The question that seems to bother Hong Kong journalists much more than their counterparts on the Mainland of China is the one that asks when Hong Kong will lose out to Shanghai as a financial centre. Why this difference in focus exists is something of a puzzle, but suggests to me that Hong Kong has developed a real (even though unnecessary) inferiority complex, especially where China is concerned. In the meantime China - or in this case Shanghai - is openly confident about achieving its goals, and sees little of concern that might hinder its progress.
Hong Kong has been successful as a financial centre. It is something that we in Hong Kong should be proud of, while at the same time making sure that we do not rest on our laurels. But, as I have said before, we do seem to take a perverse pleasure in denigrating ourselves - in allowing our media and even our legislators to "knock" (look at the slang definition) everything in sight; particularly if the Hong Kong Government is involved.
In a meeting of the Institute of International Finance I attended in Beijing last week a highly respected friend Dr Fang Xinghai, now Director General of the Shanghai Municipal Government Financial Services Office, laid out in his usual unambiguous matter of fact style the blueprint for Shanghai's aspirations. They could not be clearer. Shanghai will be the international financial centre for China, in time, and it is even decreed by the State Council that this should be the case. Period. So, what of Hong Kong, he was asked?
"Ah", said Dr. Fang, not at all put out by the question, "in terms of financial affairs Hong Kong is essentially a separate region under one country two systems, and it surely will have its own plans".
As an aside, it has surely been clear from way back that various cities in China have had aspirations to become a financial hub - international or otherwise. Beijing, Tianjin, Dalian amongst them - but the logical place for me anyway has always been Shanghai. It has historical claims, and it remains the hub of China's mercantile trade. It has been similarly evident that Shanghai actually really wants to undertake the role of international finance centre and not merely become the centre for finance in China, although heaven knows there is probably enough business there alone to keep a financial centre busy for ever.
Okay; ball firmly back in Hong Kong's court. Do we have our own plans?
Well this, perhaps, is where the story starts to get a little blurred. Do we have a clearly articulated vision of Hong Kong as an international financial centre, in the same way that Shanghai is clearly focused? Yes we talk about it, but if you were to ask one of this City's leaders - public or private sector, about the definite plans to keep Hong Kong ahead of the competition what would they say? Would it be?
"We have a well proven financial infrastructure encompassing the best practices from around the world. We have full support services for the industry with highly professional international and domestic firms in accounting and law. We have a strong, flexible, fair, industry-friendly collaborative regulatory regime. We are open to new ideas, and will always move quickly to implement the necessary changes required to keep us up with or ahead of the competition. We have a business friendly, knowledgeable legislature that understands financial affairs and acts to protect the prominence of Hong Kong. Our relationship with China is such that we can expect to be used as a "toe in the water" for changes that might be implemented more widely in China and internationally, such as Shanghai being allowed to use the RMB as a trading currency?"
If we can say yes to every one of these things then we are at least aware of our surroundings, and are proactively working towards ensuring that we remain as an important global financial centre. If we have gaps - we must close them.
The reputation of a financial centre is as important as its ability to perform, and reputations as we all know are lost in a nano-second, but take years, decades, centuries even, to establish. Look at London, and allow me to quote selectively excerpts from Stephen Inwood's excellent book "A History of London", writing on the period from 1965-2000.
"The City, nevertheless, was a huge and long-established centre of financial services, skills, contacts and institutions...this was London's greatest single advantage" ..."an enormous number of financial institutions offering profitable and tax-efficient investments of every conceivable description" ..."London's size and reputation, along with the skills and resourcefulness of its financial operators, enable it to beat or equal Tokyo, New York and its European rivals".
We have the fundamentals, the reputation, the skills and the abilities to continue to prosper as an international financial centre. It is up to us to keep those skills finely sharpened, to maintain our track record, to be creative (within the realms of decency given global financial scandals that have affected others much more than they have affected us), and make others chase us - instead of us doing the chasing.
We should welcome the competition that will be provided by Shanghai, but I would argue that this is not a heads we lose, tails they win scenario. Can Asia, and the global financial communities indeed, withstand the presence of two major international financial centres based in China - Hong Kong and Shanghai? I would say yes. Shanghai will make it, in time, but provided we do not falter in our own endeavours and ambitions, we will be right there too.
Sir,
Your sanguine observations concerning Hong Kong's future as a financial services centre in China are most certainly justified, provided there is free and fair competition between the two markets.
However, the day Beijing decides otherwise (for example, insisting all Chinese IPOs list in Shanghai, or pulling any number of other administrative levers at its disposal, both on the mainland and here in Hong Kong), then that is the day it shall be so.
Although I do not subscribe to this nefarious viewpoint, I believe it is this political calculation that causes the incessant hand-wringing to which you refer, and it is not without merit.
Posted by: Noah Webster | June 17, 2009 at 08:01 AM
echoing mr webster viewpoint above, I agree the main risk for HK is the policy risk. I think inferiority complex is probably too strong a phrase, I would rather say HKer tries to have it both ways. Trying to be both Chinese and Western. It's a gateway but at the same time charging high commission for its services. Multi-national corps will try to cut out this middleman if they can.
Meanwhile, as you rightly pointed out, the HK govt has not been able to deliver a united front to China. And I personally have doubts that what HK Govt proposed to China carries that much clout.
Posted by: CBG | June 17, 2009 at 08:34 AM
China is huge and other markets that come closest (though not close) in size host more than one financial center. The US has NY-Chicago, the EU has London-Frankfurt.
Between HK and Shanghai, one will emerge to become Asia's financial one-stop shop (like NY/London) and the other will dominate a financial or geographic niche(s) (like Chicago/Frankfurt/Tokyo/Singapore).
Language and business culture favour HK, national politics favour Shanghai. The race is on but my bet is on HK - after all, political will was not enough for Tokyo.
Posted by: jeremy | July 08, 2009 at 06:39 PM
incidentally, I see that this year's Global Financial Centres Index by the City of London has Singapore in the top 3 financial centers of the world.
even making allowances for the biases and unreliability of such rankings, it does look like Singapore's planners (accused by some commentators of a jack-of-all-hubs strategy) have played their cards well.
Posted by: jeremy | July 08, 2009 at 06:51 PM