Again, Hong Kong is gaining the strength to bounce back to the top. The city that has survived a double whammy is now proving its resilience and vitality in its competitiveness in the financial world. The 2022 “World Competitiveness Yearbook”, published by the International Institute for Management Development (IMD) on June 15, ranked Hong Kong fifth among the world’s most competitive places, up from seventh in 2021. The special administrative region also proves the potential of its “one country, two systems” arrangement in the international community — it has continued its top place in “business legislation” and third in “public finance”, “tax policy”, and “international investment”.
The IMD’s yearbook takes into account several factors, such as government efficiency, business efficiency, economic performance, and infrastructure. Denmark was ranked first, followed by Switzerland, Singapore, and Sweden. Encouraged by the good news, the SAR government announced immediately after the press release that Hong Kong, being one of the most competitive economies in the world, credited its success and competitiveness to its institutional strengths under the “one country, two systems” framework. Hong Kong has much to be proud of — its rule of law and judicial independence, free flow of capital, a free trade and investment regime, a simple and low tax system, a favorable business environment, and an efficient government. All these combined have shaped the port city into the best nexus of the East and the West, the gateway to the promising land of the Guangdong-Hong Kong-Macao Greater Bay Area, and a springboard toward the world market.
Hong Kong should start gradually reopening its borders, with the mainland first, then the rest of the world, as Singapore is doing. Other financial centers are hosting massive events and conferences; Hong Kong should consider jumping on the bandwagon of economic revival
The intermediary city is actively integrating into the national development program to seize the opportunities arising from the national 14th Five-Year Plan (2021-25) and the State strategies including, but not limited to, the Greater Bay Area and the Belt and Road Initiative.
This comes after Hong Kong maintained the third place globally in the “Global Financial Centers Index 31” report, published on March 24 by Z/Yen of the United Kingdom and the China Development Institute of Shenzhen. The GFCI report has been released in March and September every year since 2007. In the GFCI 31, 119 financial centers were assessed, and Hong Kong came third with an overall rating of 715.
Even Canada-based Fraser Institute once again ranked Hong Kong as the world’s freest economy in the “Economic Freedom of the World: 2021 Annual Report”, relying on data collected in 2019, the year of civil unrest. The Fraser Institute has a long history of valuing Hong Kong; the city has taken first place in its annual rankings ever since its first economic freedom report was hammered out in 1996.
However, the city, like many economies in the world, is managing to get back on its feet amid the global recession — the Hong Kong economy saw a marked deterioration in the first quarter of 2022, with real GDP contracting by 4 percent year-on-year. The fifth wave of local epidemic and resultant restrictive measures weighed heavily on a wide range of economic activities as well as economic sentiment.
Taking into account the economic performance in the first quarter and the latest local and global economic situation, the real GDP growth forecast for 2022 was revised by the Hong Kong SAR government down to 1 to 2 percent. Though the recession looks real in figures, the labor market suggests otherwise. The underemployment rate has been declining and the job market reviving. With the unemployment rate declining by 0.3 percentage point to 3.5 percent, the number of unemployed people fell further by 14,700.
That being said, Hong Kong need not panic about the figures that resulted from the fifth wave of COVID-19 as well as the slower growth in global demand. The devastating fifth wave ravaged the city, abruptly bringing economic activities to a halt and causing casualties.
The whole picture, on the other hand, bodes well for Hong Kong: The above-mentioned rankings reveal the city’s resilience despite the pandemic and social unrest prior to it. It is safe to state that Hong Kong’s economy remains resilient despite the huge challenges. There is a clear international acknowledgment of Hong Kong’s role as one of the most important financial hubs in the world, a financial hub that does not seem only to maintain its position, but to consolidate its position year after year.
Nevertheless, as I already stated in some of the articles I wrote last year, the main caveat that we should take into consideration, though, is that of inbound tourism. As admitted by the government, inbound tourism remained virtually frozen, posing a constraint on the pace of economic recovery.
Now that Hong Kong seems to be on its way to have most of its population immunized (be it because they got infected with COVID-19, be it because they are fully vaccinated, or a combination of both), Hong Kong needs to reopen its borders more than ever, since this pandemic is becoming endemic.
Hong Kong should start gradually reopening its borders, with the mainland first, then the rest of the world, as Singapore is doing. Other financial centers are hosting massive events and conferences; Hong Kong should consider jumping on the bandwagon of economic revival.
A survey by Allianz Partners (cited by Forbes magazine) also predicted that European travel will increase by 600 percent compared with last year, as more European countries reopen to visitors, to the point that the travel industry is calling the European airport chaos “the perfect storm”, according to The New York Times. The combination of lifted COVID-19 restrictions, both throughout Europe and in the US, plus an increase in travel demand, alongside issues with airline companies’ staffing, will call for a difficult summer of travel.
Hong Kong cannot afford to lose its tourism, since it was the world’s most-visited city for tourists, due to its unique combination of being one of the world’s most important financial centers, its enormous touristic attractiveness, and its unique geopolitical location as the gateway to China.
With Beijing’s unremitting support, the SAR is now tapping the national strategy to secure its international status as one of the world’s most important financial centers. As we saw, the economic figures provided by the Hong Kong SAR government allow us to be very optimistic when it comes to Hong Kong’s current and future situation, and the reopening of borders will help Hong Kong enhance its situation even more.
The author is a fintech adviser, a researcher and a former business analyst for a Hong Kong publicly listed company.
The views do not necessarily reflect those of China Daily.