In the past two decades or so, the sprawling Chinese cities have matched Hong Kong’s affluence. At the same time, the enacting legislation for Hong Kong SAR goes beyond the optics of administration. China used the narrative of Hong Kong beyond symbolism to exercise exquisite contortions.
Hong Kong was a dream for Chinese leaders and millions of masses looking for relief from famines, underdevelopment, and purges. Chinese mud-clad bordering villagers with daily wages of one yuan gazed across the Shan Chum at Hong Konger’s lifestyle where the daily wages reached several hundred yuan. Well before the Pearl River Delta (PRD) was opened up, in Chinese villages bordering Hong Kong, children were taught to swim from an early age to prepare for crossing the river undetected.
Post-reforms of 1978, it took considerable time for these Chinese villages for an economic turnaround. Be it mud, bricks, labour, trucking services, or even accepting waste and refuse from Hong Kong, the booming cluster of businesses soon set the Chinese economy in motion. The trade multiplied, and the fertile PRD transformed from farmland into a metropolis. Dream of Hong Kong persisted until its return to the mainland, Hong Kong’s economic output was still unmatchable at a quarter of China’s entire GDP.
After returning to China, the Chinese ‘presence’ in Hong Kong has grown multi-folds. The ‘one country, two systems’ model was supposed to be the harbinger of growth for both China and Hong Kong. However, Hong Kong suffered from an acute sense of trepidation. Under the name of economic confluence, Beijing hastened the political and administrative integration of Hong Kong into China. Although on paper, Hong Kong has time until 2047 to enjoy its autonomy, Hong Kong’s economy is threatened by slowdown and contractions on all economic fronts. Does Hong Kong remain a dream destination for global capital, manufacturing, and services? Probably the large-scale protests, layoffs, and Sinification of Hong Kong hold the answer.
The rising clout of Chinese companies in Hong Kong is more than a match for international players, let alone the Hong Kong domicile. Twenty years after the return to the mainland, a large number of mainland professionals have filled high-end positions in Hong Kong’s financial industry. As the Chinese companies increased their presence in Hong Kong, it also led to the largest increase in mainland employees.
Hong Kong also remained a gold spot for the initial public offering (IPO) of Chinese companies. According to Thomson Reuters data, Hong Kong was the world’s largest IPO market in 2016, and the proportion of mainland companies’ IPOs was 80 percent.
To illustrate this influence better, one can follow how the rise of Chinese securities firms is inseparable from the changes in the structure of listed companies and investors in the Hong Kong financial market itself.
From the perspective of the structure of listed companies, there are more than 1,900 listed companies on the Hong Kong market, of which the number of listed companies in the mainland accounts for 51 percent, and the market value accounts for 64 percent. With the integration, public funds, private equity funds, and insurance institutions from the mainland have become investors in the Hong Kong market.
Compared with the growth rate of the mainland, Hong Kong’s economic strength has indeed fallen sharply. In 2019, China’s economy slowed by 0.5 percent, while Hong Kong’s economy shrank by 1.2 percent (compared to 2018). Against the backdrop of the hollowing of its economic structure and a decline in innovation, rising instances of government’s interventions, and caught up with global volatilities, the rise of mainland cities in the field of trade and finance is significant.
This massive proliferation of Chinese business interests in Hong Kong helped the mainland to lower the rate of its dependence over Hong Kong. Rather than playing the role of a unicorn, Hong Kong’s role and responsibilities have been brought to a level of mainland cities. Besides, Hong Kong’s fate is tied with the construction of the Greater Bay Area (GBA). In the past two decades, the GBA has absorbed a large amount of human and capital from Hong Kong, and Hong Kong is expected to play a significant role in the GBA cities, especially in the financial sector.
The protests indicate that the ‘Positive Non-Intervention’ principle practiced by the Hong Kong SAR government since the late 1970s is now being undermined. The SAR government is accused of representing what the mainland deliberates. Apart from Hong Kong’s unique role in the GBA, Beijing wants Hong Kong to play a critical role in leading the Belt and Road Initiative (BRI)-led schemes.
While the GBA is to build capacities serving the national growth, the BRI promotes the cooperation agreements between China and BRI countries. In 2018, the SAR government announced five critical directions for advancement in its policy address, including strengthening policy connectivity, making full use of Hong Kong’s advantages, and promoting collaboration with partners in the mainland and the BRI countries and regions.
The rising tensions in Hong Kong indicate the period of prolonged slowdown, and the economy hit hard by political matters. Hong Kong is going through a tough spell, and the high level of uncertainty is impacting business confidence regionally and globally.Aravind Yelery is Senior Fellow, HSBC Business School, Peking University. Twitter @AravindYelery. Views are personal.