A bridge to Hong Kong's centrally planned future?
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A bridge to Hong Kong’s centrally planned future?
The recent opening of the Hong Kong–Zhuhai–Macau sea bridge is a symbol of Beijing’s plan to draw the disparate pieces of southern China’s US$1.5trillion GDP into an integrated whole. It is a potent symbol of the regional development plan for the Greater Bay Area, which will coordinate the economic integration of 12 Guangdong cities. From the provincial capital of Guangzhou down through the export-oriented towns of the Pearl River delta to China’s tech hub at Shenzhen, and finally to laissez faire Hong Kong. Ironically, Hong Kong could most benefit from some economic planning a la Beijing.
Since its return to China in 1997, the city that prides itself on free markets has not only struggled to evolve, it has stalled in place. The stock market and property bubbles that are held up as signs of success are in fact anything but. The economy is still dominated by the finance, property and shipping sectors in the same ratios as 20 years ago. The territory’s leadership has outlined no future vision and done nothing to diversify the economy away from the financial and property cartels that distort daily economic life and fuel social discontent. Cozy oligopolies dominate virtually all facets of commercial life from taxis to telecoms to supermarket retailing.
Although blame is often directed at Beijing’s alleged interference in Hong Kong, this situation is actually a result of poor governance at the municipal level. Since 1997, the Hong Kong government has come increasingly under the sway of powerful local vested interests. The Legislative Council is dominated by the city’s commercial elite – Hong Kong’s leadership (executive, legislative and commercial) are one and the same – so there is limited ability to combat the interests of large family business groups. The property cartel that enriches a few large corporate players, but also generates a disproportionate share of government revenue, is a good example of the systemic conflicts that abound.
There is no question that Hong Kong has fallen behind its regional peers. In less than a generation, cities that once lived in Hong Kong’s commercial shadow have surpassed it. Shanghai has become the centre for multinational firms’ China operations and once sleepy Singapore has attracted global money managers, commodity traders and tech magnates – in both cases with significant government planning, support and direction. Most worrisome for Hong Kong, however, should be its near neighbor Shenzhen.
No one could have predicted the poverty-stricken village across the eponymous river would one day overtake Hong Kong’s economy, but as of this year, Shenzhen’s GDP will equal if not surpass Hong Kong at about USD 350bn. This is the result of a strategic vision to transition the city from being Hong Kong’s sweaty, labour intensive assembly line to one of the globe’s leading technology hubs. Shenzhen invests roughly 4% of GDP in research and development – in line with South Korea and Israel – and twice China’s national average (Hong Kong invests less than 1%). Today, it is home to the country’s most advanced and dynamic companies: PingAn, Huawei, DJI, ZTE, Foxconn, Mindray and Tencent (the latter ironically now accounting for about 15% of Hong Kong’s Hang Seng Index).
By contrast, Hong Kong’s leadership has never outlined a strategic vision for the city’s future beyond land and stock speculation, and this needs to change. The city desperately needs to diversify the economy and its tax base to minimize its reliance on revenues from property transactions. It has ample financial resources to fund greater research and development. Hong Kong needs to find a role for itself in the Greater Bay Area, position itself as a base for Chinese companies operating internationally, and maintain its rule of law to retain the confidence of international business.
With a Gini coefficient of 0.54 – a near all-time high – Chairman Mao could justifiably quip that modern Hong Kong is a society in a ‘pre-revolutionary’ state – one dominated by monopolies and oligarchs. A rentier society where capitalism knows no limits and government fails to act as a restraining force because it too has been captured by that same oligarchy. Hong Kong could do worse than expect some strategic ‘central planning’ from Beijing – let’s hope as a part of China’s Greater Bay Area it finally gets some.