City’s Re-Emergence As Asian Financial Center Worries Many In Hong Kong
Shanghai, Shanghai, Shanghai. Lately it all seems to be about Shanghai, not only in the English-language press but in China as well. While many stories about Shanghai focus on the city’s skyrocketing real estate prices and fears of a luxury real estate bubble, or the upcoming Shanghai World Expo, this week some simple numbers were released. According to BusinessWeek, in 2009 Shanghai’s economy surpassed that of cosmopolitan Hong Kong, its rival in many ways both economic and cultural, for the first time in at least 30 years.
Shanghai’s gross domestic product grew 8.2 percent to the equivalent of $218.3 billion in 2009 compared with a 2.7 percent contraction to $210.7 billion for Hong Kong, according to data compiled by Bloomberg. The preliminary reading on Shanghai was published in January and Hong Kong’s release came last week.
The figures highlight 30 years of free-market policies that have spurred China to become the world’s third-largest economy and its No. 1 exporter. Shanghai’s rise may fan concern in Hong Kong that the mainland city will regain its position as China’s dominant financial center, after surpassing the former British colony as the nation’s biggest port and stock-market operator.
“Hong Kong’s role as the bridge linking China and the West is diminishing due to the further opening up of China,” said Hubert Tse, 36, a partner at law firm Boss & Young in Shanghai, who moved to the city from Hong Kong in 2003. “I’m witnessing history as China continues to power ahead.”
While that last quote does border on breathlessness, it does underlie an important point — through all the talk of a future “Shangkong” super-financial power, Shanghai clearly has distinct advantages over its SAR counterpart. Though Hong Kong is regularly praised for its transparency, ease of setting up business and well-established legal system, Shanghai has China’s infamous cheap labor, a massive population, and an enviable rate of economic growth.
As the BusinessWeek article puts in context, Shanghai’s rapid growth and international integration — rather than being a sudden and unexpected development — is really a correction that has taken 60 years to come to fruition. Before the establishment of the PRC in 1949, it was Shanghai, not Hong Kong, that was China’s international city.
From the late 19th century until communists took rule of the mainland in 1949, Shanghai was “an international city hooked into the world economy” and Hong Kong was only a “colonial outpost,” said Kerrie MacPherson, a University of Hong Kong professor who specializes in urban history. Their positions “reversed after 1949 with the anti-capitalist policies of the newly minted” People’s Republic of China, MacPherson said in an e-mail yesterday.
Whether the outcome of the economic rivalry among the mainland’s top cities and Hong Kong will eventually lead to more cooperation and a “Shangkong” behemoth, or whether the competition between Shanghai and Hong Kong is a sort of zero-sum game is anybody’s guess at this point. However, since most of the large companies in Shanghai are either based in or have serious interests in Hong Kong, it’s unlikely that Shanghai’s growth will come at the inevitable expense of Hong Kong’s economy.