Internationalisation is Hong Kong's most unique advantage and lifeblood, the cornerstone of Hong Kong's prosperity, and one of the most valuable contributions to the mainland. China unswervingly adheres to the principle of "one country, two systems", supports Hong Kong in playing its role as a "super-connector", and continues to consolidate its position as an international center in the fields of finance, science and technology, law, commerce and trade, so as to spread China's influence to the world. However, external factors such as the pandemic and China-US relations have had a significant impact on Hong Kong's internationalisation performance, especially compared with Singapore in the Asia-Pacific region, where Hong Kong is facing fierce international competition, leading to controversy over whether Hong Kong should continue to adhere to its internationalisation path. This paper argues that Hong Kong must unswervingly adhere to the path of internationalization, base itself on the advantages of "two systems" and "offshore", make full use of the resource support of "relying on the motherland", and actively align with the country's major strategies, so as to consolidate the traditional advantages and tap the potential of the dual track of the advantages, reconstruct the international central position with international influence and unique advantages, and fundamentally enhance Hong Kong's international competitiveness.
INTRODUCTION
Hong Kong's international genes are deeply embedded in its history, since the opening of the port to lay the foundation of the free port, and gradually establish the world's freest talent, currency, materials, information circulation system, after more than 100 years of development, it has become today's three major centers of international finance, shipping and trade. Internationalisation is the foundation of Hong Kong's prosperity and one of Hong Kong's greatest contributions to the country. How to make good use of Hong Kong's advantages as a "super-connector" to promote closer international cooperation on the mainland has always been an important issue of national concern. However, the stagnation of various international exchanges during the epidemic has caused various rumors about "foreign investment to withdraw from Hong Kong" to ferment into alarmist rumors of "Hong Kong's full mainlandization". This paper argues that only by presenting the current situation of Hong Kong's internationalization with objective data, consolidating and strengthening Hong Kong's advantages in internationalization, and strengthening Hong Kong's determination to take the path of internationalization, can we enhance people's confidence, raise the international valuation of Hong Kong, and give full play to Hong Kong's unique advantages of "relying on the motherland and connecting with the world", so as to maintain long-term prosperity and stability.
1. Why should Hong Kong firmly follow the path of internationalisation?
(1) Internationalisation has created Hong Kong's unique advantages
Internationalisation is the undertone of Hong Kong's society today. The unique advantages of Hong Kong summarized by experts and scholars are all based on internationalization as the underlying structure. For example, Hong Kong's status as an international financial center is premised on the freedom of foreign exchange and currency circulation, and the depth and breadth of its investment and financing platform are based on the ability to integrate assets within a highly globalized scope of "backed by the motherland and connected to the world", and guaranteed by a sound and mature financial regulatory system in line with international standards. Another example is Hong Kong's legal advantages, the common law system inherited from the United Kingdom is trusted by the international business community due to its high degree of predictability, coupled with the convenience of bilingual legal instruments in Chinese and English, and the full integration with the international common law system, making Hong Kong a leading international commercial dispute resolution centre in the Asia-Pacific region. Another example is Hong Kong's multicultural character of East and West, which has been influenced by more than 100 years of colonial rule and consolidated by the national institutional arrangement of "one country, two systems".
(2) National strategy
From the perspective of national strategy, Hong Kong's positioning as a "super connector" has never changed since its return to the motherland. The "one country, two systems" principle guarantees Hong Kong's free port, independent customs territory, free movement of currency exchange system and common law system, which is the underlying institutional framework for maintaining Hong Kong as an international super-connector. At present, this positioning is becoming clearer and more reinforced, and it is constantly being strengthened and enriched, injecting stronger impetus and more diversified possibilities into Hong Kong. The meaning of Hong Kong's internationalization in the new era can be enriched in three main aspects.
First, in addition to giving play to the ties of foreign relations, we should strengthen the centripetal force of integration into the motherland. In his important speech celebrating the 25th anniversary of Hong Kong's return to the motherland, President Xi Jinping accurately summarized this meaning as "relying on the motherland and connecting the world", and the report of the 20th National Congress of the Communist Party of China (CPC) gave specific guidance on deepening Hong Kong's more open and close exchanges and cooperation with other countries and regions, and at the same time promoting the development of the Guangdong-Hong Kong-Macao Greater Bay Area and supporting Hong Kong's better integration into the overall development of the country. In line with the national "dual circulation" strategy, Hong Kong should become an important participant in the domestic circulation and an important promoter of domestic and international dual circulation in the new era.
