Hong Kong is a bridge between Asian giants

By Ishu Jain Source:Global Times Published: 2016/7/28 23:08:01

Illustration: Peter C. Espina/GT



 

In a recent research report, Nomura Securities projected Hong Kong's economy may shrink by 0.2 percent in 2016, down from the previous forecast of 0.8 percent growth. The report warned that Hong Kong may fall into an outright recession because, as one of the biggest financial hubs in Asia, Hong Kong is very exposed following the result of the Brexit vote.

Concerns about Hong Kong's economic prospect have persisted for some time as critics believe that the city has been increasingly marginalized by the rapid growth of mainland cities. While it is true that Hong Kong's economy is facing some challenges amid the global economic slowdown, it would be equally wrong to underestimate Hong Kong's economic potential.

China is implementing its 13th Five-Year Plan (2016-20) which includes promoting the Belt and Road initiative. This multinational project will generate lots of opportunity for Hong Kong. Last year, Hong Kong's exports to the UK and the rest of the EU comprised 14 percent of the total, the highest in Asia and thus exposed them to risks following the UK's referendum to leave the EU. In light of these developments, the mainland's Belt and Road initiative will allow Hong Kong to continue to benefit from trade and investment.

The Belt and Road initiative is an important opportunity for enhancing global connectivity, trade and logistics. There is a role for Hong Kong businesses and industries to play in this project, from leveraging on their expertise and experience in engineering and project management to promoting Hong Kong's strength as a "super-connector".

The Asian Development Bank has estimated that the initiative in Asia will require $8 trillion for infrastructure before 2020. Even with funds from the Chinese mainland, private investment will absolutely be required. This is where Hong Kong banks and financial institutions will be particularly valuable, and by participating Hong Kong can secure its economic future and work with the mainland in the development of international aid funding.

Most importantly, Hong Kong serves as a "super-connector" between the mainland and India, two economic giants in Asia.

India is one of the Chinese mainland and Hong Kong's major trading partners. This relationship is long-established, dating back to the times of the British East India Company. Trade and investment volumes are steadily growing, with Hong Kong acting as a facilitator. A point to note here is that not only is trade progressively increasing, but it is also progressively diversifying. A number of major Indian corporations have established offices in Hong Kong, cementing its role as the gateway to China. Many Indian entrepreneurs in Hong Kong have established joint ventures with mainland partners.

China has become the world's third largest investor economy (behind only the US and EU), with about 60 percent of all investment directed to, or channeled through, Hong Kong. Hong Kong already plays an important role in facilitating investment in India, particularly on the part of non-resident Indians. The economic powerhouses of the next century - China and India - have a great scope for increasing investment and other business relations and Hong Kong is well placed to play a major role in this process.

Further, banks in Hong Kong have created special trade development desks to take care of Indian-related trade in particular. Hong Kong, by virtue of its developed financial markets, the presence of the world's top banks, and its competitive environment is uniquely positioned to handle this business.

Many of India's leading companies are in Hong Kong, looking to secure a foothold in the East Asian marketplace, and using it as a springboard to the mainland.

Hong Kong is a unique place for managing global business, and the ideal gateway to reach the growing mainland market. Hong Kong advocates and practices a free and liberal investment regime, freedom of capital movement, well established rule of law, transparent regulations, and low and predictable taxation. Its vibrant culture is a magnet for international business.

India is presently witnessing a revolution of entrepreneurship, creativity and innovation. This has made their manufacturing sector modern and globally competitive and their services sector a powerful instrument of modernization. These trends are also helping turn India into a global hub for innovation, design and development and manufacturing. Hong Kong, as a well-established global hub for advanced finance, trade and logistics support, offers immense opportunities for collaboration between India and the Chinese mainland through Hong Kong.

The author is an India-born, Shanghai-based international business consultant. He can be reached at ishujain@163.com. bizopinion@globaltimes.com.cn



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