Published: 11:37, August 21, 2020 | Updated: 19:28, June 5, 2023
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Innovation push to boost HK’s status as financial hub
By He Shusi

The Bay Area’s focus on developing new technologies will help HK compete better on the world stage. Experts say the SAR must also adopt favorable policies to lure tech companies to list in the city and enter global markets. He Shusi reports from Hong Kong.

Rapid high-tech innovation and transformation in the mega Guangdong-Hong Kong-Macao Greater Bay Area will lend further credence to Hong Kong’s status as a world financial hub, making the city an indispensable player in the region’s growth, economic experts say.

With Hong Kong’s solid standing among the Bay Area’s 11-city cluster, they see the region’s billion-dollar technology-related infrastructure push as a pillar that will sharpen Hong Kong’s unique advantages and retain its competitiveness in a complex global environment.

Since May, the Shenzhen and Guangzhou municipal governments have spent up to 600 billion yuan (US$86.66 billion) to shore up high-tech infrastructure and expedite digital transformation in the Bay Area.

Infrastructure investments are like the spine and bones of the Bay Area initiative. They’re the foundation, but will not take you to places without all of the supportive muscle and soft tissues

Carlos Casanova, head of APAC economic research at Coface

Robert Lui, government affairs leader for the southern region at Deloitte China, thinks the campaign will accelerate the upgrading of industrial chains of Hong Kong manufacturers based in the Bay Area and raise productivity. 

According to the Chinese Manufacturers’ Association of Hong Kong, the number of Hong Kong manufacturers based in the Bay Area had reached 21,345 as of 2018, with a combined turnover exceeding HK$900 billion (US$116.12 billion).

The application of 5G, big data and industrial internet can effectively boost the manufacturing sector’s digital transformation, Lui said.

Many companies engaged in the retail, education and healthcare spheres in both Guangdong province and Hong Kong have approached Deloitte seeking advice on how to be a part of the tech push, he said.

They want to participate in the process of optimizing logistics, making online education more effective, and boosting efficiency of online healthcare, by applying artificial intelligence and 5G technology.

Lui said the technological deployment will transform the business model of Hong Kong enterprises, enabling them to better cater for mainland customers in the digital age.

At the same time, more innovation and technology companies, as well as professionals from Hong Kong, will be able to participate in the development of new technologies, he said.

In the long term, Lui believes the infrastructure upgrade, as a backbone for applying new technologies, can help Hong Kong stay at the forefront of modern services, and keep its global competitiveness.

Edward Au, Deloitte China’s managing partner for the southern region, believes Hong Kong’s internationalized and diversified capital market can turn the city into an investment center for new economies.

Hong Kong can meet the financing demands of companies involved in new infrastructure projects by introducing various types of securitized financial products, including special bonds, he said.

Gateway to the world

Sherry Madera, chief industry and government affairs officer at Refinitiv, noted that Hong Kong is well positioned for international investors to participate in equity and debt fundraising for the Bay Area’s new infrastructure projects.

She noted that Hong Kong had held the crown as the world’s largest IPO market seven times in the past 11 years. 

In specific sectors, the development of biotech and fintech innovation across the region will give play to Hong Kong’s global financial system, especially with the innovative power of neighboring Shenzhen, which is home to tech giants like Huawei and Tencent, Madera said.

Last year, 11 tech and 14 biotech companies from the Chinese mainland went public in Hong Kong, accounting for 9.6 and 8.4 percent, respectively, of the total number of companies listed in the city in 2019. The trend has continued in 2020, with seven companies from the same sectors floated in the SAR so far.

The size of the Hong Kong market may be small compared to the mainland, but once the reach for new products and services is extended to the Bay Area, the “home market” for innovation becomes very appealing, Madera stressed.

The market is set to grow as the region’s population is projected to climb by 43 percent by 2035 and, therefore, continue to drive the area’s gross domestic product, she said.

Meanwhile, innovation and digitization generated under the region’s new infrastructure plan will be essential to test, track and ensure appropriate regulations in place to govern their use, she said.

Carlos Casanova, head of APAC economic research at Coface — a trade credit insurer — stressed that the right regulatory environment is needed to attract emerging tech companies in the Bay Area to list in Hong Kong and enter the international market.

“Infrastructure investments are like the spine and bones of the Bay Area initiative. They’re the foundation, but will not take you to places without all of the supportive muscle and soft tissues,” Casanova said.

Hong Kong needs to adopt the right policies and legislations to foster a favorable environment for tech companies, ensuring the city can be an intermediary for financial services and a gateway to global markets.

This means the SAR government must liberalize certain parts of the economy, Casanova said.

Moreover, he noted that Hong Kong has competitive advantages in the healthcare sector, helping it to play the role of a service provider for the rest of the Bay Area.

“For this to happen, the Hong Kong government needs to focus more on developing soft infrastructure, meaning higher expenditure on welfare services. In addition, it needs to support research and development efforts by the private, public and education sectors and liberalize the mobility of human resources.”

Ultimately, the booming new economies in the Bay Area can give better play to Hong Kong’s role as an international financial center, as well as an offshore pivot for mainland businesses, he said.

But it will depend on how well Hong Kong can improve the business environment, and upgrade the financial services sector, to ensure that the city is transforming at a speed that meets the needs of companies and clients in Guangdong, Casanova said.