Shanghai vs Hong Kong

[wushijiao]

Reading articles about China, one often gets the impression that Shanghai might quickly overtake Hong Kong in competitiveness. That doesn’t seem to be the case according to a recent study:

"Hong Kong's competitiveness score is still ahead that of Shanghai in 2005 with an even wider gap, a research report said Tuesday.

Based on the Pyramid of Metropolis (International City) Competitiveness using a 32-item structural questionnaire, the 2005 survey interviewed 248 Chief Executive Officers from local and multinational corporations both in Hong Kong and Shanghai. They are requested to give a score from 5 (best) to 1 (worst) on each of the 32 measuring items for both Hong Kong and Shanghai.

According to the survey, Hong Kong's competitiveness score is still ahead that of shanghai in 2005 by almost one point (0.9), a consistent behavior observed during the past four years.

Hong Kong's score increased from 3.7 in 2001 to 4.1 in 2005 representing an increase of 0.4 (or 10 percent) and that of Shanghai 3.0 to 3.2 representing an increase of 0.2 (or 7 percent) for the same period.

Compared with 2004, Hong Kong gained modestly by 0.1 from 4.0 to 4.1 and on the contrary Shanghai's score dropped modestly by 0.1 from 3.3 to 3.2. "

also:

"Zuo Xuejin, Vice President of Shanghai Academy of Social Sciences, said the result of the survey is reliable though it appears a surprise to some people.

"Shanghai is developing fast in hardware but lags behind in software, where rests a huge gap between Shanghai and Hong Kong," he said.

During the eleventh five-year program (2006-2010), Shanghai will readjust its industry structure as Hong Kong conducted 20 years ago, from labor-intensive mode to modern service-oriented type, paying more attention to finance, shipping, communication and culture, Zuo said."

I also think this is an interesting opinion about Hong Kong's survivability:

"Tuan believed there exists absolutely no concern regarding the marginalization of Hong Kong even though confronted with competition from Shanghai because China needs multiple metropolis in considering the sheer size of the country. Both cities have the natural geographical locations at south and east China, where they can play unique and dominant roles there. "

http://www.chinadaily.com.cn/china/2006-05/24/content_598926.htm

Thoughts?

[gato]

I agree. China can certainly accomodate multiple metropolises, though like in other countries, one might be clearly superior to the others in one respect or another. As for Shanghai, I don't think it's going to overtake HK's in attracting for businesses until it develops a court system that's as effective and efficient as HK's.

[SampanViking]

Ultimately I think shanghai will overtake Hong Kong. Shanghai is being promoted as China's business capital and I am sure that will come true in the end.

I have strong links in Hong Kong and many of my relatives live in SAR with others in the general Pearl River Bay Region, so I say this from a benign perspective.

Shanghai has a big advantage as the Premier Sea Departure point for the US West Coast, and whilst the US economy remains strong and massive, Shanghai will surely thrive.

Hong Kong seems more poised to deal with Europe and Africa, still major markets. Hing Kong itself though is changing and much of its Industry including Docks is relocating to the mainland, leaving Hong Kong to specialise in Financial and Management services plus of course Tourisem.

The interesting view will be towards the end of the 50 years. My best guess is that Hong Kong and Shenzhen will merge into its own Municipality. If it does, the resulting city could give Shanghai a real run for its money.

[flameproof]

SH is WAY back compared to HK. Nowadays you can have a rep office in SH, but you will do much better with HK as the major transaction center.

Just consider:

Rule of law

Freedom of information

Unrestricted currency transactions

Bureaucracy

Transparency

Banking procedures

SH is still way behind in all those aspects.

Shanghai has a big advantage as the Premier Sea Departure point for the US West Coast....

Hong Kong seems more poised to deal with Europe and Africa,

That quote is wrong. You ship from your nearest sea port, no matter where to.

A good example for me is Airport transport. SH has the Maglev, HK has the AP Express. The Airport Express goes really to the center (Central) and direct to the arrival/dept. halls. You can even check in in the City and can get rid of all you luggage early.

SH has the advanced Maglev, it stops quite a long walk and a staircase away from the dept/arrival halls. The moving sidewalks are a good idea - but seldom work. On the city side it goes to a remote suburb, where you can even not check in. Like many things in China, it's not well thought through.

[SampanViking]

Hi Flameproof

I doubt it would make a huge amount od sense to try and argue every single point you make. Mainly this is because of the perspective from which; I guess, we are writing.

I do not doubt what you are saying about the current situation, I am rather thinking about the next ten to twenty years and about the kind of decisions I would need to make if I had to choose between these cities to set up a office.

I cannot ignore what is likely to be one of the biggest events in China over the next couple of decades, which will be the development of the Yangtze corridor into (again my belief) one of the worlds greatest economic zones. Shanghai will and will remain the main point of exit for exported goods from this zone and will become a major financial centre for it as well.

I take your point about people export from whichever port is nearer, but many companies both domestic and foriegn will view location and export market proximity as an issue when they invite tenders or look to site factories in China.