Second, the road of internationalization is further enriched, in addition to connecting Western countries, it can also actively play the role of connecting countries in the "Belt and Road" countries. At the celebration of the 25th anniversary of Hong Kong's return to the motherland, President Xi Jinping stressed that the central government fully supports Hong Kong in seizing the historical opportunities brought about by national development and actively aligning with national strategies such as the high-quality development of the Belt and Road Initiative.
Third, Hong Kong's internationalisation should be based on the goal of serving the country's strategic needs, and the focus of international cooperation should be shifted according to needs. In recent years, Hong Kong has made great achievements in the country's strategic goals of internationalisation, such as high-level scientific and technological self-reliance and self-reliance, RMB internationalization, active participation in global governance, and accelerating the construction of China's discourse and narrative system, which can not only promote China's establishment of a new open economic system, but also help China's voice and influence spread around the world.
The above international transformation can better integrate Hong Kong's advantages of "relying on the motherland and connecting with the world" with the national strategic goals, so there is no reason to weaken Hong Kong's international connectivity, on the contrary, the national strategy requires that this positioning be strengthened.
(3) The blueprint for the future of Hong Kong
After Hong Kong moved out of the manufacturing industry in the 90s of the last century, it regretted that it missed the global cycle of technological explosion and high-tech industry boom that lasted for 30 years, and now the problem of economic growth due to excessive dependence on real estate and finance and the hollowing out of the real economy needs to be solved urgently. The Central Government and Hong Kong have reached a clear consensus on the future development: Hong Kong should build an "international innovation and technology hub", build a northern metropolis with the theme of "international innovation and technology city", and strive to improve the innovation and technology ecosystem and achieve re-industrialisation. Hong Kong must further consolidate and give full play to its advantages in connecting with the world, gather the world's top scientific and technological resources, maintain the ties of scientific and technological exchanges and cooperation at home and abroad, form outstanding scientific and technological achievements with global influence, and have the right to speak internationally in a number of key fields.
As Hong Kong's largest pillar industry and an area with important global influence, finance should become a model for Sino-foreign ties and cooperation. Recently, there have been criticisms of Hong Kong's status as an international financial center that are not worthy of the name, and even dubbed it a "ruin of an international financial center", which includes concerns and misunderstandings that Hong Kong's financial industry may affect the degree of internationalization due to the continuous strengthening of the docking with the mainland system, as well as the concern that Hong Kong is facing fierce international competition pressure. Due to the profound changes in the pattern of international political, economic, and technological competition, as well as the political and social adjustment that Hong Kong has undergone, some Western countries have indeed made policy adjustments regarding Hong Kong and Chinese mainland as one, and even openly threatened to cancel the special trade treatment for Hong Kong. To get rid of the traditional dependence on a single path that is subordinate to the European and American institutional systems, and to reshape Hong Kong's status as an international financial center, it is urgent to establish core advantages with important international influence and unique value contributions. It is a more realistic path for Hong Kong to transform its momentum into the secondary development in the new era by integrating international resources for national strategic needs, transforming national strategic advantages into international influence output, and focusing on the development of global offshore RMB business, green and sustainable finance, international carbon market, and financial technology.
2. Hong Kong's advantages and challenges in internationalisation
(1) In the aspect of traditional pride
In this part, this paper compares the data of Hong Kong's traditional areas of strength in the short, medium and long-term stages, focusing on four important areas that are facing competitive pressure. Hong Kong's traditional advantages, such as the legal system and business environment, have not been analysed as they have not changed significantly with the situation.
