Published: 23:14, March 3, 2024 | Updated: 09:48, March 4, 2024
Speculation about the SAR’s impending demise is overexaggerated
By Andrew Leung

I was putting the finishing touches to my rebuttal to the latest Cassandras about Hong Kong’s impending demise. Then I watched on television Hong Kong Financial Secretary Paul Chan Mo-po’s well-placed budget speech addressing Hong Kong’s dark clouds today as well as its challenges and opportunities tomorrow. 

Perhaps his budget speech is the best riposte to Hong Kong’s doomsayers. It details Hong Kong’s concrete future-oriented measures to embrace artificial intelligence (AI), the digital economy, green finance and talent-pool building, growing the city into the world’s ideal place where East meets West in arts, culture, sports, tourism and mega-events, including high-end business and intellectual roundtables. 

However, I need to thrash out in greater depth why the prevailing mood of doom and gloom is misplaced, including, in particular, the helpful wakeup call of Stephen Roach, former chairman of Morgan Stanley Asia, to Hong Kong’s perceived loss of its “high degree of political autonomy in the aftermath of the massive demonstrations of 2019-20”, the impact of the Chinese mainland’s “economic malaise”, and “friendshoring” headwinds as a result of US-China rivalry.    

As someone whose entire career has straddled Hong Kong’s British-rule era and the period after its return to China, I must point out that Hong Kong has never had any “political autonomy”, simply because Hong Kong has never been, and will never be, a separate political entity.

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Before its return to the motherland, Hong Kong’s colonial laws, administrative practices and people’s activities were never allowed to challenge Britain’s rule. 

After July 1, 1997, Article 2 of Hong Kong’s Basic Law, a constitutional document of China, “authorizes the Hong Kong Special Administrative Region to exercise a high degree of autonomy and enjoy executive, legislative, and independent judicial power, including that of final adjudication, in accordance with the provisions of this law”. This is exactly what has happened, notably the functioning of Hong Kong’s Court of Final Appeal in accordance with the common law, including the expertise of 10 outstanding overseas nonpermanent judges. 

What happened in 2019-20 was by no means mere “demonstrations”. I personally experienced these painful shocks. Many “demonstrators” turned out to be well-coordinated black-clad rioters resorting to violence, holding Hong Kong’s law and order to ransom, and demanding what amounted to a violation of the Basic Law and China’s sovereignty. As a result, the National Security Law for Hong Kong had to be promulgated. Hong Kong is now fulfilling its unfinished obligation of implementing Article 23 of the Basic Law to prohibit acts of treason, secession, sedition, subversion, theft of State secrets, and foreign interference.  

Regardless of the whys and wherefores, Hong Kong has reemerged to where it was in the first place, as a special administrative region of China with a high degree of autonomy. Against severe geopolitical headwinds, Hong Kong remains the world’s safest city with excellent business infrastructure and a wealth of national, regional and global advantages in its favor.   

Let me turn to worries about China’s seemingly endless “economic malaise” and divisive “friendshoring” tactics in the intensified US-China power play. 

Most doomsayers don’t seem to see the longer-term wood for the short-term trees. China is embracing a new era of “challenges and opportunities not seen in 100 years”. Far from casting a gloomy shadow over Hong Kong, this will serve only to reinforce its long-term bright destiny under “one country, two systems”. 

For a start, the myth of “peak China” featured in The Economist’s cover story of May 23, 2023, must be debunked, as outlined in my China Daily op-ed of June 21, 2023. 

The oft-cited “China’s demographic cliff” misses the labor-efficient implications of a new technology era driven by the fourth and fifth industrial revolutions. These transform how economies work, how businesses are conducted and how people interact in daily lives. 

China’s industrial robotics, farming mechanization as well as staffless hotels and outlets are becoming commonplace. Original and disruptive innovations in AI, big data, quantum technologies, and the internet of things are making impressive headway. These are the “new productive forces” recently highlighted by President Xi Jinping and the “new industries” outlined on China Daily’s business page of Feb 26.  

According to the Australian Strategic Policy Institute’s report of March 1, 2023, China is leading in 37 out of 44 of this new era’s critical technologies, supported by a huge reservoir of top brains, growing by 2025 to some 77,000 STEM (science, technology, engineering and mathematics) doctorates per year compared with approximately 40,000 in the US. 

Five Hong Kong universities command the top 65 global ranks in 2023. Closely linked to Chinese mainland and other global research institutions, they are well placed to capitalize on the “new productive forces” of the technological revolutions. The HK$3 billion ($383 million) fund support for AI and quantum technology development announced in the 2024-25 Budget speaks to the city’s university talent in this frontier technology. Similarly, the Hong Kong Polytechnic University’s newly launched research center for electric vehicle innovation has in mind the mainland’s vast talent pool as China has become the world’s new Detroit for electric vehicles.  

US-led “friendshoring” partitions the world economy under the guise of “de-risking”. However, never before has the world become more interrelated and interdependent. By 2018, China has become a bigger trading partner for 128 of 190 countries than the US, according to the Lowy Institute. Seven of the top 10 container ports are in China, including Hong Kong. Even if not “Made in China”, numerous products across the globe have China embedded in terms of minerals, components, spare parts and logistics. 

