swiss audience in Zurich that day, even those with little or no familiarity with Hong Kong.
Hong Kong has hollowed out its manufacturing capabilities - economists are often hard-pressed these days to produce a list of things actually produced in Hong Kong - but what remains of its strengths, like the strong legal system, a world financial center, regional logistics hub, free flow of information, etc , will be increasingly dependent on China.
The InvestHK web site has a corporate video to promote “Hong Kong Advantages”. It comes across as a textbook-styled list of bullet points of hot air without any material substance or facts to back up – and I lost count of the number of times the word “free” was emphasized throughout the video but anyone residing in Hong Kong long enough will recognize how meaningless that has become in recent years. And the Financial Services section of the web site is not even updated, boasting data dated to only 2009.
So while the going is still good, it saddened me that an occasion like the recent Zurich conference comes across as a (or another?) lost opportunity.
Hong Kong has been enjoying all these freebies from China. One day it may become the parasite of China, one attendee told me privately during the intermission. I cannot help wondering if Hong Kong has become complacent.
(Vanson Soo runs an independent business intelligence practice specialized in the Greater China region. This appeared simultaneously in The Standard of Hong Kong. Email: firstname.lastname@example.org)