1. International financial center
Hong Kong's foreign exchange and bond markets performed steadily in the global financial market, with the foreign exchange market maintaining a slight rise despite the pandemic, continuing to be the second largest foreign exchange market in Asia and the fourth largest in the world; the bond market achieved steady growth driven by the significant growth in offshore RMB bond market demand, but the bond fundraising in 2021 was surpassed by Singapore; wealth management remains an area of great international competitiveness, but it is under great pressure to maintain its position as an international private banking center and stand out from the fierce competition among family offices; there is still a lot of room for improvement in the stock market in terms of internationalization indicators, with foreign companies accounting for less than 10% of the total market capitalization%, and New York, London and other international securities trading centers about 30% of the market value of foreign companies accounted for there is still a gap, especially since the epidemic, as the source of important listed companies on the Hong Kong Stock Exchange, Singapore, Malaysia listed companies in Hong Kong fell off the cliff to 1 per year. According to Refinitiv data, in the first half of 2023, the cumulative fundraising ranking of IPOs (initial public offerings) on the main board of the Hong Kong Stock Exchange has dropped significantly to the ninth place in global exchanges. According to a report by Morgan Stanley, the participation of overseas institutions in Hong Kong stocks fell by one-third in 2021, and the liquidity of Hong Kong stocks decreased significantly. In 2023, the turnover of Hong Kong stocks on many trading days will be less than HK$100 billion, and the stocks of companies below the top are basically illiquid. In the context that China-US relations have not seen a significant turnaround for the time being, it remains to be closely observed whether there will be a continuous outflow of US capital in the future. The internationalization element of an international financial center needs to be enriched and strengthened.
2. Asia-Pacific headquarters of multinational corporations
The importance of this advantage is often underestimated, but the combination of the terms "transnational" and "headquarters" includes more important global resource coordination capabilities – Hong Kong is well versed in the manufacturing chain (sourcing) and market conditions of Chinese mainland and Asia, as well as the production capacity of thousands of factories, with strong value-added services and familiar management of subcontracting. As the perfect intermediary between the global industrial chain and China's and Asia's production capacity, Hong Kong's number of Asia-Pacific headquarters of multinational companies can reflect the mainland's participation and position in the global industrial chain to a certain extent, which is the true significance of this advantage. Looking back at the development of Hong Kong in the past decade (Table 1), the number of multinational corporations in Hong Kong has been growing well before 2019, and has begun to turn around during the epidemic, with two frequent inflection points in the past three years (15 fewer in 2020 and 71 fewer in 2022), and the absolute value of the reduction is increasing, and the "regional headquarters", a category with higher decision-making levels and resource coordination capabilities, have seen the largest decline, and the enterprises that have reduced their Hong Kong companies are mainly from developed countries such as the United States, the United Kingdom, and Japan (Table 2). The change in the structure of the industry is also noteworthy, with most tech multinationals such as Google, Amazon, and Byte placing their Asia-Pacific centers in Singapore instead of Hong Kong, and correspondingly, the de facto Asia-Pacific centers of international venture capital and investment banks are also moving to Singapore. Hong Kong's co-ordination position in the global industrial chain is facing greater competitive pressure.
3. A global investment and trade hub
In terms of investment, Hong Kong's FDI (direct foreign investment) inflow was surpassed by Singapore, Hong Kong's FDI dependence index on the mainland climbed to 54.87%, and the proportion of FDI to Hong Kong in the five countries of the United States, the United Kingdom, Canada, Japan and Singapore fell from 25.21% in 2019 to 4.13% in 2021, and Hong Kong's role as a one-way channel for global capital investment in Chinese mainland is now changing to a two-way channel. In terms of trade, Hong Kong's role as a global trade centre is changing, with the proportion of trade with the United States and Japan declining, and the proportion of trade with Chinese mainland and Belt and Road countries rising. In 2020, the United States announced that it would not recognize Hong Kong's status as a separate customs territory and prohibit the export of defense equipment and sensitive technology to Hong Kong, and the United Kingdom, Canada, Australia and other countries also suspended relevant agreements with Hong Kong, intending to cut off Hong Kong as a global advanced technology channel to Chinese mainland, and the introduction and application of global advanced technology products by Hong Kong and Chinese mainland will be blocked. At the same time, the import and export controls and tariffs and other barriers directly imposed by the United States on Chinese mainland also directly affect Hong Kong's status as a global trade hub between Chinese mainland and Hong Kong, and in the long run, the suppression of Chinese mainland and Hong Kong by the United States and the West will inevitably have a certain impact on Hong Kong's status as an international financial center and the pillar industry service industry.
