American economist Stephen Roach published an article in the Financial Times on Feb 12, titled It Pains Me to Say Hong Kong Is Over, which has set off a heated debate, especially in Hong Kong.
In that article, Roach cited the prolonged underperformance of the Hong Kong stock market as one of his key arguments. During his visit to Hong Kong in June, he reiterated his view by underscoring the need for the city to develop technological innovation to help diversify its industrial base. Later, Roach posted on X (previously Twitter) again about Hong Kong. This time, he said Hong Kong’s central issue lies in its being “China-fied”.
Roach’s Financial Times article sparked responses from many Hong Kong people, especially opinion leaders who refuted his views, and asserted that “Hong Kong is doing well, and it won’t fail.” Many of their arguments relied on the same set of narratives such as the benefits of “one country, two systems”, Hong Kong’s continued practice of capitalism, its status as a free port and a financial center, the common law, low tax base, ease of doing business and its role as a superconnector. Also, while some commentators acknowledged the problem of a brain drain, they noted that those who have left are just a tiny minority. Despite such feedback, Roach was not convinced. He said he was disappointed that the Hong Kong Special Administrative Region government did not respond to him.
At the time of its handover in 1997, Hong Kong’s GDP was equivalent to about 18 percent of the Chinese mainland’s GDP. Today, that ratio has dropped to less than 3 percent. In 2010, Hong Kong’s per-capita GDP was $32,600 while Singapore’s was $47,200. By 2023, these numbers had become $50,000 and $82,800 respectively. In 2023, the amount of capital raised through initial public offerings in Hong Kong fell to sixth place globally, behind Shanghai and Shenzhen. Hong Kong’s container port throughput had dropped out of the world’s top 10 by 2023.
Given these data, concerns about Hong Kong’s future are understandable. But I don’t agree that “Hong Kong is over”, mainly for two reasons: First, Hong Kong is a part of China, and second, it has the potential to create much higher value by taking on a composite development mindset and approach. Despite narratives such as “the coming collapse of China” and “China has peaked”, I believe China has significant growth potential.
While some people may have doubts about China’s economic condition these days, I believe that China’s development, as a whole, is on the rise. Guided by policies, technological innovation, and new demand, China’s economy is shifting into higher-quality development. Amid geopolitical challenges, China will continue to embrace the notion of building “a community with a shared future for humanity”. China will continue to establish closer and deeper cooperation with Global South countries. President Xi Jinping has pointed out that China has strived to achieve a “moderately developed economy” over the next 15 years (since 2020), and aims to achieve “socialist modernization” by 2035, ahead of its original midcentury goal. In the second stage, i.e., from 2035 to the middle of the century, China will transform itself into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful.
Today, according to purchasing power parity, China’s GDP is already the largest in the world, and it is expected to remain so in the foreseeable future. China has also become a global manufacturing powerhouse, accounting for over 30 percent of the world’s total output. Driven by technological innovation, China will play a crucial role in the Fourth Industrial Revolution. Enterprises, both foreign and local, continue to be active in investment, innovation, competition and sometimes collaboration, leading to the emergence of various new corporate relationships. With China at its core, the global supply chain is rapidly developing in terms of its logistics, production capacity, and capabilities, as well as technology. In the new world, China’s role will probably become even more indispensable.
Hong Kong has the distinctive advantage of having strong support from the Chinese mainland while at the same time being intricately connected to the world. However, since its handover, Hong Kong’s apparent “decline” manifests because people have not fully understood how to leverage this advantage, and some may still have reservations about forging closer ties with the Chinese mainland.
Before the handover, Hong Kong’s strategic decisions were made in London, and Hong Kong local officials simply carried out those decisions. Officials at this time tended to consider themselves as “higher-class Chinese”. While these Chinese officials might be capable in implementation, they didn’t need to learn much about strategic thinking. Post-handover, Beijing adhered to the principle of “one country, two systems” and gave Hong Kong a high degree of autonomy. However, different chief executives have shown different levels of competence, ideology, and vision.
The social unrest in 2019 and the subsequent COVID-19 pandemic aggravated many deep-seated and latent issues in Hong Kong. Through measures such as the National Security Law for Hong Kong, electoral reforms, and Article 23 legislation, Hong Kong has gradually returned to a more stable state. However, many challenges still remain.
In recent years, the HKSAR government officials often talked about the need for “integration into national development”. However, exactly what it means has not always been clear. We have not heard a comprehensive and concise explanation of that from government officials. Perhaps they know what it is, but choose not to elaborate; or perhaps they only know part of the picture.
Over the past few decades, China’s development has progressed rapidly and extensively. Going forward, the Chinese people will continue to be guided by several important principles: building a community with a shared future for humankind, pursuing Chinese-style modernization, and driving a set of global civilization initiatives. While some critics debase these as mere rhetoric, I believe they represent a set of values that China has refined and embraced through decades of reform and opening-up, as well as continued learning and adaptation. These values guide China’s domestic governance and its relations with foreign countries. Needless to say, China still faces many challenges as it continues to evolve. As a city with a special status, Hong Kong can and will continue to play a significant role in this process.
In the short term, it may be difficult for Hong Kong officials to develop the high-quality strategic thinking capabilities needed to boost the city’s development. However, just as it did during the British era, Hong Kong will only need the appropriate support and collaboration from Beijing, along with contributions from Hong Kong’s society (especially the capable elites in the city), as well as those officials with the aspiration to make things work. I believe Hong Kong can, and will find a useful role. However, this role may be different from what Hong Kong was accustomed to for decades.
I do not think that Hong Kong “becoming another Chinese city” is an issue at all. Hong Kong has always been a part of China but its uniqueness lies in its ability to play a composite role. Hong Kong is both Chinese and international, where multiple languages and cultures coexist. While Hong Kong can continue practicing capitalism, Hong Kong residents should, and can, understand and appreciate socialism more. Hong Kong can adopt market economics, but it should also accept a proactive government role in industrial development. Finance and real estate sectors can continue to be important for Hong Kong, but it should also diversify its industry structure, so as to provide young people with more opportunities for upward mobility. Hong Kong can continue to be the 1,100 square kilometers south of the Shenzhen River, or it can (at least theoretically) encompass the entire Guangdong-Hong Kong-Macao Greater Bay Area. As someone I greatly respect once said, “When one is young, one should embrace socialism’s ideals and enthusiasm; when one gets older, one should skillfully use the tools of capitalism.” I believe this exemplifies the essence of composite thinking.
With this, I believe Hong Kong can play a more sophisticated role, finding its own position in an evolving and increasingly multilateral world.
I am not saying Roach is entirely wrong; however, I wouldn’t bet on his assessment of Hong Kong’s future proving true.
Certainly, in “an era of profound changes unseen in a century”, China’s development will continue to experience ups and downs. Geopolitically, China will continue to face challenges. Transitioning from a “property-driven economy” to a “digital economy” will take some time and it won’t be easy. Hong Kong’s development will also have its own ups and downs. Hong Kong society should avoid excessive panic during downturns or overexcitement during upswings. In this era of mega changes, Hong Kong residents must engage in deeper reflections, learn more about and embrace composite thinking, and cultivate a world-class level of competence and adaptability.
I would put Roach’s narrative together with Gordon Chang’s The Coming Collapse of China and Hal Brands’ and Michael Beckley’s “China has peaked” notions. Let’s see if and how what they said turns out. Time will tell.
The author is founder and CEO of Gao Feng Advisory Company, a strategy and management consulting firm with roots in China.
The views do not necessarily reflect those of China Daily.