China has also been deepening its national connectivity by forming “megapolises” of economically knit city clusters connected by the world’s most extensive high-speed rail network. This transport network is set to expand from 35,388 kilometers (more than the rest of world combined) to 70,000 km by 2035. The four largest megacity clusters comprise the Yangtze River Delta, the Pearl River Delta — or the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), the Beijing-Tianjin-Hebei region, and the Chengdu-Chongqing Economic Circle. These four mega-regions cover 8 percent of China’s land but contribute to over 50 percent of China’s economic output and foreign investment. This national transport connectivity acts as a productivity-boosting counterweight to shrinking demographics.   

As a world financial center underpinned by an internationally respected independent judiciary, Hong Kong has a long-established reputation for financial products and services. It is positioning itself as a regional fund-raising hub and arbitration center for the BRI

Hong Kong is the international beating heart of the GBA of 70 million inhabitants, with a combined GDP of US$1.5 trillion. This compares with $1.8 trillion of the Greater Tokyo Area and $1.7 trillion of New York City, according to Hong Kong Monetary Affairs statistics. With 2,300 km of railways including high-speed lines, modern expressways, the new Hong Kong-Zhuhai-Macao Bridge, and streamlined border-crossing facilities, the traveling time between Hong Kong and other major cities within the GBA has been reduced to within one hour. 

Hong Kong has applied to join the Regional Comprehensive Economic Partnership (RCEP), which consists of ASEAN members and their main trading partners including the Chinese mainland. This is the world’s largest free trade bloc accounting for a third of global GDP and a third of the world’s population. With its common law jurisdiction and international financial and legal arbitration infrastructure, Hong Kong’s likely RCEP membership this year will deepen its role as a “superconnector” between the Chinese mainland and countries linked to the Belt and Road Initiative (BRI) across the globe. 

As a world financial center underpinned by an internationally respected independent judiciary, Hong Kong has a long-established reputation for financial products and services. It is positioning itself as a regional fund-raising hub and arbitration center for the BRI. 

Inequalities aside, it is also one of the world’s richest cities with more ultrahigh-net-worth individuals than New York City, according to the September 2023 findings of the Robb Report, a Los Angeles-based luxury-products publication. This supports a vibrant banking and wealth management ecology. 

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Aging demographics notwithstanding, this superconnected economic and logistics network enhances productivity for the nation as a whole, including Hong Kong as part of the dynamic GBA. 

Many Chinese mainland and Hong Kong retirees remain healthy and economically active, in addition to helping with childcare for their second-generation. Many are financially independent, supporting a vibrant “silver economy” of health, recreational, consumer and financial products and services for the elderly. The hype over the negative impact of aging demographics is therefore prone to overexaggeration. 

One key growth driver for China is its dominance in solar and wind power. According to the International Energy Agency, the world’s tripling of green energy to 510 gigawatts in 2023, the fastest growth in two decades, was driven by China, which installed as many solar photovoltaics as the whole world combined in 2022. Apart from collaboration with mainland research institutions, Hong Kong has been pushing ahead with green finance, including the issuance of more green bonds as announced in the 2024-25 Budget.  

Another bright spot in Hong Kong’s trajectory is international sports. At the 19th Asian Games held in Hangzhou, Hong Kong won a total of 53 medals, comprising eight gold, 16 silver and 29 bronze medals. 

Sports can be a key driver of economic productivity, as in the case of over 300 million Chinese winter sports enthusiasts in the wake of the Beijing Winter Olympics. The extensive national media coverage and the China team’s stellar performance are turbocharging many winter-sports businesses, activities, services, production, and sale of equipment and products, including branded merchandise, clothing, fashion, and advertising. 

Likewise, Hong Kong’s men and women have been achieving success in various international sports, including swimming, fencing, cycling, windsurfing, sailing, table tennis, snooker, badminton, athletics, golf, show jumping and rugby sevens. Competitive sports are strongly supported by the Hong Kong government. Not only do they usher in new business dynamics, they serve to reinforce Hong Kong’s celebrated “Lion Rock Spirit” in the face of daunting challenges.  

Apart from its status as a world financial center, perhaps the chief asset of the Pearl of the Orient is its arts and culture. In this regard, Hong Kong’s West Kowloon Cultural District, with 23 hectares of public open space, including a 2-kilometer waterfront promenade, is one of the largest and most ambitious cultural projects in the world with a mix of theaters, performance spaces, and museums producing and hosting world-class exhibitions, performances, and cultural events. Its world-renowned Hong Kong Palace Museum is legendary. 

I could go on with more examples. Suffice it to say that, notwithstanding current and potential headwinds and disruptions, including a protracted Ukraine war, the ongoing Israeli-Hamas conflict, bumpy US-China rivalry, and Donald Trump’s possible return to the White House, it is clear that China, including Hong Kong, retains many resilient growth dynamics.  

In any case, speculations about Hong Kong’s impending demise are greatly exaggerated, to paraphrase Mark Twain.   

The author is an international independent China strategist, and was previously the director-general of social welfare and Hong Kong’s official chief representative for the United Kingdom, Eastern Europe, Russia, Norway, and Switzerland.

The views do not necessarily reflect those of China Daily.