4. A gathering place for international professionals
Hong Kong's training system and quality of professional knowledge and skills in the fields of law, medical care, construction, finance, auditing, logistics and other fields are well-known around the world, creating a world-leading advantage in Hong Kong's professional service industry. As an international city, Hong Kong has always had a high level of population mobility. However, in recent years, there has been a lot of media hype about the problem of population mobility, saying that Hong Kong has a serious problem of professional brain drain. In fact, the remarks are groundless, ignoring the fact that Hong Kong continues to be a highland for international talents, irresponsibly degrading Hong Kong and misleading the public and public opinion. The reality is that Hong Kong's current strong attraction for international talent continues unabated. Statistics from the Hong Kong SAR government show that from mid-2022 to mid-2023, Hong Kong has a net inflow of 174,000 people, and there is no so-called "wave of departures". From January to November 2023, the HKSAR Government received more than 200,000 applications for various talent introduction schemes, of which more than 120,000 were approved, and 80,000 have arrived in Hong Kong, far exceeding the target of at least 35,000 talents per year. In the World Talent Report 2023 released by the International Institute for Management Development in Lausanne, Switzerland, Hong Kong ranked second in Asia in terms of talent competitiveness. These statistics and facts fully demonstrate that Hong Kong continues to be valued and favored by talents from all over the world.
(2) In the new economic field to be developed
No matter from the current situation of Hong Kong's economic and industrial structure, or from the trend of international competition, the national strategic direction and the general trend of coordinated economic development between regions, innovation and technology will be an important driving force for Hong Kong to rebuild its advantages and enhance its international competitiveness in the new stage of development. This article analyzes the vision and positioning of Hong Kong as an international I&T hub, Hong Kong's I&T foundation and development blueprint, and puts forward the following two new advantages that Hong Kong can focus on.
1. The first city of innovation and technology ecology
Hong Kong has strong strength in basic and applied scientific research, with 5 QS World University Rankings by Subject (2023) top 100 universities, 37 disciplines ranked in the top 100 in the world, 16 State Key Laboratories, 28 InnoHK R&D Centres, 3 public research institutes and 6 Hong Kong branches of National Engineering Technology Research Centres, in electronic and electrical engineering, computer science and information systems, materials science, medicine, environmental science and other academic research and integrated circuits, robotics, precision manufacturing, It has a world-class of excellence in applied scientific research such as biotechnology. However, the manufacturing industry, which accounts for only one percent of GDP, is really weak, and it is the important task of providing a wide range of application scenarios and necessary results for the transformation of front-end scientific research achievements. The Hong Kong SAR Government has set a target of achieving comprehensive new industrialization by 2035 and has proposed to develop the Northern Metropolis as an international innovation and technology hub to provide sufficient land space for high-tech industries. The structural shortage of talent is also an important factor limiting Hong Kong's re-industrialisation, as Hong Kong people value business, medicine and law, and science and engineering talents are few, and not all of them stay in Hong Kong for development. Venture capital invested in the high-tech sector is small, and most of the local venture capital is in the hands of families, with a preference for finance and real estate rather than high-tech enterprises. In addition, under the current situation of fierce competition between China and the United States in science and technology, Hong Kong enterprises will face greater difficulties in obtaining advanced technology and products from the United States, and academic exchanges and research cooperation with the United States will also be affected to a certain extent. In the Global Startup Ecosystem Report 2023 released by StartupGenome and the Global Innovation Index 2022 released by the World Intellectual Property Organization, Hong Kong's I&T ecosystem ranked second to Singapore, lagging behind Singapore in indicators such as human capital, business maturity, knowledge and technology output, and there is still room for improvement in the future.
