Just another Chinese city? 3 reasons you can’t write off Hong Kong

Hong Kong is the heart of the Greater Bay Area, has growing ties with emerging economic blocs in Asia and the Middle East, and remains an international lifestyle and financial centre
With each economic swing of the pendulum, Hong Kong has adapted and thrived – and defied the critics

Ronald Chan

Published: 9:30am, 21 Feb 2024

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Over the past few years, and more recently, commentators – often from afar – have tried to write off Hong Kong or say that our time is over. Nothing could be further from the truth.

Hong Kong is at the heart of a newly emerging economic powerhouse with extraordinary growth potential. Our stock market ranks sixth in the Asia-Pacific by capitalisation, and ninth globally. London, a long-established economic and financial hub, ranks 11th. While the Hong Kong market has had a few tough years, it also pays out dividends that are three times that of the Southeast Asian bourses combined and double Japan’s – indeed, its payout is the highest after mainland China’s.

Change and reinvention are central to Hong Kong’s DNA, as are our legendary resilience and fortitude. Time and again, we have been told that our days were numbered, that we would become “just another” Chinese city.

Looking at the success of many Chinese cities compared to their Western counterparts, this seems like a good plan, but for many reasons, it simply will not happen. Hong Kong, as always, will redefine itself and chart its own course.

As a strong starting point, our ratio of debt to gross domestic product is extremely low (at 7 per cent), so the government has the financial capacity to continue to invest, whereas many global economies exited the pandemic with heavy debt loads.

I am confident that our success will be based on three factors. First, Hong Kong is at the heart of the economic and commercial Greater Bay Area rocket ship in southern China.

With 11 cities, a population of 86 million and a GDP of about US$2 trillion (on a par with South Korea’s), the only way is up for the Greater Bay Area. By 2030, the World Economic Forum expects the Greater Bay Area’s GDP to more than double to US$4.6 trillion – this is equivalent to about 10 per cent growth every year, against 2.2 per cent for global GDP.

Shenzhen, just one Greater Bay Area city out of many, has a population of nearly 18 million, close to what London and New York have combined. Hong Kong is already a financial hub similar to London or New York. Shenzhen will be, or possibly is, the new Silicon Valley, while Macau can be a family-friendly Las Vegas.

Now imagine all these cities being less than an hour away from one another, rather than thousands of miles apart. While the precise outcome cannot be predicted, the Greater Bay Area offers limitless economic, business and societal potential.

Second, our closer ties with North and Southeast Asia, the Middle East and mainland China offer Hong Kong tremendous opportunities for business and economic growth.

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Global GDP reached US$100 trillion in 2022 with the Asia-Pacific and the Middle East accounting for more than a third, at around 35 per cent. Regionally, we are among the top trading partners for Japan, South Korea, Singapore and Vietnam.

Looking towards the Middle East, we are the United Arab Emirates’ eighth-largest partner. Last month, Hong Kong signed a memorandum of understanding with the kingdom of Saudi Arabia to enhance financial market connectivity.

The direction is clear: new economic blocs are being developed and Hong Kong will be a key player in this emerging environment. The mainland is just one of many players in Hong Kong’s economic future.

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Third, Hong Kong is both an international lifestyle centre and a financial centre. It is a wonderful place to live, work and play in, along with fast-growing cities in the Greater Bay Area that are less well-known, such as Zhuhai, Foshan and Huizhou.

Hong Kong has mountains, beaches, world-class restaurants, superb public transport and warm weather, all within 1,115 sq km and at a top income tax rate of 17 per cent. We are an incredibly safe city, have a vibrant multinational culture, and offer direct travel connections to the rest of the world from our award-winning airport.

The development of the airport alone is a metaphor for Hong Kong’s growth. As anyone flying over the construction will have seen, the scale is breathtaking. Our very own 50,000-seat Kai Tak stadium will soon open, which will help Hong Kong attract and retain international talent.

Art Basel will return the city next month. The Milken Institute will hold its first-ever Global Investors’ Symposium in Hong Kong on March 26, attracting leaders from the Asia-Pacific and globally. Soon, we will also welcome LIV Golf and the best players from around the world.

Hong Kong must look beyond outdated formulas to thrive

Economies are like pendulums: development and growth come in cycles. Like every global economy, Hong Kong has experienced numerous swings, both positive and negative. We adapt and change each time to thrive in the next. Our critics would be well advised to focus on the future of Hong Kong as well as the present.

I like the perspective of Austrian economist Joseph Schumpeter who coined the term “creative destruction” in 1942. He characterised it as the process of industrial change which constantly revolutionises economic structures from within, creating new ones. This seems like an excellent metaphor for our future. In with the new. See you in Hong Kong.

Ronald Chan is the founder and chief investment officer of Chartwell Capital Limited, a Hong Kong-based asset management company