Maintaining Hong Kong’s Competitive Advantages Compared to Other East Asia Cities
...grading to an international one. First, as a relatively small size of financial market compared with world- class financial center such as London or Tokyo, financial fragility co-exists with the high level of openness. It has be strongly demonstrated by the Asian Crisis. Second, inflation rate continuously climbing up would affect the competitiveness power on account of high business cost. Third, varieties of derivatives brought forth in the recent years have added extra speculative risk to financial market. Bankruptcy of the Berlin Bank is a case worth noting. In addition, Tokyo, Singapore and Shanghai are strong rivals in this region, of which Tokyo has overwhelming predominance in foreign exchange and stock markets and Singapore is mainly component with a pro-business government, while Shanghai, a vanguard for China’s opening up process, is catching up. Moreover, another problem related to the two above is unemployment. In spite that the total number of the employed increased from 3427,000 to 3543,000 by the end of Aug 2004 (Statistic, 2004), the unemployment rate still keeps beyond 6.8%--an undesirable level. This can be explained by the undergoing economic restructuring after the Asian crisis. On one hand, a sophisticated service-based economy demands a highly skilled workforce; on the other hand, lower skilled workers struggle to find jobs as the SAR Government wants to encourage development of knowledge--intensive economic sectors such as information technology. In a word, the mismatch in labor market leads to high unemployment rates. If the disturbing trend cannot be arrested, it would surely widen the social disparity and undermine Hong Kong people’s confidence, resulting in negative effects on HK’s substantial development in the long-term. To survive and set the pace in regional competition, Hong Kong is supposed to do more in the three aspects accordingly. To boost trade, it is significantly important to reinforce the cooperation with mainland, especially integrating itself into the Pearl River Delta. According to Chief Executive Tung (2003, July), CEPA (the Closer Economic Partnership Agreement) will bring about considerable business opportunities. On trade in goods, HK products will benefit from the tariff arrangement; in services, a numbers of sectors including financial market, tourism and real estate market will be beneficial. Additionally, low taxes, a sound law framework, and expansions of cargo dealing facilities should be retained as they are still very much intact. As for finance, there may be several points worth consideration. First, technology innovations in finance such as bank branches based on internet will help to cover the global market with much lower cost and higher efficiency. Second, HK should be sensitive and well prepared for the chances in the process of China’s entry into WTO. It is estimated that corporations in hinterland will have dramatic increase in capital demand that can be met through HK security market. Also, it is hopeful to turn HK into a centre for offshore RMB business for HK has been permitted to engage in Yuan-related business. Finally, it is on the part of Hong Kong Monetary Authority Institutes to ensure the stability of financial system, including capital injections if financial crisis emerges, as well as strengthening regulations and supervisions of risky financial products. Although it is not an...