As the last rays of light settle gently into the sea, dusk gives way to the inkiness of the night. At Hong Kong’s Victoria Harbor, this everyday spectacle turns into an awe-inspiring sight. With every last breath of the day, as the immense vast darkness sets in, the city is magically transformed. A million lights sparkle into life. Hong Kong’s towering skyscrapers reach into the sky, touching the night. It is a breathtaking orchestra of lights and one of the most dazzling city skylines in the world. Chaotic, bustling with life, overthrown with smog and pollution, a bundle of confluences and contradictions, and hailed as a glittering capitalist jewel, Hong Kong stands as a colossal might in the heart of Asia. The 11th largest trader in the world and the largest source of foreign direct investment among Asian economies, Hong Kong is tethered to the economic might of China, and stands as a city in symphony with progress.
A minor neglected outpost of the Qing dynasty, Hong Kong rose to the forefront when it was captured by the British, signaling the beginning of the infamous Opium War. This small village inhabited by pirates, farmers and fishermen became the center of a bloody battle between the Qing regime and the British Empire. Unhappy about the emperor’s decree banning the import of opium, the British, with their superior naval force, easily occupied Hong Kong Island in 1841. One year later, China was to sign the humiliating Treaty of Nanking, which ceded Hong Kong and the adjacent islands in perpetuity to Britain. Another defeat followed in the Second Opium War in 1856, giving the British more land on the Kowloon Peninsula. Finally, the New Territories as well relinquished control to the British, on a lease of 99 years in 1898.
Under British rule, strategically placed between Japan and Singapore, Hong Kong grew from being predominantly dependent on trade to a manufacturing hub. Growth was rapid, especially as hordes of Chinese immigrants flocked to the region, attracted by the development of light industries. World War II then intervened, and Hong Kong was forcibly invaded and occupied by the Japanese for almost four years. During the Communist regime in China, which began in 1947, Hong Kong suffered an uneasy calm, yet maintained its sovereignty. In 1984, the U.K. agreed to hand over all of Hong Kong and the New Territories to China upon the expiration of the lease in 1997 under the Sino-British Joint Declaration. Following the secession back to China, Hong Kong is seen as a Special Administrative Region (SAR) and is governed under the ‘one country, two systems’ policy advocated by Beijing. Hong Kong is assured of a high degree of autonomy, and has its own government, with complete financial freedom. Post-handover, doubts were raised over the extent of Beijing’s interference in Hong Kong. Following the peaceful 10th anniversary of the handover in 2007, it appears that such fears may have been exaggerated. Hong Kong continues to exercise greater freedom than any other place in mainland China although pleas for universal suffrage and complete democracy continue to be ignored by Beijing so far.
The current chief executive of Hong Kong SAR is Donald Tsang who was re-elected in 2007 to office after winning 649 of a maximum 800 nominations from election committee members. Except in matters of defense and foreign relations, the local Hong Kong government retains sovereignty and exercises relative autonomy.
A smorgasbord of people and cuisines, literature and art, Hong Kong represents almost the perfect fusion of East and West. With nearly a century of British rule, Hong Kong retains many elements of that colonial regime although things have changed considerably since the handover. Cars still drive on the left side of the road, for example. English and Cantonese remain the standard languages spoken, while the use of Mandarin is also accepted.
The Hong Kong film industry is one of the most vibrant and active in the world – having produced such stars as Jackie Chan, Bruce Lee and John Woo. The region remains a ‘shopper’s paradise’ and brands from all over the world find a place here in one of the most exotic celebrations of materialism there can be. Glitzy shopping malls lie juxtaposed next to crowded food streets, and the world’s tallest seated Buddha on Lantau Island meets the swank showrooms of Yves Saint Laurent, Louis Vuitton, Givenchy, and Chanel.
Buddhism and Confucianism, with its emphasis on family values, remain inherent traditions among the people. The Chinese concept of ‘losing face’ is common here as well, and many Hong Kongese would go to great lengths to avoid any kind of social embarrassment. The Hong Kong Arts Festival and the Hong Kong International Film Festival are annual events, and the Hong Kong Philharmonic Orchestra, Hong Kong Dance Company, and the Hong Kong Chinese Orchestra perform regularly, adding a touch of élan to this diverse city.
The economic miracle on the Pearl River Delta
Once a small fishing harbor, Hong Kong has evolved into one of the world’s most important economic giants. Its success lies in its strategic geographical position – throughout history Hong Kong has served as the port of entry and trade into China. It stands at the center of the Greater Pearl River Delta region, which includes in addition to Hong Kong, Macau, and a portion of Guangdong. Together, this region has emerged as one of the world’s most dynamic economic zones and indeed the world’s biggest manufacturing region.
Hong Kong’s economy has always been based on trade, commerce and shipping, and this emphasis on industry and trade reached its peak during the period between 1950 and 1980 when manufacturing grew rapidly. This was particularly evident in the 1980s, when the manufacturing sector employed nearly 905,000 people. Eventually, Hong Kong rose to become one of the leading producers of textiles, rattan furniture, plastics, watches and clocks. However, as the date of the handover to China began to loom close, Hong Kong underwent a structural shift in its economy as more manufacturing began to swing to lower-cost bases in Guangdong in southern China. In a way, such a transfer did not imbalance Hong Kong as much as it helped mature the region’s economy.
