Hong Kong… the next Boston?
Last April, the State Council announced its ambitions to transform Shanghai into an international financial and shipping center by 2020, sparking debate over Hong Kong’s place in the grand scheme of things and bets over which metropolis would reign supreme. Unsurprisingly, the official stance downplayed any rumors of rivalry and emphasized a harmonious, peaceful coexistence between Shanghai and Hong Kong. Also not a shocker was how unassured Hong Kong was by these pats on the head; sibling issues run deep, we say, and now our southern sister is apparently having jitters about turning into that sad city called… Boston.
This fear was reported in a recent Reuters article summing up current speculation on the Shanghai – Hong Kong rivalry:
T.C. Chan, a well-known Hong Kong banker, captured the mood. “Will Hong Kong become a Boston?” he asked. “If you can be a New York, you don’t want to be Boston or Chicago,” he added, referring to two American cities that have long lived in the shadow of the United States’ main financial and cultural centre.
Just how threatened is Hong Kong? Sure, Shanghai does have big aspirations, with skyscrapers seeming to go up every minute, frenetic expansion in every corner for the Expo, and financial reforms on the table to allow foreign company listings on local exchanges.
However, Hong Kong has a strong edge over Shanghai in many respects. A few examples: It’s the thriving regional headquarters for many major banks, with a deep pool of top-notch human resources. Also, while Shanghai’s stock market has a larger market capitalization, the Hong Kong Exchange has more listed companies (1297 compared to Shanghai’s 869). Personal income tax is also extremely low in Hong Kong at a flat rate of 15% compared to up to 45% in Shanghai.
Boston: Hong Kong’s fear
Of course, Hong Kong could lose its edge by 2020. Reuters outlines three possible scenarios for the future:
- What the State Council wishes – prosperous coexistence, both Hong Kong and Shanghai handling foreign and domestic capital. A harmless, happy rivalry not much different from Hong Kong competing with New York or London.
- What seems logical – Hong Kong as the preferred hub for regional and international capital, while Shanghai handles domestic renminbi trade and investment flows. A parallel situation would be that of London and Frankfurt after the euro zone came into effect.
- Hong Kong’s worst nightmare – second-tier status if Shanghai’s markets are liberalized; an official at the Shanghai Stock Exchange declared it would be easy to surpass Hong Kong with an unrestricted market.
We still find it pretty hilarious that hyperactive, heaving Hong Kong could ever turn into Boston. As our friend put it, the fact that Hong Kong is scared of being labeled anything but #1 shows how deeply New Yorker they actually are.