2. Asia-Pacific Data & Intelligence Center
As an international financial, shipping, trade centre and international aviation hub, Hong Kong gathers the latest information and data from around the world, has a complete and reliable network infrastructure and a comprehensive cloud service provider. The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area and the Hong Kong I&T Development Blueprint set out to accelerate the development of digital infrastructure, data applications and smart cities, and the HKSAR Government is also actively promoting Hong Kong as the preferred location for setting up data centres in the Asia-Pacific region. However, Hong Kong generally lags behind Singapore in international rankings related to data centers and smart cities, and is facing greater competitive pressure. In the 2023 Data Center Global Market Overview released by Cushman & Wakefield, the 2023 Smart Centre Index Report released by Z/Yen, the 2023 Smart City Index Report released by the Smart City Observatory of the International Institute for Management Development in Lausanne, Switzerland, and the global digital competitiveness rankings compiled by the IMD World Competitiveness Centre, Hong Kong lags behind Singapore, with a certain gap with Singapore in terms of innovation intensity, delivery capacity, human capital, infrastructure, etc. Tech giants such as Google, Amazon, and Microsoft have all located large data centers in the Asia-Pacific region in Singapore. Especially in the context of the Sino-US trade friction and other geopolitical tensions, Singapore is seen as a more politically and economically stable market, attracting domestic tech giants such as ByteDance to set up data centers. At present, Hong Kong's advantages as a data link connecting Chinese mainland and the rest of the world have not been fully utilized, and in the future, we must give full play to our unique advantages of relying on the motherland and connecting the world, and take the lead in the construction of data and intelligence centers in the Asia-Pacific region.
(3) The dangers and opportunities of Hong Kong's internationalisation
Looking back at the changes in Hong Kong's international advantages, Hong Kong's once proud international financial center, Asia-Pacific headquarters of multinational corporations, global investment and trade hubs, and gathering places for international professionals and elites are now facing varying degrees of international competitive pressure, either in the form of further enhancement of influence, structural adjustment, or new opportunities hidden in the crisis. The following highlights the changes in Hong Kong's strengths and the possible impact of these changes on Hong Kong.
1. International influence may be challenged
Changes in the number of foreign companies listed, foreign participation, and liquidity of Hong Kong stocks in the Hong Kong stock market reflect the changes in the internationalization of Hong Kong's financial market, and Hong Kong stocks have increasingly become a barometer of China's economy and even the Asia-Pacific economy. From a structural point of view, due to the wanton suppression of China by the United States, the trend of Chinese technology companies going to the United States to list in the United States will become the mainstream, which also means that the number and market value of Chinese enterprises in Hong Kong will be further expanded, which itself is an organic positive event for Hong Kong, but the joint analysis of the indicators of the decline in foreign participation finds that Hong Kong's role as a link between Chinese enterprises and global investors is declining, and even if companies below the head are successfully listed in Hong Kong, factors such as high breakage rate and low price-earnings ratio and lack of stock liquidity will affect the realization of sustainable and stable capital raising。 However, in the future, Hong Kong's role as an international capital pool will be brought into full play, and it is unlikely that it will become a financial market that is fundamentally different from the domestic exchange, and its unique competitive advantage will hardly be surpassed by the relevant cities in the mainland.
Although the change in the number of regional headquarters and offices of multinational corporations in Hong Kong seems to have changed little in aggregate, it is the first inflection point in Hong Kong's sustained growth over the past decade. At the same time, the structure of multinational corporations is changing, and the accelerated entry of Chinese enterprises and enterprises from countries along the "Belt and Road" in Hong Kong has to a certain extent filled the vacancy left by European and American multinational enterprises, but it is not a simple substitute relationship in terms of global capital, market, supply chain, talent, science and technology, etc. The impact of the departure of these multinationals is not limited to Hong Kong, but also reflects the re-examination of Chinese mainland's market and supply chain position and resource allocation. In addition, some of the withdrawn foreign investors have moved to Singapore, a region with increasingly fierce competition with Hong Kong, which has further enhanced Singapore's influence and dominance in finance, trade and technological innovation in the Asia-Pacific region, which has a greater impact on Hong Kong's international influence.
