In a more divided world, ‘superconnector’ Hong Kong must get creative

In a more competitive world with multiple economic hubs, the once-dominant influence of East-West superconnectors is waning
Hong Kong must capitalise on the Greater Bay Area, Belt and Road Initiative and focus on ‘sweet spot’ sectors where China and other regions seek better cooperation

Janet Pau

Published: 3:30pm, 19 Dec 2023

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To achieve or maintain a “superconnector” status in an increasingly fragmented world, Hong Kong must adopt new strategies.

Historically, superconnector economies served important functions. Typically located at crossroads or between major economic regions, they are natural hubs for trade, investment and transport. They often have well-developed financial sectors that provide sophisticated services for cross-border transactions, streamlined customs procedures and efficient logistics networks. As such, they wield an outsize influence in facilitating global exchanges.

Today, many countries are embracing an “inward” approach as the new norm. Geopolitical tensions, a rollback of policies supporting international investments, rising trade barriers and military conflicts have erected higher fences and obstacles to global interactions and cooperation.

For these countries, the pursuit of intermediaries – whether countries or cities – to foster connections with entities beyond their immediate vicinity has become less of a priority. Some businesses are opting for a more localised approach to operations and supply chains. Nationalistic leaders have gained popularity and power, and 2024 may see an increase in protectionist-leaning economic policies.

The acceleration of digital technology has made information more easily accessible and affordable, reducing the need for intermediaries as information providers. Moreover, multinational companies now have a broader range of tools to directly connect with and transact in new countries.

The competitive landscape for superconnector status is crowded, with cities such as Singapore, Hong Kong, Dubai and New York all vying for recognition. Hong Kong has long held the crown as a superconnector economy, punching above its weight. More recently, it has also acted as a strategic intermediary, strengthening mainland China’s ties with other countries.

Chief Executive John Lee Ka-chiu speaks at the Hong Kong Economic Summit on December 4. Photo: Handout from Hong Kong’s Information Services Department

The challenge is to maintain Hong Kong’s self-proclaimed title as “Asia’s World City”, given that neighbouring Singapore is especially attractive to foreign businesses seeking an inroad into Southeast Asia, and new and direct ties between China and Singapore reduce the need for Hong Kong as an intermediary.

Like Hong Kong, Singapore boasts advanced infrastructure, business-friendly tax and other policies, and a strategic location in Southeast Asia with extensive shipping and air connectivity with the rest of the world. Importantly, Singapore is perceived as an impartial intermediary between different countries and regions, and offers a stable and predictable operating environment.

Hong Kong, however, maintains a unique advantage over other superconnector economies, such as Singapore and Dubai, due to its inclusion in the Greater Bay Area.

This grants Hong Kong access to a larger population and a diverse range of companies. Hong Kong can capitalise on this advantage by ensuring fair and balanced collaboration between foreign entities and China. It can establish industry-specific bodies dedicated to overcoming operational barriers in new industries and reducing costs, while adeptly managing intricate legal nuances.

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Taking a step in the right direction, Hong Kong established a green technology committee this year, composed of scholars, regulators and business figures, to enhance its status as a global green tech hub.

This industry-specific agency in Hong Kong will be particularly helpful to Middle Eastern investors looking to diversify their fossil fuel-based economies and invest in green tech industries in China and the rest of Asia, as both regions set their eyes on decarbonisation.

Recently, Middle Eastern businesses have shown interest in partnering Hong Kong in industries where there is high growth potential, such as technology, renewable energy and healthcare.

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Hong Kong’s connections with the mainland and the rest of the world make it an attractive destination. The city remains a magnet for foreign direct investment, with inflows of US$118 billion last year, placing it fourth in the world for FDI, according to the Unctad World Investment Report 2023.

Moreover, with the Belt and Road Initiative well into its 10th year, there will be opportunities for Hong Kong to act as a link connecting not only the Middle East but also Africa and Europe to mainland China. Establishing country and industry-specific committees and dispute resolution procedures could further enhance ties.

Additionally, focusing on sectors where China and other regions seek better cooperation is a sweet spot for Hong Kong. Education, a highly competitive sector at all levels, benefits from Hong Kong’s networks and influence, enabling education providers to reach potential students, partners or donors. Other value-added functions include accessing new markets and technologies.

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Healthcare, in which Hong Kong has traditionally excelled, is another sector where intermediaries can assist with licensing, compliance, research cooperation and relationship-building in areas of common interest to China, the region and the world. For instance, advancements in detecting and treating cancer and neurodegenerative diseases would benefit humanity.

Long-standing people-to-people relationships are crucial, as they are built over many years and decades. These relationships help set Hong Kong apart. The strengths of Hong Kong business leaders and professionals include understanding cultural nuances, facilitating and convening productive conversations, and managing diverse and highly skilled talent. Hong Kong must cultivate a new generation of students and business professionals who possess these skills and can establish trust and mutual understanding from the outset.

In a more competitive world with multiple economic hubs, the once-dominant influence of East-West superconnectors is waning. Yet, functional connective tissue is necessary, to enable seamless business operations and the exchange of ideas in new industries and activities. The people of Hong Kong have long shown their adaptability and flexibility, making them invaluable assets in a world that urgently needs revitalised connections and new bridges.

Janet Pau is executive director of the Asia Business Council