Smooth Sailing: Hong Kong's Economic Transition
Fung, Victor, Harvard International Review
Dr. Victor Fung is Chairman of the Hong Kong Trade Development Council and of Prudential Asia Investments Ltd.
On the eve of Hong Kong's transition to a Special Administrative Region (SAR) of the Peoples Republic of China, there is much discussion about the best way forward for Hong Kong's economy. I believe most of us in the business world share the same vision for Hong Kong after 1997--to be the prime international business and financial center not simply for China, but for the entire Asian region. Understandably, questions and differences exist over how best to achieve that vision. In my view, many of the answers are obvious and self-evident.
Over the years, Hong Kong's highly flexible and adaptable economy has become its own best template for patterning the future. When trade with China was disrupted in the 1950s with the onset of the Korean War, the entrepot of Hong Kong quickly reconstituted itself as a light industrial manufacturing base. In Hong Kong's first major transformation, the country also learned to react quickly to global trends. When consumer demand in major markets switched from plastic flowers to wigs, Hong Kong became wigmaker to the world, virtually overnight. In 1978, when China adopted its open door economic policy and permitted manufacturing investment in its Special Economic Zones (SEZs) of southern China, Hong Kong began its second major transformation from a manufacturing to a service-based economy to meet many of China's needs.
All of these transformations have evolved in a remarkably market-driven and frictionless way. Hong Kong has a system which reflects its entrepreneurial ways and promotes upward mobility, a factor which has proven vital to Hong Kong's well-being as a society. This system enables Hong Kong to be competitive as a source of products and services while leaving it free to capitalize on opportunities offered by the changing market, Hong Kong's particular genius.
Perhaps what is most needed in the years ahead in Hong Kong is the political courage not to change things for the sake of change--not to "fix" what is manifestly "not broken." Hong Kong is at its best when left to evolve naturally to prevailing market conditions. Yet at the same time, it is incumbent on Hong Kong's entrepreneurs to sharpen their entrepreneurial abilities and skills, to make even more of what they already have.
One new threshold of opportunity for Hong Kong lies in one of its core activities, the physical movement of merchandise. Because of Hong Kong's wise investment in infrastructure in the past decades, Hong Kong is now primed to take advantage of new opportunities. By April 1998, the new airport at Chek Lap Kok will be functioning; soon afterward, Hong Kong's port, already the world's busiest, will be expanded with the addition of Container Port 9. Hong Kong is also upgrading rail and road links to the People's Republic of China. It is estimated that, in twenty years, Hong Kong will be able to handle three times the current volume of goods passing through the colony. The implications of this projected increase in trade volume for Hong Kong's economy are huge: more jobs, more pressure on ports to use technologically advanced systems, and more demand on vital support services ranging from insurance to telecommunications.
Another key role played by Hong Kong, that of the middle man, will also provide a new threshold of opportunities. Hong Kong built its entrepreneurial reputation largely on its ability to build networks of contacts and put buyers and sellers together. While some predict that the information age will diminish the role of the middle man in trade, that suppliers and customers around the world will increasingly be in direct contact, I believe the opposite is true. Indeed, I see a significant expansion of opportunity for Hong Kong.
The fact is that Hong Kong's major customers in North America and Western Europe are moving toward very sophisticated management information systems. …