Hong Kong’s industry was out many years ago. With the wholesale migration of manufacturing activities to the mainland, domestic exports have slipped into economic oblivion. Re-exports of goods made on the mainland, the main engine of economic growth in the 1990s, is fast dissipating as more and more shipments are diverted to ports in Shenzhen and other cities in Guangdong province. Hong Kong’s container ports, no matter how efficient they may be, can never hope to compete with facilities in mainland ports in terms of cost.
Meanwhile, Shanghai’s GDP has maintained a double-digit growth over last ten years. By 2007 it reached 14.3 percent which far exceeded the 6.4 percent in Hong Kong. The total GDP is 1218.9 billion Yuan, which is 77.7% of Hong Kong’s. The mainland stock market’s boom has greatly boosted Shanghai’s standing as a credible source of capital and raises the question of Hong Kong’s long-term relevance to the mainland’s economic development. The media on the mainland and in Hong Kong has greatly blown up the expectation that Shanghai will overtake Hong Kong in the amount of capital raised in initial public offerings and the issuance of other instruments.
Now, a question to be asked: who will be the future economical center of China?
According to the “Index of the global financial center” published by London Financial City in May, 2008, the top 5 international financial centers are London, New York, Hong Kong, Singapore and Zurich. Among the top 50 cities, Shanghai only ranks by No. 31. There are still large gaps between Shanghai and the top 10 financial cities of the world. Although the economy gap between Shanghai and Hong Kong is being quickly narrowed, such developments have not in any way shaken Hong Kong’s economic status. The economic foundation of Hong Kong rests securely on the bedrock of a dynamic free enterprise system, preserved and disciplined by the rule of law, also supported by the local government that is well known as efficient and accountable.
On one hand, in the industrial structure, Shanghai and Hong Kong still has a big gap. Hong Kong, due to its small area and large population, has been taking the service industry as the mainstay of economic development, meanwhile, the financial sector as a high-end service sector is becoming the most important pillar industries in Hong Kong. In 1990, Shanghai’s tertiary industry accounted the proportion of GDP for 30.9%, while Hong Kong has reached 75.4%; in 2006, the value of Shanghai’s tertiary industry accounted for 50.6% the proportion of GDP, while Hong Kong has more than 90%.
On the other hand, in the import and export trade, the dependence on foreign trade in Shanghai is much lower than that in Hong Kong. In 2007, the Import and Export amount of Shanghai was 283 billion U.S. dollars, equivalent to 176.5% of GDP. Of these, exports of goods amounted to 143.9 billion U.S. dollars. In the same year, Hong Kong’s import and export goods amounted to 712.2 billion U.S. dollars, equivalent to 343.7% of GDP which was 2.5 times higher than Shanghai. Of these, the exports amounted to 344.5 billion U.S. dollars which was 2.4 times of Shanghai.
Apart from above, as a financial center, the size of financial services practitioners is another important factor. In 2006, Shanghai’s financial services practitioners reached 195,700, more than the number of 186,000 of Hong Kong; while back to 2004, the number of Shanghai was still less than 10,000 people compared to Hong Kong. Through has advantages on the size of employees in the financial services industry, Shanghai is still at a disadvantage in terms of the proportion that over total employment. For Shanghai the total employees in the financial services sector took a ratio of 2.0% in 2006, while Hong Kong was 5.5%. This somewhat reflected the levels and degrees of economic activities as finance-oriented cities.
To be sure, also, Shanghai has never been shy about its bid to become China’s premier financial center, and the speed to catch up with Hong Kong has surprised all of the economists. There still required a crucial prerequisite that the RMB should become fully convertible. For various reasons, however, that process is expected to be long and gradual. It leaves plenty of time for Hong Kong to expand and consolidate its role as an international financial center and to explore with Shanghai on developing business opportunities on a complimentary basis.