Given development on the mainland in recent decades Hong Kong is no longer able to reap the benefits of being the ‘Gateway to China’. What does the city need to do to adapt to this new reality and find its niche?
Perhaps I am too early to claim this, but I see that development in China has focused on doing things right – getting things done effectively, efficiently, and cheaply. Much of what they do is still focused on the middle, manufacturing-oriented sections of the value chain. As we’ve seen from the “Made in China” phenomenon, this doesn’t yet mean that they are leading in the more valuable, services-driven upstream and downstream activities, like R&D, brand-building, and advertising.
Hong Kong, on the other hand, continues to excel in the high value-added upstream and downstream activities of the supply chain. Its economy is almost entirely services oriented, with tourism, finance, logistics, and trade being its four key services industries. The city’s local and international talent provide world-class service in these sectors, in addition to sectors like legal, retail, medical, PR, retail, and the like. It has some of the best physical infrastructure in the world, while its legal, linguistic, and cultural similarities with the west make it easier for multinationals to set up shop.
Recall that Hong Kong is still one of the pillars of the financial and service economy – it is part of the New York, London and Hong Kong “Ny-Lon-Kong” trio that provides 24 hours of continuous services. Hong Kong is home to over 1000 regional headquarters, overseeing an eight-hour time zone stretch between New York and London. Little happens in the region without these time zone headquarters getting involved – just as financial activity in Sao Paolo, Brazil will eventually wind up involving New York, so too will activity in Kuala Lumpur and Sydney eventually involve Hong Kong.
As a time zone headquarters, Hong Kong is a place that people prefer to live, travel, and work in. Its connectivity and openness mean that money, people, goods, and information flow freely to other global cities all around the world.
Hong Kong has always relied on these advantages to thrive in the global economy – being able to provide the breadth, depth, and quality of services has been a part of the city’s history for a long time, and it will continue to be for some time yet. What the city needs to do is to realise this competitive advantage and capitalise on our strength. China’s rapid expansion of “hard” infrastructure, through projects like the Belt and Road, are going to need the “soft” expertise and experience in areas like financing, strategy, and management to succeed. Chinese consumers are demanding better healthcare and education. These are just a few examples of where Hong Kong can shine.
What are some of the merits and drawbacks of the historical Anglo-Saxon influence on Hong Kong’s current business and political landscape?
The merits are huge – cultures and institutions that respect the individual, the rule of law, the role of business, and the importance of community and professional institutions. Taken together, these have helped build Hong Kong into a thriving economy where contracts are enforced and upheld, disputes resolved through arbitration and fair courts, and government corruption kept in check by the ICAC. Linguistic and cultural influences have meant that Hong Kong is better able to thrive in the western-centric international economic order.
This has definitely left a hugely beneficial legacy; world-class cities in places like the UK or the US have their roots in Anglo-Saxon influence. You don’t see too many world-class cities running on the Belgian system, or the Italian system.
The drawback is that there is now a troupe of people who think that the British empire was evil, and that any and all ills in Hong Kong can be blamed on over 150 years of colonial rule. These people don’t recognise the benefits that the system has given us. Why can’t we just trade the good and leave the bad?
You’ve written for the South China Morning Post that “Hong Kong must rid itself of a top-down mindset that alienates the workers – and leaders – of tomorrow”. Is it realistic to expect this to change given the top-down mindset is deeply rooted in Chinese culture?
No change comes overnight – think about how long it has taken places like UK or the US to change cultural values, like allowing women to own property. Much longer than how long modern China has had, that’s for sure!
Change certainly is coming. Millennials and the middle class all over the world – including in China and in Hong Kong – are saying that they don’t like the top-down mindset, and that they want to have a say in many aspects of their personal and professional lives. Hong Kong’s youth are perhaps speaking up louder than their counterparts in many other countries; just look how many came out for the Occupy protests in 2014.
The question is what will happen when the millennials themselves become older and move into the middle classes. Will they carry through with these desires for change once they become the leaders, or will they revert to the “old ways” once they hit 50? This will be the real sea change, and the top-down, command control world had better be ready for their arrival.
Does Hong Kong’s evolving relationship with the mainland concern or enthuse you? Why?
I would say that I am generally optimistic for the relationship, in that the business and economic opportunities that this provides Hong Kong are huge. As I mentioned before, Hong Kong has the talent and the capacity to provide the depth, breadth, and quality of services that China needs as it “goes overseas”.
More fundamentally, Hong Kong is also in a position of responsibility to educate the mainland about how the international system works. We have expertise in the services mindset and in the global values of care, character, and competence. These lessons will prove invaluable if China is to be truly successful. “Competence comes and goes, care and character is forever.”
The Belt and Road (B&R) initiative presents Hong Kong with many exciting opportunities. Which ones do you think local business leaders should be focused on?
I think that Hong Kong’s firms can provide the services or train the nationals that are needed to operate China’s huge infrastructure projects in the Belt and Road initiative, ranging from financing, to operations, to marketing. Just as you cannot operate a motel without service, you cannot have a cargo port without leaders. Leadership is a type of service, and Hong Kong is capable of providing leadership in services to any position that requires care, character, and competence.
The Guangdong-Hong Kong- Macau “Greater Bay Area” is a hot topic at the moment. A burning question yet to be answered is if it to be developed into a joint service hub would it use a HK or mainland operating system. Given you are probably the leading service guru in the region what are your views on this?
This is a burning question, and one that needs careful thought. Bay areas around the world are usually united in the type of values and operating system that they use. Including Hong Kong in the Greater Bay area complicates things because a decision needs to be made as to which system to use. We cannot simply expect that building up the Greater Bay area will automatically incite companies and investors to come.
I think that the Chinese system is very good for a place like China, and its rise to prominence over the last 40 years can attest to that. Hong Kong has a very good system that works with the rest of the world. If China wants an economic area that works in China, they don’t need Hong Kong; they could set it up anywhere else, such as around Shanghai and Tianjin.
But if they want a bay area that works as an international hub, in line with how everywhere else is doing it, then the Hong Kong values and operating system probably works better. This is not to say that nothing else will work, but policymakers and political leaders should be aware that creating a new system for the Greater Bay area will take many years of trial and error, and without the guarantee of success at the end of it all.
I don’t have any particular opinion on what a new system might look like, but if I had to choose, I would most definitely say that the Hong Kong system has the most to offer because it is functioning very well with the rest of the world.
A big THANK YOU to Po Chung for his enlightening thoughts and invaluable contribution!
Read Part 1: On Leadership here.
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