With his first 100 days in office nearly complete, CY Leung, the Chief Executive of Hong Kong, has many challenges still to face as he attempts to reshape the former colony. One of the most difficult tests will be to maintain the city’s long-term status as Asia’s financial hub. With Shanghai, Singapore and even Seoul aiming to steal Hong Kong’s crown, serious challenges have arisen that may well affect the Special Administrative Region’s status. Chief among them is how to attract and retain the wealthy expatriates that have long been a key driver of the SAR’s knowledge economy.
Although the economic slowdown is encouraging large numbers of Westerners to move to Hong Kong, there are signs that the city’s international rivals, especially Singapore, are becoming more attractive destinations, thanks to worries about Hong Kong’s quality of life. Concerns around air quality and school access regularly hit the headlines.
The danger is that when the global economy starts moving again, Hong Kong will have been too complacent in attracting and retaining the best people. “Hong Kong is still attracting top talent,” says Nick, a head-hunter who regularly places new hires from London and New York. “But there are concerns about the quality of life, especially for young families. This could definitely be a problem for Hong Kong when the supply of talent gets tighter.”
Of all the region’s cities, it is Singapore that is the biggest threat to Hong Kong, a rivalry that has lasted for decades. With Singapore having overtaken Hong Kong as the world’s leading container port in 2005, the city state looks set to surpass its Chinese rival in other measures of success in the coming years, particularly on quality of life comparisons.
One area where Singapore has a dominant lead is in air quality. According to the country’s National Environment Agency, air quality in terms of Pollutant Standard Index (PSI) was good on 93% of the days in 2010 and moderate on 7% of the days. In comparison, researchers at the University of Hong Kong reported in January this year that local air quality was ten times worse than in 2005, with 3,200 people dying annually from a pollution-related illness.
Hong Kong’s location at the mouth of China’s Pearl River Delta – home to tens of thousands of factories – does not help. Yet the worst culprits are of its own making, specifically its industrial and traffic emissions, which are kept concentrated by the canyon effect of the high-rise skyline.
It is unclear how successful the Hong Kong Government will be in addressing this issue. Plans to significantly reduce the problem by 2014, by linking pollution gauges to the air-quality standards of the World Health Organization, have been dismissed as “not strict enough to make any positive impact” by the Hong Kong Civic Exchange, a think tank. And a recent law that banned roadside vehicle idling has done little to reduce pollution from the large fleet of old buses, which are major particulate producers.
Singapore may have natural environmental and geographical advantages when it comes to air pollution. Yet the country leads in other key areas too, notably in international education. The recent opening of several new schools, like Britain’s famous Dulwich college, serves to top-up the high number of foreign school places already available there, making the city even more appealing to expats and their families.
Hong Kong is not in the same position. Despite protestations from local Hong Kongers, the majority of expatriates want to escape the government school system. With 72 international schools and 36,000 places, it should be easy to find a space. But pressure on supply is intense, and growing. “We were told to start looking for both nursery and primary schools as soon as our daughters were born,” said Jonny, an expat from London. Even the opening of schools like Harrow, another British institution, has done little to ease the situation.
Notwithstanding the obvious lead that Singapore has in quality of life markers, some experts are dismissive of the threat to Hong Kong’s future. “Quite simply, if you want to do business in China you have to be in Hong Kong,” says Christopher Hammerbeck, the head of the SAR’s British Chamber of Commerce. “The Beijing Government has made it quit clear that they will continue to support Hong Kong as a major financial hub, for example by guaranteeing its status as the international clearing centre for RMB.”
Hong Kong remains important for non-financial sectors too. Anecdotal evidence from several European trade bodies indicates that Hong Kong remains the natural starting point for companies wanting to do business in China, not least because of its common law heritage and its high prevalence of English as a primary business language. Its proximity to Mainland China and its British legal and linguistic heritage give the former colony a business advantage that none of its Asian rivals can match.
So whilst quality of life is vitally important to some, it is unclear whether this will be of sufficient reason to write off Hong Kong’s future just yet. But it would be a brave politician to assume that, when the global economy starts to improve, high quality talent will want to bring their families to the SAR rather than commute from more congenial climes. And with universal suffrage coming in 2017, tackling two of the biggest issues facing Hong Kong makes good sense for the domestic audience too.