Hong Kong now serves as an important distribution center for the manufactured goods which come from China. In fact, many of the manufacturing companies which shifted base to China kept the center of their export operations in Hong Kong. This enabled the growth of the services sector, which accounts for a staggering 90.7% of the city’s Gross Domestic Product (GDP). The transformation is now complete – Hong Kong has shed a lot of its dependence on manufacturing and is now a services-oriented economy. The city has grown to become a leading center for management, information, coordination, finance, and professional services. Correspondingly, labor growth has been particularly high in the communications, international trade and financial sectors. Of the 3.5 million residents who make up Hong Kong’s labor force, over 91% of these workers are in the service sector, although industry and tourism remain important areas of growth.
At the same time, Hong Kong’s free market economy, which is the world’s thirty-fifth largest, continues to rely on international trade, maintaining a successful balance between imports and exports. Much of Hong Kong’s rapid growth can also be credited to the government’s hands off policy – and the region remains a prime example of laissez-faire capitalism. In fact, in the Index of Economic Freedom, Hong Kong has been ranked as the world’s freest economy for 14 consecutive years. Not only that, the city has also been voted the most competitive economy in Asia and the easiest place to raise capital.
With China’s ‘one country, two systems’ policy, Hong Kong benefits from being a part of China, yet separate from it. The attractions are immense – the city has its own currency, its own flag, and complete autonomy over its financial transactions. The Hong Kong currency has been pegged to the dollar since 1983.
The agricultural sector continues to decline, especially as farming suffers due to lack of arable land. As such, Hong Kong must resort to importing much of its food requirements. The agricultural activity in Hong Kong is primarily concentrated on growing premium food and flower varieties. Relatively unimportant to the city’s economy, this sector contributes just 0.1% of the GDP.
Tourism has grown to become one of Hong Kong’s biggest foreign exchange earners, with 2007 attracting more than 28 million tourists primarily from the Americas, Europe, Australasia, and mainland China. At 81.7 years, Hong Kong has the sixth highest life expectancy in the world, and its residents enjoy a high standard of living comparable to some of the best cities worldwide. Per capita income as well remains one of the highest in Asia. With a population of seven million, Hong Kong does not breathe easy with a density of 6,477 persons per square kilometer.
As with most other countries in Asia, Hong Kong was a victim of the financial crisis of 1997. The economy managed to rebound well, only to be pounded again by the dot-com crash of 2000 and an outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003. However, Hong Kong’s impressive status on the world economic stage could not be stymied for long. It recorded a GDP growth of 6.9% in 2006 with inflation at -0.3%. An increasingly close relationship with China has significantly boosted Hong Kong’s status as one of the biggest stock markets in the world. A number of Chinese companies looking to list abroad invariably use the Hong Stock Exchange. Although exports to the U.S. remain strong, China has also recently overtaken the U.S. to become Hong Kong’s number one trading partner.;
The government is also looking to pursue more initiatives in the Greater Pearl River Delta region, and its close connection to this dynamic zone has allowed the city to build a transportation and logistics juggernaut that boasts the world’s second busiest container port and the world’s busiest airport for international cargo.
Exciting and vibrant with worldly charm, Hong Kong is one of the truly global cities on par with New York, Paris or London. That global appeal stems from political stability, a pro-business approach to governance, and enduring free market principles. Its infrastructure ranks among the best in the world, and its business-friendly environment has always attracted substantial foreign investment.
Problems, it might appear, are far flung from its vision. They do exist, but not enough to alter its economic landscape drastically in the short term. With a low birth rate, Hong Kong’s population is aging rapidly, and the city’s current old-age dependency ratio of around 16% is expected to double by 2030, and exceed those of other Asian regions by 2060. Indications are that unless drastic efforts are undertaken, Hong Kong could see a radical decline in its population in the first half of this century. With a limited democratic system in place, Hong Kong residents have long wished for universal suffrage, but it appears unlikely that Beijing will grant that freedom any time soon. Increasingly, observers are noting that the Communist Party’s influence is weighing in heavier than before on Hong Kong – but freedom of the press and media continue to exist, and Hong Kong remains one of the freer societies in China.
On the economic front, however, the news continues to be good. Total exports grew strongly by 9.2% in 2006, and quickened to 15.8% year-on-year in January 2008. The labor market improved notably in 2007, with the unemployment rate falling to 3.4% by year-end. The government now forecasts a GDP growth at 4-5% in real terms for 2008.
The region continues to attract heavy foreign direct investment, and according to the UNCTAD World Investment Report 2007, Hong Kong was ranked the second in Asia and seventh in the world in 2006, with FDI inflows increasing by 28% to $42.9 billion. With the third largest foreign exchange market in Asia and the seventh largest stock market in the world in terms of market capitalization as of December 2007, Hong Kong’s growth has been skyrocketing. Yet concerns over a projected recession in U.S. markets have had repercussions on the Hong Kong stock market, and it remains highly volatile. Rapid growth in the Pearl River Delta has led to a severe deterioration in air quality and the environmental impact of Hong Kong’s spiraling growth could affect the long-term standard of living in the city. However, the governments of Hong Kong and Guangdong Province have signed an agreement promising to reduce four major air pollutants by 2010.
Much of Asia remains a chaotic sphere. But Hong Kong’s enduring success story continues. The city serves as a bridge to the promise of China, and the stability of the West. From the far-flung days of the Qing Empire, when it was but a forgotten dot on China’s landscape, to the epicenter of a fierce war between the British and Chinese, and finally the remarkable transformation to one of Asia’s finest cities – Hong Kong’s journey has come full circle. Asia’s shrine of capitalism is a synthesis of materialism, eastern exoticism and global traditions. Hong Kong is here to stay.
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© Thomas White International, Ltd 2013