Is Hong Kong still so peculiar as “Special Administrative Region”? Its “One country two system” status made it smart enough to take advantage of its role and location? The answer is complex.
Economic indicators are still on its side, even if some trends like increasing pollution and income concentration make its future unclear. We should forget the imposing skyscrapers and the glittering shopping centers. In reality, the former colony has tried so far to perpetuate its function as “gateway to China” and it has lapsed into a comfortable past. Factories were shut down and moved to Guangdong just to be replaced with financial services and tourism facilities.
The Hong Kong Stock Exchange (HKSE) is one of the world’s largest, fostered by Chinese companies’ IPOS’. Mainland corporations are 19% of all firms listed in the HKSE, but account for 62% of its capitalization. Hong Kong’s tertiary sector – impeccable and corruption-free – now represents 90% of GDP. Still, these results have been achieved because of the proximity to the Mainland. Toys factories were not replaced by new smoking chimneys or by different manufacturing outfits. Old money went North to build real estate and did not fund innovative processes or products at home, like R&D centers, business schools, knowledge-based industries.
The former colony is still a cash cow, but is gradually lacking personality and identity. Any future projection should consider the “lost decade”, when Hong Kong missed the opportunity to build a different future and chose instead an easy link with Mainland China, binding its destiny to Beijing only. Singapore took another direction. Similarities with Hong Kong are obvious: former British colony, mainly Chinese populated, huge port facilities, and very high income. Similarities stop when economic and industrial policies are considered.
Singapore delocalized too, due to increasing land and labor costs. Surrounded by unfriendly neighboring Muslim Countries and without the protection of China, Singapore was however forced to find a way to the future in unchartered territories. The city-state modernized its industry as the Government was determined to maintain the industry’s contribution to GDP at 27%. The secret recipe was to close obsolete factories and privilege innovative ones: fine-chemical, pharmaceutical, biotechnology, electronics, “medical tourism” and “international education” are today the cornerstone of Singapore’s new success. The Lee Kuan Yew School of Public Policy”, named after the founder of contemporary Singapore, is among the best reputed in the world.
The difference with Hong Kong is striking. True, Singapore Government has bigger responsibilities, being an independent state. But Hong Kong ceded its peculiarities too soon to link up with Mainland China, even more and faster than it was expected. Hong Kong businessmen found easy to go make money in real estate or in traditional low-tech industries in Guandong and did not have to scratch their head to find creative or risky solutions. This comfortable piggy backing will last up to the moment Beijing and international companies will not need the old “gateway to China”; probably soon.