Hong Kong: from gateway to highway

Hong Kong may be losing its edge, especially in merchandise trade.

"What does it mean for Hong Kong if Shenzhen becomes just as wealthy and a larger “gateway” to China?”

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As a “gateway”, Hong Kong was essentially a port, a locus for the interchange of physical goods.

In 2001 it was the world’s busiest port. In 2006 it had dropped to number two – behind Singapore. By 2011 Shanghai had surpassed both, dropping Hong Kong to three. And in 2016 Hong Kong was down at five with three Chinese ports – Shanghai, Shenzhen and Ningbo-Zhoushan – and Singapore above it.

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This is an economic story but it is interesting to look at the data alongside Deng Xiaoping’s prophesy concerning the Basic Law and China’s Two-centennial policy.

The Basic Law Article Five states “the socialist system and policies shall not be practiced in Hong Kong SAR and the previous capitalist system and way of life shall remain unchanged for 50 years”.

If we consider forecasts of GDP per capita, Hong Kong will remain far wealthier than China as a whole for well beyond the 50 years. But not Shenzhen…

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What does it mean for Hong Kong if Shenzhen becomes just as wealthy and a larger “gateway” to China? I think we will see Hong Kong become more of a 'highway' than a “gateway” – a fast connection, both literally and digitally.

Far more of Hong Kong’s trade will be services.

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And far more of those services will reflect Hong Kong’s digital connectivity, with finance and technology services as major growth drivers.

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We may see this in the increasingly digital world of financial services and a far greater role for virtual trade instruments – whether smart contracts or blockchain-based trade finance documents – to play in more traditional gateway activities.

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Free flow of information remains the cornerstone for this city. Hong Kong’s gateway role will be transformed digitally. And the opportunity to be a highway will be more attractive than just being a gateway.

• This is an edited version of Raymond’s opening presentation to ANZ’s Horizons Economic Outlook event in Hong Kong this month. bluenotes will also be publishing a account of the panel debate at the event, Blockchain and Crytpocurrencies – their impact in the their economy featuring experts from the Hong Kong Monetary Authority, PwC, Ashurst and ANZ. Make sure you are subscribed to our newsletter so you don’t miss out.

Raymond Yeung is Chief Economist, Greater China at ANZ