社団法人 日本経済研究センター

No. 81

Japan Center for Economic Research

April 20, 2006

Hong Kong’s Competitiveness Still Shines 10 Years
After Its Reversion to China
Shigesaburo Kabe,
Senior Economist
Hong Kong’s presence appeared to have diminished and its glitter seemed lost due to its
reversion to the People’s Republic of China. But the truth of the matter is, Hong
Kong’s competitiveness has risen rather than declined. What is the source of its
strength? A visit to the territory reveals that the ability to come up with flexible ideas,
and the capacity to act as the occasion demands, as only Hong Kong could, as well as
its strategy to function as a hub for flows of people and goods, are the factors mostresponsible.

Stronger Than Ever, Rather Than Being Buried
Hong Kong, which was once in the limelight as one of the newly industrializing
economies (NIES), was returned to the People’s Republic of China from the United
Kingdom in 1997. Now, almost a decade after its reversion to China, the assumption isthat Hong Kong has been overshadowed by China, a giant whose surging economy is thelocomotive of the world economy, and that it has lost its past glitter and presence.
This assumption is probably shared
Light and Shadow in Competitiveness:by more than a few people.
Hong Kong and Japan
Surprisingly, however, when the strengthof countries and regions is measured
using economic data and other indicators,
it is found that Hong Kong has become
more competitive than ever. PotentialCompetitiveness Ranking, 2005, which
this center compiled at the end of lastyear, found that out of 50 countries andregions in the world, Hong Kong was
the most likely territory to see thehighest per capita GDP growth in thenext 10 years (it was in third place in2002). This is in sharp contrast toJapan, which ranked 15th, despite hopesthat it would rise from its “lost decade.”Hong Kong ranked second in World
Competitiveness Yearbook, 2005, which
was compiled by the Institute of Management Development (IMD) in Switzerland. (HongKong ranked sixth in 2004).

http://www.jcer.or.jp/－ 1 －Japan Center for Economic Research

JCER Staff Report No.81

Where does this gap between Hong Kong’s image and the ranking results come from?
In mid-February, and with this question in mind, this writer visited Hong Kong and theSouth region of China, which has close economic relations with Hong Kong. He exploredthe sources of Hong Kong’s strength by visiting businesses and factories, and exchanging
views with analysts and experts.
“Hub” for Flows of People and Goods
Hong Kong receives high marks in the overall ranking of potential competitiveness,because it ranks first or second in three out of the eight items that constitute the basis forevaluation. They are internationalization, finance and infrastructure.
Hong Kong ranks high in “internationalization” because of the upward trend in its
amount of trade, which is attributable to an expansion in its trade with China, as well as toan expansion of foreign direct investment. In 2005, the total amount of Hong Kong’s
merchandize trade increased 11 percent above the level of the previous year to 587.0 billion
U.S. dollars, maintaining double-digit growth. Service trade was also buoyant in 2005,
rising by 9 percent from the previous year to 93.8 billion U.S. dollars. In the field offinance, Hong Kong’s place as the financial center of Asia is sound.
What, then, is the strength of Hong Kong’s infrastructure? In the determination ofranking, factors relating to physical distribution, such as the volume of container cargoes
handled and the ratio of paved roads, are important items of evaluation. In marinetransportation, in 2005, Hong Kong ceded its position as the world’s top port in terms of thevolume of maritime containers handled, but it is still vying in the top group. In airtransportation, in 2004, international air cargoes handled in Hong Kong reached 3.09
million tons, sharply exceeding those at Tokyo (Narita), Seoul or Anchorage.
Hong Kong’s strength in physical distribution can be seen in areas that do not appear
in statistical data. An example is Hong Kong Air Cargo Terminals Limited (HACTL),
which handles air cargoes at Hong Kong International Airport. In 2005, the company
handled more than 2 million tons of air cargoes, chalking up an 8 percent-growth from theyear earlier. While it strives to increase its business volume, it is also working hard tooffer superior services for the convenience of clients. It is not merely carrying out thecollection and transportation of cargoes efficiently, but has taken the bold step of creating anetwork with the Chinese Customs Office to offer a package of collection andtransportation of cargoes combined with customs procedures. Under this system, cargoes
arriving at Hong Kong International Airport are shipped in bonded trucks to the Southregion of China (which is close to Hong Kong geographically) and hence are not required
to be checked at the border. They go through customs clearance after they are in the handsof consignees, thus cutting greatly the time and effort required.
Hong Kong’s dedication to serving as a hub (center) for flows of people and goods
can really be felt, when one moves around in Hong Kong International Airport with heavyluggage. Its design concept of eliminating steps as much as possible and enabling access

http://www.jcer.or.jp/－ 2 －Japan Center for Economic Research

JCER Staff Report No.81

to public transportation right from the airport gates is in sharp contrast to that of Narita,
where one has to struggle with heavy luggage.
Also responsible for Hong Kong’s rise in overall ranking is the fact that, while
maintaining its conventional strength in physical distribution and other areas, in the area ofscience and technology, where Hong Kong used to rank low, it has sharply revised upward
the ratio of engineers in the research and development sector from slightly under 100 (as of1995) to slightly over 1,500 (as of 2002) per 10,000 R&D staff.
Meeting Needs Rather Than Aiming at Quantitative Expansion
The question then is whether Hong Kong will be able to remain competitive. Evenwith respect to the highly competitive area ofinfrastructure, some people in the Japanese Shows strength in airand marine cargo transportshipping circle in Hong Kong express
concern, saying, “What will happen to HongKong, if Chinese ports and harbors continue
to grow in scale?” In fact, when asked
which airport (out of Japan’s Narita, SouthKorea’s Incheon and the airport in China’sSouth region) will likely become Hong
Kong’s rival in the future, Dr. David J. Pang,
Chief Executive Officer of Airport Authority
Hong Kong, has responded, “It is the airportin South of China.” He is aware that China
is a potential rival.
If Hong Kong competes quantitatively
with China, which runs with all its might on
its astounding growth path, it will very likely
be overtaken. Therefore, the key to Hong
Kong’s future competitiveness appears to bewhether or not it will be able to furtherenhance its function (somewhat akin to that of a “general trading company”) of carefully
identifying and meeting diverse client needs in the areas of infrastructure, finance, etc., bytaking advantage of its unique ability to think flexibly and act as the occasion demands.
（Contact：81-3-3639-2443）※No copying of this report is allowed without a prior consent. Please contact JCER for further details.
Copyright © 2006 JCER―――――――――――――――――――――――――――――――――――――――――――

Japan Center for Economic Research (JCER)
Nikkei Kayabacho Bldg. 2-6-1 Nihombashi Kayabacho, Chuo-ku, Tokyo 103-0025, Japan
Phone:81-3-3639-2810 ／ FAX:81-3-3639-2839 ／ E-mail:jcernet@jcer.or.jp

http://www.jcer.or.jp/－ 3 －