Foreign firms will boost Hong Kong only if local industries benefit
- For a ‘headquarters economy’ to work, foreign corporations must be encouraged to connect with local industry and local talent, and strengthen the local supply chain
- Hong Kong’s true competitiveness does not lie in attracting more foreign companies but in building up a strong local economy
With the government largely looking outwards, however, it needs to strengthen the link between incoming enterprises and local industries, helping the latter thrive to maintain a strong local economy. After all, it is easy for large corporations to leave.
According to the census, the number of regional headquarters in Hong Kong dropped from 1,457 in 2021 to 1,411 last year, with regional offices falling from 2,483 to 2,397 – while local offices increased from 5,109 to 5,170. The drops might seem small but they are an alert: foreign-affiliated companies’ perception of Hong Kong’s position in their global strategies is changing.
Also, Lee’s policy address did not provide direction on how the attracting of foreign talent and companies would benefit local industry. If we look back on the economic history of East Asia, the way to maximise the economic benefit of foreign investment is to boost local industries and train local talent, who then go on to start their own companies and maintain the economic impetus.
And, given the streamlining of procedures for foreign talent to enter Hong Kong, the job opportunities created by new corporations might fall into the hands of foreigners instead.
Although foreigners are an important source of labour for the local economy, their departure can be as easy as their arrival. Unlike local talent, with family living here and connections to the city, foreign talent can be more easily lured away by incentives or a desire for change.
The government must therefore introduce more measures to ensure local talent benefits from these incoming foreign companies. It can, for instance, establish requirements for the employment of locals, or set up training programmes for local graduates to gain experience in these international companies.
A strong local supply chain would help Hong Kong build a solid local economic base. This could continue even if the newly attracted head offices do decide to leave one day, thus protecting Hong Kong’s economy.
Lee’s policy address has unveiled many measures aimed at boosting Hong Kong’s economic competitiveness. But the city’s true competitiveness does not lie in attracting more foreign companies but in building up a strong local economy and local talent. The government needs to make sure that incoming enterprises truly benefit the local economy and local talent.
John Hanzhang Ye is a PhD student in science and technology history at the University of Minnesota, Twin Cities and also holds an MPhil degree in sociology from the Chinese University of Hong Kong