The same structural change is taking place in Hong Kong's global investment and trade sector. Investment in Hong Kong from Chinese mainland and countries along the Belt and Road has gradually increased and compensated for the decline in FDI from the US, UK, Canada, Japan and Singapore. It may seem like a small change in scale, but the impact of these structural changes on Hong Kong and Chinese mainland needs to be taken seriously. The developed countries of Europe, the United States and Asia are still the dominant players in the global industrial chain, innovation chain and capital chain, and the real value of FDI from these countries lies in the participation right in the core international economic field rather than the capital value itself. In recent years, FDI from developed countries has shifted to new economies in Southeast Asia, and countries such as Vietnam, Thailand, India, and Indonesia are accelerating the construction of a modern industrial system, carving up a lot of China's industrial chain share, and even China has a large number of manufacturing enterprises to invest in these new economies to build factories. The same is true for trade, we observe the trade between Hong Kong and the United States, the import and export volume accounts for less than 5% of Hong Kong's trade volume, but it is very important for Hong Kong, because the main products imported are the most advanced international technology products represented by integrated circuits, which is the window for Hong Kong to keep pace with the world's most advanced technologies and industries, and the impact of decoupling with the United States on Hong Kong and Chinese mainland's high-tech industries is beyond the "Belt and Road" countries can compensate. In the absence of a fundamental improvement in Sino-US relations, the external environment for Hong Kong's external trade will remain full of challenges.
The Hong Kong SAR Government is increasing the introduction of global high-end talents and launching the "Top Talent Pass Scheme" (TTPS), which has approved nearly 26,000 cases by the end of June 2023, of which nearly half are from Chinese mainland. More than 80 per cent of the approved TTPS are graduates from the world's top 100 universities, while less than 20 per cent are high-income earners with an annual salary of $2.5 million, which will provide a large talent pool for Hong Kong's future development. The replacement of the talent structure is an aspect that deserves attention for the maintenance of Hong Kong's international characteristics. One of the important manifestations of Hong Kong's internationalization characteristics is the convergence of the world's multi-ethnic, multi-faith, multi-age, multi-class inclusive culture, the collision and integration of different cultures to give birth to an innovative and dynamic economy and society, but also to maintain the cultural ties between Hong Kong and the global economy, for the maintenance of Hong Kong's status as a global financial and trade center is of great significance, such as the Hong Kong SAR government to enter the "Belt and Road" market, in Hong Kong's Malaysia, Indian professionals can act as a connector by navigating between the two cultures. Therefore, how to balance the increment and structure to maintain Hong Kong's international characteristics is also an aspect that Hong Kong needs to focus on.
2. A new historical opportunity to reshape international influence
Simply opening up, connecting and catering to international rules and markets cannot shape a country's or region's international influence. Only when it has core competitiveness and discourse power in certain fields, and can influence global resource allocation or decision-making consensus, can it be regarded as having international influence. The two must complement each other, and one over the other. Hong Kong's positioning as a "super-connector" under "one country, two systems" belongs to the former, which is susceptible to changes in the international political and economic situation, and is also the place where Hong Kong faces the most challenges to internationalization;
There are at least three favorable opportunities for Hong Kong to maintain its status as an international financial centre: First, there is an opportunity for the global offshore RMB business to explode. With the development of China's economy and the increasing demand for overseas transactions and investments in RMB, Hong Kong has the world's largest offshore RMB liquidity pool and the richest range of RMB products and services. The second is the opportunity for significant expansion of international assets under management. With the development of China's economy, the number of China's wealthy groups has grown steadily, and the number of "high-net-worth families" with investable assets of tens of millions of yuan has exceeded 1 million, and the demand for property preservation and appreciation has increased significantly. The third is the opportunity for the rapid growth of green financial assets. With the international commitment of "dual carbon" and the accelerated development of economic and social green transformation, the investment demand for sustainable finance in Chinese mainland is expected to reach US$25 trillion in 2023, accounting for a quarter of the total global demand, and Hong Kong will usher in a major opportunity in creating green financial asset designs that are more suitable for China's domestic market.
Hong Kong's status as an international investment and economic and trade center will also usher in some opportunities: first, the regional synergy effect of the Guangdong-Hong Kong-Macao Greater Bay Area will further enhance Hong Kong's international economic and trade influence, and Hong Kong can use its own experience in business services and legal services to serve advanced manufacturing and technological innovation enterprises in the Greater Bay Area to go overseas, with Hong Kong as its overseas business headquarters; Thirdly, the diversified economic industries in emerging markets such as the Middle East and ASEAN along the Belt and Road have been diversified, and the trade volume with the mainland has continued to grow, bringing opportunities for Hong Kong to build a global core business hub of the Belt and Road Initiative.
