Stephen Roach, former Morgan Stanley Asia chairman, is right on one narrow point: The old Hong Kong has gone. But where he delivers an undesirable eulogy, we should recognize a transition. He confuses the end of a particular growth model with the end of the city itself. Hong Kong’s problem is not that it abandoned its old ways too quickly — it is that it has been too slow to invent new ones.
Hong Kong’s past success rested on a formula that no longer fits today: a laissez-faire economy tethered to global finance, heavy reliance on property, and an identity as a bridge between the Chinese mainland and the West. That model delivered prosperity for decades, but it was always finite. The harder task now is to reimagine the city — not as a nostalgic outpost but as a laboratory for the future.
To mistake the exhaustion of the old paradigm for terminal decline is to miss the point. Hong Kong is not “over”; it is reengineering itself. The question is not survival, but whether the city can break from inertia and embrace reinvention. The urgency lies not in mourning what has gone — the old model — but in designing what comes next: a diversified Hong Kong economy beyond property and finance, a role in the nation’s hard-tech transformation, and a civic identity that speaks to the aspirations of its younger generations.
Much of Roach’s pessimism rests on one concern: the influx of mainland professionals, which is misread as erosion of distinctiveness. In fact, migration has always been Hong Kong’s engine of reinvention. At every critical juncture, waves of newcomers have reshaped the city’s elite architecture and catalyzed economic rebirth. This is Hong Kong’s phoenix moment, and we are witnessing its latest iteration.
The first wave arrived during and after the Chinese Civil War (1946-49). Industrialists from Shanghai brought capital, expertise, and networks, quickly dominating textiles and shipping. They transformed Hong Kong from an entrepot into a global manufacturing hub. The second wave came in the 1960s and 70s, when nearly 1 million migrants from Guangdong province powered the city’s manufacturing boom. They became the backbone of industrialization, creating the ecosystem that drove Hong Kong’s economic takeoff. Many Cantonese migrants who had arrived earlier also rose to prominence, adapting to the demands of a new era. Reinvention defined this transformation. The third wave is unfolding today, driven by mainland professionals, wealthy families, and global talent. They bring technological literacy and risk capital — the ingredients needed to build the Northern Metropolis and position Hong Kong as a tech hub. Rising demand for international schools is not cultural displacement but evidence that the city is once again attracting the human capital required to compete in the 21st century.
Hong Kong’s identity has always been shaped by waves of immigration. The third wave of mainland professionals does not erase the city’s character; it renews it, just as earlier waves did.
Hong Kong can learn from mainland cities and other regional tech powers that have rapidly upgraded into high-tech economies. But its comparative advantage lies elsewhere: evolving from a superconnector of goods and capital into a super-value-adder of rules and standards. Its legal system, arbitration expertise, and financial infrastructure give it leverage to shape global norms in digital assets, AI governance, cross-border data and green finance. This is not about being a passive intermediary — it is about becoming a rulemaker in emerging domains
Yes, more Mandarin is heard on Hong Kong’s streets today, but this is not cultural erasure. Under British rule, the city had more Western expatriates; now, as Hong Kong nears the 30th anniversary of its return to the motherland, its demographics have shifted. For some, the city feels less “exotic” than before, yet that perception is part of its transformation. The challenge is not to resist change but to ensure Hong Kong remains open enough to welcome a broad mix of global talent.
The decline in Western expatriates reflects geopolitics — sanctions and political headwinds have made the HKSAR less convenient for some Western firms, even as mainland and regional talent flows have intensified. A British think tank, the China Strategic Risks Institute, has even urged UK ministers to encourage HSBC and Standard Chartered to relocate out of Hong Kong, underscoring how political pressures drive the change.
Hong Kong’s challenge is not to preserve the old order in amber but to channel its resilience into a new phase of reinvention. What matters is its refusal to be complacent, its determination to defend its position under pressure, and its capacity to remain a magnet for talent worldwide.
Against this backdrop, the claim that the HKSAR’s initial public offering market has “lost” its global character misreads its historical foundations. The exchange was never designed to operate purely as a neutral bazaar for non-Chinese issuers; from the emergence of formal mainland enterprise listings in the early 1990s, its defining role has been to channel international capital into the China growth story. Even at the supposed peak of international listings — Prada, Samsonite, L’Occitane — the logic was the same: They came because the Chinese mainland was their primary growth engine. The HKSAR’s globality lies in its investor base, not its issuer mix, and today, capital is flowing in with renewed force through artificial-intelligence and hard-tech listings, entrepreneurs returning from Singapore, and funds redirected amid geopolitical shocks. Investors are voting with their capital, and they are voting for the HKSAR.
What has changed is the composition of issuers: The old market of State-owned enterprises and banks has given way to hard tech, electric vehicles and biotech firms. This is not a decline but an upgrade. The euphoric artificial-intelligence-driven IPO surge of 2026, with oversubscribed retail demand and international investors piling back in, shows Hong Kong is not losing relevance but repositioning itself at the frontier of technological finance.
Beijing’s policy support is part of the story — but combined with international investor demand, it is precisely what makes the HKSAR unique: a dual platform where the China growth story meets global capital. The surge signals a deeper structural shift, powered by regulatory reform and strategic industrial policy.
For the first time, Hong Kong has broken with its old dogma of “positive noninterventionism” by introducing a medium‑term development plan. It identifies priority sectors, allocates land, and coordinates cross-border infrastructure — tools long used by Singapore and South Korea, and increasingly adopted by the United States through industrial policies like the CHIPS and Science Act, in its push for AI and semiconductors.
Hong Kong is finally pursuing reindustrialization through technology. The Northern Metropolis is being developed as an innovation corridor linked to Shenzhen. Aviation rules are being revised, and sandboxes launched for drones and urban air mobility, positioning the city as a regional test bed for autonomous systems. The latest budget commits funds to smart manufacturing, AI research, and biotech translation centers, aiming to commercialize university research at scale.
Hong Kong can learn from mainland cities and other regional tech powers that have rapidly upgraded into high-tech economies. But its comparative advantage lies elsewhere: evolving from a superconnector of goods and capital into a super-value-adder of rules and standards. Its legal system, arbitration expertise, and financial infrastructure give it leverage to shape global norms in digital assets, AI governance, cross-border data and green finance. This is not about being a passive intermediary — it is about becoming a rulemaker in emerging domains.
According to the Securities and Futures Commission’s 2025 survey, overseas investors still account for the majority of assets under management, with Europe and North America being significant contributors. Invest Hong Kong also reported a record number of foreign parent companies operating in the city. These figures show that global capital continues to choose Hong Kong — not out of nostalgia, but because of its enduring strengths.
The old model is gone, but the foundations remain. The task now is acceleration — so the HKSAR emerges not just as China’s international city but as Asia’s global city, where capital, talent, and rules converge to help shape the next chapter of China’s rise.
The author is a professor of globalization and business at the City University of Hong Kong.
The views do not necessarily reflect those of China Daily.
