People walk past Hong Kong and China flags, hung to mark the 25th anniversary of the establishment of the Hong Kong Special Administrative Region, in Central on June 28. Photo: AFP
Opinion
The View
by Richard Harris
The View
by Richard Harris
Dynamic change may be in the past for an ageing Hong Kong amid greater mainland integration
Hong Kong is inevitably taking on mainland characteristics as a sovereign part of China, but we have a unique skill set that will serve us well
The city might be diminished as a global financial hub, but that does not threaten its future as a commercial metropolis and a hub of finance and investment
When people ask me whether Hong Kong has changed since 1997, I say, “Yes, but it changed just as much in the 25 years before that.” The city has changed more than most places on the planet, but eventually we all get old. The next 25 years look to be less exciting as we move towards old age.
Hong Kong’s population stood at about 3.9 million in 1972, 6.3 million in 1997 and is 7.6 million today. Estimates suggest the city will be home to about 8.1 million people by 2047 – that is an extrapolation, of course, but it does indicate that things are slowing. Our population has doubled, but Hong Kong is getting older.
The 10-14 age group had the largest number of citizens in 1972. By 1997, they had grown up, and the 35-39 age group was the largest. Today, that accolade goes to the 60-64 group (and with just under 20 per cent aged 65 and over). The 60-64 age group is also expected to be the largest by 2047, but with a startling one-third of the population aged 65 and over.
The numbers reflect rapid immigration in the 1970s and 1980s, the emigration of young working men between 1997 and 2022 and the city’s 400,000 foreign domestic workers. There were almost 650,000 more women than men in Hong Kong in 2020. This is unusual by world standards, where the differential usually only widens as male mortality creeps ahead past 60.
Hong Kong has undergone dramatic changes, with each decade displaying its own character. The 1970s were sedate and colonial. The 1980s were a period of incredible postcolonial growth as Britain sought to hand over the administration and simply made the place work.
The 1990s were uncertain, both successful and volatile. The 2000s were a decade of blue-sky ambition. In the 2010s, the sense was that the Chinese economy would be the boss but we would ride calmly on its coattails.
09:49
A look back at Hong Kong 25 years since the handover
A look back at Hong Kong 25 years since the handover
Yet, we have found out there is no free lunch and the next 25 years will see us taking on our share of the national load. This time, it really is different. As a sovereign part of China, we have extreme pandemic border protections that no longer exist elsewhere.
These have resulted in a life-cycle change in Hong Kong’s position as a global city. We are currently moribund and unable to chart a course as before. All observers are hoping for a bright future once the pandemic restrictions are lifted, but that is entirely in the hands of the central government.
The base case is that such easing is likely to be forthcoming. Hong Kong is inevitably taking on mainland characteristics as a sovereign part of China, but we have a unique skill set. The political and legal environment will parallel mainland China’s, but our commercial and financial system is likely to remain modelled as before.
Hong Kong’s historical development provides key advantages for China’s economy. We are a free trade area with an unfettered currency, no capital controls, low taxes, a simple and fair tax system, a common law process that assumes nothing, a globally recognised stock exchange, strong business and financial regulations, unobstructed access to global communications and generally little government interference in commerce.
This allows us a distinct role in the Chinese economy that would be impossible to achieve on the mainland. There is nothing policy-related about Hong Kong becoming China’s favoured financial centre. This is pure economics.
The combination of financial, human, legal and physical infrastructure in Hong Kong makes us the best city in China for finance and investment. There is a role for Hong Kong in China just as Monaco, Jersey or Delaware have with their larger neighbours.
It is true that money and talent are leaving Hong Kong, and this could take years to stabilise, but these people will be replaced with others from the mainland. Money is like water – it takes the easiest route, moving to the safest, most flexible place.
Our commercial freedoms are still enviable. Mainland money will return to support the property and equity markets, global and mainland capital will flow bilaterally, mainland trade will continue to support logistics and mainland tourists will return.
Our differentiation means that Hong Kong will not lose out to Beijing or Shanghai. Our role as the international financial centre of China is like that of Frankfurt in Germany.
Shanghai already has a role as the domestic financial and industrial centre for the country, much like Munich. The imperious centre of government and administration will remain in Beijing, as it does in Berlin. Our city might be diminished as an independent global financial hub, but the change does not threaten its future as a commercial metropolis.
The 2020s will see Hong Kong’s economy developing in lockstep with China’s, as Monaco does with France. You can step over the border from France into the principality just by crossing the street.
In 25 years, our border with China might merely be marked by a line of stones, like those that marked the city boundary in 1903 or the stones in the middle of Chung Ying Street in Sha Tau Kok today. We can even hope that perhaps the president will be our guest and spend a night in the city.
Richard Harris is chief executive of Port Shelter Investment and is a veteran investment manager, banker, writer and broadcaster, and financial expert witness
