The next era of global economic development will largely depend on U.S.–China cooperation, and Hong Kong is a place where East can meet West with very little friction, speakers said in Atlanta Feb. 2.
The southern Chinese city was administered by Great Britain until 1997, when the British government returned it to China after a 99-year lease on the territory expired.
Now, Hong Kong continues to be a regional hub for companies doing business throughout Asia, especially those looking for a lower-risk way to enter the Chinese market.
A financial and logistics powerhouse, Hong Kong has the largest cargo airport in the world and the third busiest ocean port, with many of the goods it processes flowing in and out of mainland China.
Although it’s adjacent to the Pearl River Delta manufacturing region in the Chinese province of Guangdong, Hong Kong is a separate customs district and has its own currency as part of the “one country, two systems” policy.
The Chinese government embraced this policy to maintain stability after the transition from British rule. The result is that for businesspeople, little has changed since the British relinquished control to the Communist-led Beijing government.
The legal system, the free flow of information, and the financial structures instituted by the British remain intact, making it easy for Westerners to do business in the city, said Wiliiam Ramsey, executive director of Troutman Sanders LLP, an Atlanta-based law firm with offices in Hong Kong.
Troutman entered Hong Kong in June 1997, a month before the handover. Now it has 15 attorneys there and 16 more in the offices it started in Shanghai, China, two years ago.
Mr. Ramsey said China is a market that globally minded businesses must address, and Hong Kong can help them ease into it, much like Troutman did.
“It is a region that you ignore to your great peril because it is, I’m going to call it, the 1,600-pound gorilla in the region,” Mr. Ramsey told an audience at the Metro Atlanta Chamber of Commerce.
Longtime banker and former Atlanta resident Henry Yu agreed. Formerly with SunTrust Banks, Mr. Yu moved to Shanghai last year to become a director there for London-based Standard Chartered Bank.
The Chinese economy is fast-paced, he said, and it’s almost impossible to go a day without seeing new companies set up in Shanghai’s central financial district.
China’s gross domestic product growth rate slowed this year along with the general downturn in the world economy, but the drop doesn’t foretell a sustained loss of opportunity, Mr. Yu said.
Though the sector slowed in the second half of the year, retail sales grew by 21.8 percent in 2008, 4.8 percentage points higher than 2007.
That trend should continue as 200-300 million people are expected to join China’s middle class within the 10-15 years, Mr. Yu said.
About 70 percent of China’s population still lives outside cities, and while the traditional hotspots – Beijing, Guangzhou and Shanghai – are still ripe for business, the real opportunity lies in the “second- and third-tier cities” in less-developed regions where competition is not as fierce.
In Hong Kong, Western businesses would inevitably meet companies from these mainland locales and establish relationships in an environment free from many of the hurdles they would face on the mainland, Mr. Yu said.
And Hong Kong itself is a significant market, he added, citing the example of Atlanta-based Coca-Cola Co. and other international companies that have been successful in the city of nearly 7 million people.
“One of the common characteristics is that all these companies went to Hong Kong first because the market itself is huge,” Mr. Yu said.
Louis Ho, who directs the New York office of the Hong Kong Trade Development Council, outlined some of the specific opportunities available for companies in Hong Kong.
Massive investments are coming in the form of infrastructure projects. The Kai Tak Airport, closed in 1998 in favor of a new international airport, will be redeveloped into a more than $1 billion cruise ship terminal and multi-use facility.
Construction on an 18-mile bridge linking the islands of Hong Kong and Macao to the mainland city of Zhuhai will start this year. The project is expected to cost nearly $5.5 billion.
But even more than a destination for large projects, Hong Kong is a hub for entrepreneurship and innovation, Mr. Ho said. About 90 percent of the city’s GDP comes from service industries.
American products can be reshaped for the better by Hong Kong research and development, and financing for manufacturing and production can be done through banks in the city.
On top of all that, Hong Kong can serve as the logistical launch point for distribution back to the U.S. or other desired markets, Mr. Ho said.
Because of this versatility, Hong Kong is the prime breeding ground for the cooperation that will be necessary as the world’s economic balance shifts, said Rick Niu, executive vice president and chief growth officer for ING’s U.S. insurance group.
“It is our belief that the next business model will have to converge or combine the East and West,” Mr. Niu said.
Despite the current economic crisis, the U.S. should look at this time as an opportunity to re-evaluate and improve its role in the global economy, he said.