“[But] Hong Kong and Shenzhen to a certain extent, cannot be compared … for a start, the legal structure is not the same,” he said. “In the short term, I can’t see how Shenzhen can replace Hong Kong.”

Hong Kong operates on a common law system that is aligned with international standards and globally accepted for conducting business. Chau said that even if Shenzhen were granted new policies to deepen reforms, its legal system would still be built on Chinese law, which was not internationally accepted.

A second factor that set Hong Kong apart, he said, was the free flow of information. This is critical to making well-informed business decisions and something that China lacks due to the “Great Firewall” that regulates the internet and a heavy domestic censorship of news.

The two factors, coupled with Hong Kong’s international standards of doing business and free capital flow, have seen Western governments grant economic privileges to Hong Kong that no other mainland Chinese cities enjoy, pointed out a Chinese academic who spoke on condition of anonymity because of the sensitivity surrounding the subject matter.

In 1992, the United States Congress passed the US-Hong Kong Policy Act, which treats the city as a separate entity from mainland China. The law grants Hong Kong economic and trading privileges, including access to sensitive technologies and the free exchange of the US dollar with the Hong Kong dollar.

These benefits are contingent upon Beijing fulfilling its commitments under the 1984 Sino-British Joint Declaration on Hong Kong, which allowed the city as a Chinese Special Administrative Region to keep a high degree of autonomy, freedom and rule of law until 2047.

The US-Hong Kong Policy Act also empowers the US president to issue an executive order suspending some or all of Hong Kong’s privileges if the city “is not sufficiently autonomous to justify treatment under a particular law of the United States”.

“These economic and trade privileges that the West has given Hong Kong are equivalent to [those given to a sovereign] country. If the West stops granting them, Hong Kong would be as good as dead; its advantages would be gone,” said the academic.

With complete freedom of capital movement and the ability to operate seamlessly in both onshore and offshore markets, Hong Kong has become by far the largest offshore yuan trading centre, with the biggest overseas pool of the Chinese currency.

More than half of Chinese companies’ initial public offerings abroad take place in Hong Kong, which also accounts for the bulk of corporate bond sales by mainland firms. The city is also an important springboard for foreign investment entering and exiting China. About 65 per cent of foreign direct investment into mainland China came from Hong Kong last year and 70 per cent of China’s outward investment goes through the city, according to Chinese official data.

So, even as Beijing grants Shenzhen further leeway to experiment with reforms, Hong Kong’s decades of experience and credibility as an international financial centre and business city cannot be eroded easily.

“Hong Kong’s legal and regulatory system can be replicated to some degree on the mainland,” said Mark Williams, chief Asia economist at Capital Economics. “But the foundation of Hong Kong’s success is that laws and regulations are fairly and predictably applied, even if that constrains the powerful. People and firms on the mainland don’t have that reassurance. It’s the difference between rule of law and rule by law.

“And on capital flows, you can’t build a global financial hub somewhere that the authorities reserve the right to restrict capital flows at any time.”

According to the 2018 Global Financial Centres Index 25, which was released by London-based Z/Yen Partners and the China Development Institute in March, Shenzhen ranked 14th among global financial centres, with Hong Kong third behind New York and London.

The research argued that financial centres thrive when they develop deep connections with other centres, as in the case of Hong Kong’s strong links with both New York and London, rated between 80 to 99, at the top of the scale up to 100 points. Shenzhen, however, has no rating at all.

Long, who headed the Chinese team that negotiated China’s entry into the World Trade Organisation in December 2001, argued that Beijing’s directive to elevate Shenzhen’s status should not be interpreted as an attempt to erode the position of Hong Kong, whose proximity has contributed to the Chinese city’s rise and remains its unique advantage.

Under Beijing’s directive, Shenzhen will transform into a model “socialism with Chinese characteristics” city built on a modern economic system that will lead the nation’s “high-quality development”. It will also become the model for a legal city that “creates a stable, fair, transparent, and predictable international and legalised business environment”.

Released at the end of August by the State Council, China’s cabinet, the directive with its wide-ranging policies supports reforms in industries including technology, medicine and finance, research into cryptocurrency, enhanced mutual recognition of financial products with Hong Kong, as well as further internationalisation of the yuan and pilot cross-border financial regulation.

“To think that Hong Kong’s problems today provides Shenzhen with an opportunity is an extremely wrong concept. Only when Hong Kong is doing well will Shenzhen do better,” said Long.

From a domestic perspective, the Chinese academic said Shenzhen’s new status could also be read as Beijing’s search for the next development model to address mounting pressures within the country and from abroad to keep its economy humming and society stable.

Shenzhen is forecast to be one of the 10 largest city economies in the world by 2035, with a gross domestic product reaching US$800 billion based on 2015 prices, according to Oxford Economics.

Whatever the views towards Beijing’s push for Shenzhen are, or where Hong Kong stands amid its worst political crisis since it returned to Chinese rule in 1997, politics are increasingly intruding in the situation.

Economists from Capital Economics, including Williams, believe that the protests highlight the growing strain on the “one country, two systems” framework that allows Hong Kong to retain its attractive legal, regulatory and tax structures.

“But with politics increasingly taking precedence over economics, we suspect that the Communist Party would be willing to undermine the foundations of Hong Kong’s success if it felt doing so was necessary to keep the city in line,” they said.

Additional reporting by Karen Yeung

Other articles in this series have analysed how Carrie Lam has ruled out a police inquiry, Hong Kong’s emergency law, whether protests will ruin the city’s role in the Greater Bay Area plan, Taiwan’s high stakes in the protests, how leaders have spurned the chance to listen to public opinion, and how Beijing keeps getting Hong Kong wrong