Both cities will always be very special and my heart will always be in Hong Kong. I would say though that questions about which are the greatest are often a poor way to look at some complex entities as Cities. It is surely better to say "I want to do x, which city is now and most likely to be in the future, the most appropriate for my particular activity?".

[Ian_Lee]

I think HK should be compared with Tokyo, not Shanghai.

When HK's stock market collapsed in '97-'98, the shocks rippled around the world. By that time, everyone in Wall Street woke up and asked how HSI closed yesterday. But even today not too many investment bankers cared how Shanghai bourse fares.

But to be fair, Shanghai is more handicapped than HK:

(1) Shanghai pays a huge chunk of its local tax to Beijing's coffer but HK pays none.

(2) Shanghai cannot put up a gate to stop inflow of migrants. But HK can regulate the inflow.

(3) Shanghai cannot have the kind of liberal visa policy to faciliate the entry of foreigners like HK has.

(4) Shanghai's leadership is appointed directly by Beijing. HK's leadership is also appointed by Beijing but indirectly. However, he/she must be HK local who more or less will place HK's interest on top.

(5) HK can unilaterally enter into agreements and treaties with foreign governments while Shanghai cannot.

If Shanghai can have the same kind of status, I think it will surpass HK.

[flameproof]

SampanViking

I think it's impossible to talk the future. We just don't know. But don't be too optimistic! I can see 2 problems coming up:

1. Labour shortages in the wider SH area

2. Wage increases because of #1.

3. Factories moving further and further away from SH because of #1. + #2.

Labour shortages are already a HUGE reality in Guangdong area.

4. The RMB WILL appreciate, and China therefore will get less competive. Therefore the economy will slow down at one point.

Ian_Lee

When ones says "surpass" - then we have to ask surpass in what? SH has surpassed HK long time ago in the 'population' and in # of Mandarin speakers, and in the production of dust particles. There are 1000's of figures you can compare.

It's like saying that bank is the biggest. Biggest in what? Branches? Assets? Employees? Customers? Network?

[SampanViking]

HI Flameproof, Hi Ian Lee

You both make very good points.

For Foriegners of course Hong Kong is far more Westerner friendly and will be a major point of entry for Western Buyers and Investors.

The points though about escalating prices and labour shortages play more in Shanghai's favour than Hong Kong's. Shanghai is undoubtedly the regional champion and as business migrates further away from the Delta Municipality, it should increase its hub strength and draw more areas into its fiscal orbit. Again, I would urge you to watch development along the Yangtze corridor.

Hong Kong is hampered physically by both its Legal staus and Geography. As an SAR it cannot expand into the mainland and is contianed on its Peninsular. Even if these restraints were removed, I doubt if it would be able to so totally overshadow its Boom Town neighbours such as Shenzen, Dongguang or Guangzhow.

There is another shadow on the horizon, the proposed Fujian Free Trade Zone. If this goes ahead its a pretty easy guess that a lot of US money will start choosing Taipei as its entry point.

But I say again both cities (and regions) are big enough and far enough away to ensure that they both remain key economic centres, irrespective of relative differences.

A far more interesting subject for this comparison would be Chengdu or Chongqing as too which will become the Premier hub of the Upper Yangtze.

[bhchao]

There is another shadow on the horizon, the proposed Fujian Free Trade Zone. If this goes ahead its a pretty easy guess that a lot of US money will start choosing Taipei as its entry point.

That is a good point, especially considering that direct transport links are likely to become reality if the KMT returns to power in Taiwan in 2008. Fujian would be the biggest economic beneficiary from a Pan-Blue victory in 2008.

[kid-kut]

Hong Kong is a great business city, however, they are way too dependent on other countries, cities. For example: If Taiwan were to trade directly with mainland China, HK will most definitely lose a huge portion of their business. They play a middle man between China and Taiwan. Obviously, HK is able to work with Western nations because they were once a colony of Britain and they understand how to deal with Western companies.

[flameproof]

kid-kut

well, in international business it's quite normal to work with other place. Otherwise it wouldn't be international.

HK is an excellent local SE Asia place for off shore transactions. No matter where and what you do, HK tax incentives are quite good.

Just a reminder also that SH, or better China in general is lightyears away from the "Rule of Law" concept. There is no working legal system. The huge amount of burocrazy in China is another negative factor.

[kid-kut]

I agree, HK has a system of law that people follow and obey. Something which Shanghai still needs to work on. It will be a long while before that ever happens.

[sinodefence]

http://www.msnbc.msn.com/id/13989901/site/newsweek/

This excellent article on Hong Kong's future says that HK is like the New York of China and that Shanghai is becoming the Chicago of China. "This means that the rivalry between the two is not a zero-sum game". This is stating the obvious. I'm just glad that China has these two great cities, which will become even greater in the future.

Also, the article says:

...China is particularly interesting among major trading nations in that it is the only one, other than the United States, that is cultivating two financial capitals with distinct specialties...