Economist Stephen Roach’s comment that “Hong Kong is over” has sparked renewed discussion about the city’s future. His views are part of a broader trend in recent years that consistently underestimates China’s potential. While these opinions are worth noting, they should not erode confidence in Hong Kong’s development prospects.
In 2012, I wrote an op-ed for the Post mentioning the prediction that Hong Kong would surpass New York as a global financial centre. I’ve had the privilege of working at a local regulatory body in Hong Kong, which further solidified my confidence in Hong Kong’s future. As for Western scholars who have lowered their expectations of the Chinese economy, such as former US Treasury secretary Larry Summers, I believe China’s economic trajectory will prove them wrong.
Before the Covid-19 pandemic, mainstream global economic research institutions widely predicted that China would surpass the US in economic size by around 2030.
In fact, measured by purchasing power parity (PPP), China is already the world’s largest economy. This method is straightforward. For instance, if a hamburger is selling in Shanghai for 20 yuan (US$2.8) and in New York City for US$20, this would imply a PPP exchange rate of 1 yuan to 1 US dollar.
The pandemic has changed many aspects of global dynamics. China-US competition has intensified, and this has fuelled negative rhetoric about China among Americans. Advocating for China’s success or predicting its economic ascendancy has become politically incorrect in the US. More critically, the deterioration of US-China relations has caused many Chinese-American researchers to leave the US and return to China, including Hong Kong. Several of my friends are among them.
Although British occupation played a significant role, Hong Kong’s status as a global financial centre has long been closely tied to the development of mainland China, rather than being a gift from the United States or the United Kingdom. Among the former British colonies in the Asia-Pacific, perhaps it is only Hong Kong and Singapore that have maintained economic prosperity.
Investors put in last-minute application at HSBC’s branch in Kwun Tong just as Industrial and Commercial Bank of China’s initial public offering is about to close in Hong Kong on October 19, 2006. The IPO was the world’s largest at the time. Photo: Martin Chan
Therefore, as long as mainland China continues to advance towards becoming the world’s largest economy, Hong Kong will inevitably strengthen and stabilise its position as a global financial centre, despite competition from cities like Shanghai and Singapore.
Hong Kong’s current difficulties and challenges stem from several sources. First, mainland China’s economy has not fully recovered from the three-year impact of the pandemic. Second, as China’s economic development approaches the level of developed economies, its growth rate may slow down, a trend that is in line with economic development theory. Third, the US leveraging its global financial dominance to suppress China has a direct impact on Hong Kong.
However, China’s long-term positive economic trajectory will not be halted by natural or man-made disasters. Although China’s economic recovery initially fell short of expectations, multiple indicators suggest a comprehensive recovery, as recently reflected in the International Monetary Fund’s upgraded revision of China’s 2024 gross domestic product (GDP) growth forecast.
Moreover, last year China included becoming a financial powerhouse as a key national development goal. Consequently, the China Securities Regulatory Commission recently introduced five measures to strengthen cooperation between mainland Chinese and Hong Kong capital markets. Hong Kong is an indispensable and crucial part of the national financial-powerhouse plan. As China’s economy continues to grow, this will further consolidate and enhance Hong Kong’s international financial status.
Additionally, the Greater Bay Area development zone, which includes Hong Kong, has emerged as a major hub for technological innovation. The future importance of being a technology innovation centre may rival that of being a financial centre. Of course, both complement each other and are indispensable.
By 2035, China’s goal is to become a developed economy, with per capita GDP exceeding US$20,000 and total economic output becoming the largest in the world. If all goes according to plan, the economic growth rate is likely to remain around 5 per cent in the coming years. As the economy grows, financial demand will also expand, creating opportunities for Hong Kong to grow its financial market.
On this basis, Justin Yifu Lin, former chief economist and senior vice-president at the World Bank, has pointed out that China’s per capita GDP is expected to reach half that of the US by 2049. He also expects China’s economic output to potentially double that of the US by the same year. By then, won’t Hong Kong, backed by the world’s strongest economy, be the world’s top financial centre?
G. Bin Zhao is founding chairman of the Global CEO Institute
