Opinion | Hong Kong can retain its special status with the US if it cultivates its differences from mainland China

Technological competition is at the heart of the current US-China trade conflict. What is at stake is which country can best turn technological innovation into a new engine of growth. At a time when Hong Kong officials say that the city has to “prepare for the worst”, it would do well to examine where it can add real value. What are Hong Kong’s unique characteristics in competing in the new digital economy? Is it condemned to be “just another Chinese city”, as pessimists have predicted, or should it aspire to distinguish itself?

The just-released US-China Economic and Security Review Commission report brings into focus the dilemma that Hong Kong finds itself in. The question raised over whether Hong Kong should continue to be treated as a separate customs area for dual-use technology with civilian and military aims suggests how a worst-case scenario might play out, one in which the US’ hardline approach on trade with China threatens Hong Kong’s unique trade status. The report also noted Hong Kong’s self-positioning as a “key node” of the Greater Bay Area, which the US sees as a competitor in technology.

When China was hit with an embargo as a result of the Korean war, Hong Kong was cut off from many US shipments as American companies didn’t want to take the chance that their goods would be smuggled into the People’s Republic. Today, curbing the transfer of US technology seen as sensitive could disrupt key sectors including medical and telecommunication technologies, as well as technologies crucial to the realisation of Hong Kong’s “smart city” ambitions.

Hong Kong’s competitive advantage in technological innovation hinges on preserving the perception that it is different and can play a unique role that no one else can fill, notably Shenzhen, the technology epicentre of the Greater Bay Area, which has prospered through forging a less state-controlled, more private-sector-driven economic path. Shenzhen-based companies in sectors ranging from drones to genomics have grown rapidly and become competitive overseas.

But the weaknesses of Shenzhen and other Chinese technology hubs are Hong Kong’s core strengths. Hong Kong’s strengths are its rule of law and mature regulations, its intellectual property protection and asset protection regimes, its financial markets and expertise, and its protection of individual privacy and freedoms. Mainland Chinese elites buy property and let their children attend international schools in Hong Kong that teach students about world-class innovation and entrepreneurship.