Misconceptions about Hong Kong are real, but it’s still economy over politics

Concerns about Hong Kong’s future, in many ways, eventually settle on its competitiveness and potential, even if politics is inevitably intertwined
Hong Kong must walk the talk, and get Beijing’s backing to showcase how ‘two systems’ is not only alive but working well

Tammy Tam

Published: 7:47pm, 12 May 2024

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“Why is Beijing developing Hainan into a duty-free shopping centre on a much larger scale? How will this affect luxury product sales in Hong Kong?”

This was a rather surprising question from a senior executive of a major international brand to a Hong Kong business delegation visiting Europe recently. The influential business leaders from the Better Hong Kong Foundation, a privately funded non-profit organisation, were meeting their European peers to exchange views on the city’s latest political and economic situation.

Where China’s “duty-free shopping paradise” should be located became a more stimulating topic of conversation than the usual politics. As an invitee at the meeting, I realised that concerns about Hong Kong’s future, in many ways, eventually settle on its competitiveness and potential, even if politics is inevitably intertwined.

The southern province of Hainan, dubbed “China’s Hawaii”, is 12 times the size of Hong Kong. It has transformed into the country’s biggest duty-free shopping destination, with annual sales volume in that sector for 2023 surging to more than US$6.1 billion. The year-on-year growth of 25.4 per cent was thanks to a special policy granted by Beijing in 2020, with an ambitious plan to transform the entire island into a duty-free zone by 2025. More than 800 international and domestic brands have already set up shop in Hainan, and more are in the pipeline.

Hong Kong, which has been a free port and a shopping paradise in its own right for decades, recorded a total of US$52 billion in overall retail sales volume last year. But the question raised by the international-brand executive put the focus on whether Hainan or Hong Kong should be the one to expand in the future.

This points to the reality that for a country of China’s size with such a huge population, having two duty-free shopping hubs is not only inevitable but there could be room for even more.

Haikou, the capital of Hainan. The southern province has been dubbed “China’s Hawaii”. Photo: Shutterstock

While Hainan’s star is on the rise, Beijing is also doing what it can to boost Hong Kong’s tourism. State immigration authorities have added eight more mainland cities, including the capitals of the remote Tibet and Xinjiang regions, to the “individual travel” scheme, which means their residents can travel to Hong Kong without having to join organised tour groups.

It remains to be seen how much of a real boost this will give Hong Kong’s economy, and whether it will create enough potential to attract relevant foreign investors eyeing the city. The risks can be a deterrent, but so is misinformation.

This particular group of business heavyweights from Hong Kong expressed frustration that factual information about the city’s social, legal, economic and financial systems being different from the mainland’s was overshadowed by political and geopolitical narratives.

One particularly hard reality they came across was that some foreign business leaders they met were not even aware that Hong Kong’s common law system is here to stay beyond 2047, the date that marks 50 years of the “one country, two systems” governing formula promised by Beijing.

Non-official exchanges like this could help clear up some misconceptions overseas, but a lot more needs to be done, given how widespread those misconceptions are.

“One country” means Beijing will call the shots in deciding major development directions for Hong Kong, just like it has decided to put the focus back on economic growth for the city. But achieving this goal, including taking strong steps to boost tourism, does not mean Beijing should be hand-holding the city every step of the way.

Hong Kong must walk the talk, and get Beijing’s backing to showcase how “two systems” is not only alive but working well. That will help reassure investors who, at the end of the day, are more concerned about business prospects and the city’s potential for growth.

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