Change shouldn’t intimidate Hong Kong – we have always thrived on it

Through periods of crisis and uncertainty, the city has stayed relevant thanks to its resilience, adaptability and entrepreneurial spirit
Now, amid global geopolitical divergence, Hong Kong’s role as a link between East and West has never been more important, and we must seize the opportunities it brings

David Liao

Published: 9:15am, 3 Jul 2022

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At a time when the local, regional and global challenges seem to outweigh the opportunities, Hong Kong finds itself on familiar ground. With the outlook clouded by a storm of inflationary pressures, geopolitical turmoil and pandemic uncertainty, pundits are calling Hong Kong’s future into question.

But we’ve been here before: during the riots of the 1950s and 1960s, through the crisis of confidence surrounding the handover in 1997, and again during the severe acute respiratory syndrome (Sars) outbreak. Not only did we survive those challenges, we thrived, emerging stronger and more relevant than before.

Without land or natural resources, Hong Kong has always had a precarious existence. Born in conflict, the city has taken the slim advantages of a good location and the soft capital of a determined people and turned itself into a financial centre to rival the global giants of New York and London.

At the heart of our success is, and has always been, our connection to mainland China, and our unparalleled ability to act as a conduit for commerce between East and West.

Pedestrians in Hong Kong’s Central district on October 29, 2021. Photo: Bloomberg

As Hong Kong marks 25 years since the handover, challenges abound. China’s economy is slowing as it matures and the drivers of growth undergo a long-term shift from investment to consumption, and from manufacturing to services, but it is still the world’s most dynamic market by a considerable margin.

Despite Hong Kong’s prosperity, we could have done far more to realise the full potential of our China connection. In the past 25 years, Hong Kong’s economy has grown in real terms by more than 90 per cent. That’s faster than the US economy, which grew 68 per cent. Still, it is significantly slower than the mainland, where the economy has grown more than sixfold.

We possess the tools to benefit from the best of both worlds. “One country, two systems” means we are part of China, but we retain the familiar legal system that gives confidence to global investors. We are rightly proud that more than half of the mainland’s foreign direct investment flows in through Hong Kong, but we should also be asking what we can do to attract more.

In some ways, we should be a beneficiary of the uncertainty. The world is too deeply interconnected and interdependent to decouple, and Hong Kong’s role as a link between East and West at a time of geopolitical divergence has never been more important. Every data point shows both how much global investors want to be part of the China growth story and how China’s most ambitious companies are continuing to look overseas for growth.

If Hong Kong is to take advantage of the opportunities out there, we have to lean in. In the past, we have been at our best when we have been most adaptable and most entrepreneurial, confident in our ability to navigate risks and reap the rewards.

Hong Kong has never been big enough to shape the environment in which we operate: our genius has been to recognise those silver linings of whatever situation we find ourselves in and turn them into gold.

Nostalgia is a natural reaction at a time when the assumptions that have underpinned our world view for a generation are looking less secure, but Hong Kong has always been at its best when it has embraced change and the risk that comes with it.

To that end, we need to revitalise our start-up culture. We live next door to the most dynamic part of the most dynamic economy in the world, and Hong Kong’s universities turn out some of the best and brightest graduates in the region, yet in Start-up Genome’s annual survey last year, the city failed to make it into the top 30 start-up ecosystems.

This is meant as encouragement rather than criticism; an illustration of the opportunities that are out there if we are bold enough to grasp them.

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China's ambitious plan to develop it own ‘Greater Bay Area’

And those opportunities start on our doorstep. We are part of the Greater Bay Area, an arrangement that lets us retain our unique differences while making us part of something much bigger.

Of the 18 unicorns that Hong Kong had produced by the end of 2021, nine had set up research and development or production bases in the bay area, suggesting a strong correlation between successful Hong Kong start-ups and a willingness to make the most of cross-border opportunities.

Another good example of bold innovation is green finance. The world is going to need tens of trillions of dollars to mitigate the damage we’ve done to the climate and transition to a more sustainable future. Encouraged by the adaptability of the Monetary Authority, Hong Kong was Asia’s leading issuer of green and sustainable bonds last year, with almost a third of the regional market.

It is natural to become defensive and risk-averse at times of global economic uncertainty, but now is the time for Hong Kong to trust its entrepreneurial instincts, its adaptability and its resilience, and reach for the opportunities that are out there. This challenge is ours to lose.

David Liao is co-chief executive, Asia-Pacific, at HSBC