When Hong Kong transitioned from British to Chinese rule, Edmund Hui was a floor trader on the bustling stock exchange, watching the roaring growth of a city at the crossroads of West and Asia.
Under a deal signed with Britain before the 1997 handover, China promised Hong Kong could maintain its capitalist system for 50 years, an arrangement that helped the city flourish as one of the world’s top financial centers. helped in
Friday marks the halfway point of that experiment, with uncertainty clouding the economic future of Hong Kong – a city increasingly dependent on isolated China, political unrest and pandemic-induced border closures Struggling to recover reputational damage.
Hui, who is now the chief executive of a mid-tier stockbroker with around 300 employees, said the post-handover markets have changed drastically, becoming more China-centric than ever.
“Before 1997, foreign capital made up half of the market,” he said. “After 1997, things gradually changed until the entire market was held by the Chinese capital.”
China’s meteoric rise over the past two decades brought broad benefits for Hong Kong, which became a gateway for mainland firms to raise funds and for foreign businesses to access the world’s second-largest economy today.
“Hong Kong was like the poster child of free trade and open markets,” Regina Ip, a pro-Beijing Hong Kong politician, told AFP.
But its fate’s intertwining with China has also raised warnings about over-reliance and complacency.
Chinese companies made up about 80 percent of the market capitalization in Hong Kong’s stock market this year, up from 16 percent in 1997.
And Chinese firms now account for seven of the top 10 holdings of the benchmark Hang Seng Index, which used to be anchored by domestic brands such as Cathay Pacific and Television Broadcasts Ltd.
Meanwhile, Hong Kong’s GDP has shrunk from the equivalent of mainland China’s 18 percent in 1997 to less than three percent in 2020.
Hui welcomed this sweeping change with a light shoulder.
“It’s just a matter of changing the boss,” he said.
“We can only hope that the pace of our country will surpass that of Europe and the United States.”
‘Gateway to China’
As China’s economic and political power has grown over the past few decades, so have tensions with Western nations – which have affected Hong Kong as well.
Beijing cracked down on discontent in the city in 2019 after massive democracy protests prompted the United States to revoke Hong Kong’s preferential trade status on the grounds that it was no longer autonomous enough.
Washington also banned some Hong Kong officials.
“Back in 1997, we were able to play a very important middleman. But now… our background is all the more skeptical,” Yan Wai-hin, an economics lecturer at the University of Hong Kong in China, told AFP.
“If a trading partner feels that (Hong Kong) is not a neutral middleman … then mutual trust may be lost.”
Yan said regional rivals such as Singapore were trying to capitalize on what they see as an opening to replace Hong Kong.
Adding to that pressure, the tightening of political controls also means Hong Kong sticks to mainland China’s zero-Covid policy.
Tighter travel restrictions have cut off the trade hub from both China and the world for the past two years, with officials acknowledging that it has prompted a brain drain.
But the IP said once the restrictions are lifted, Hong Kong will be fine.
“We still have a very advantageous geographical position,” she said.
“We are still the gateway to China.”
‘Satisfied and insular’
However, some industries other than finance have struggled after the handover.
Simon Ho, president of Hong Kong’s Hang Seng University, said: “Over the past 10 years, our GDP growth has lost steam and I think it was related to Hong Kong people being complacent and insular.”
For example, the city’s port was one of the busiest in the world for decades, but slipped in the rankings after peaking in 2004.
“The government took a neoliberal, non-interventionist approach, and had no blueprint for developing industries and the economy,” Ho said.
He said officials had devoted resources to areas such as research and development, but that the results were “half-baked” and not competitive enough compared to neighboring tech hub Shenzhen.
“Hong Kong needs to figure out its role,” Ho said.
“In the past, we did not know how to complement the mainland, and in some cases even compete with it. In the long run, it would only get harder.”
read all breaking news , today’s fresh news watch top videos And live TV Here.