With the acceleration of the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong's innovation and technology and innovation and entrepreneurship development will usher in major opportunities: First, new industrialization will solve the dilemma of economic hollowing, and Hong Kong will usher in the opportunity of a new growth curve of economic transformation. Hong Kong's reshaping of its high-end manufacturing advantages will open up the whole chain of basic scientific research, achievement transformation and technology services, and form an innovation ecosystem that nurtures and supports the development of high-tech industries. The second is the opportunity to join hands with the Guangdong-Hong Kong-Macao Greater Bay Area to build a science and technology innovation center with international influence. The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) has the highest concentration of high-tech industrial clusters and a highly export-oriented industrial structure in China, which can provide Hong Kong with highly complementary I&T and industrial synergies in terms of industrial technology research capabilities, application scenarios and industrial chain support. The third is to become an opportunity for innovation sandbox in the field of science and technology in China. In some of the world's cutting-edge technology fields in Chinese mainland that are subject to regulatory restrictions, such as human stem cells and virtual asset trading, Hong Kong has rich experience in international scientific research cooperation and the advantages of docking with international standards, and can take the lead in exploring advanced technologies and models, and become an important scientific and technological force to participate in global competition on behalf of the country.
3. The path for Hong Kong to consolidate and strengthen its advantages in internationalisation
(1) Basic ideas
In the current rapidly changing international environment, Hong Kong's new unique functions and advantages are gradually emerging and strengthening, although from a number of authoritative international rankings, Hong Kong's traditional advantages have been surpassed by Singapore, and it is facing greater international competition pressure. However, with the deepening of Hong Kong's integration into the overall development of the country, Hong Kong's unique international advantages have become more solid. The opportunities outweigh the challenges and will be the long-term ecology of Hong Kong's internationalisation path.
1. Establish a bottom-line view of the crisis situation and a view of the limit of opportunities
Be cautious and take precautions to resolve the crisis to the greatest extent. The biggest crisis in Hong Kong's efforts to maintain its international advantages lies in the fact that Hong Kong, as vainly claimed by European and American countries, is gradually being "turned into a mainland"; under the situation of further tension in the political and economic relations between China and the United States and even the risk of decoupling and breaking the chain, the United States has re-examined Hong Kong's economic and trade security, and even canceled the special trade preferential treatment for Hong Kong, and European and American enterprises and capital have become more cautious about the business outlook in Hong Kong. This crisis is manifested in the data indicators, that is, the comprehensive structural adjustment of key indicators such as investment, talent, and trade. Hong Kong's more than 100-year-old international advantage is based on this, and we must be cautious against a greater change in these factors. First of all, it is necessary to strengthen the firm practice of "one country, two systems" in Hong Kong, maintain the stability of the rule of law, clean government, free market and other institutional cornerstones, and frame uncontrollable changes within a controllable institutional framework, so as to build Hong Kong into an expected stable political and economic environment. Secondly, it is necessary to fully demonstrate the openness, inclusiveness and freedom of welcome as always, create a fully supportive business environment for local multinational corporations and international organizations, strengthen public diplomacy with Europe and the United States, and convey the true situation of Hong Kong and friendly invitations to the European and American public through various channels, so as to break down prejudice and enhance mutual trust.
Create the conditions to make the most of the opportunities. Backed by the huge economic volume of Chinese mainland and based on the special positioning of the strategic intersection of domestic and international dual circulation, on the one hand, it will effectively connect with Chinese mainland's policies, make full use of the resources and opportunities of the domestic market, and on the other hand, maintain the connection with the rules and standards of the international mainstream market, and explore the unique value proposition of Hong Kong as a converter and connector of domestic and international rules and standards. In the areas where the country has the greatest growth potential and unique advantages, such as RMB internationalization, green finance, international science and technology cooperation, etc., we will further play the role of two-way value communication and enhance the international influence of the mainland's finance, science and technology, and culture. Seize the opportunity of the rapid growth of trade and investment between the mainland and the "Belt and Road" countries, and expand Hong Kong's professional services such as international investment and financing, legal arbitration, logistics and trade, consulting and management to emerging market countries, so as to expand Hong Kong's market capacity and international influence.
2. Examine and learn from international advanced cases
There are two kinds of complementary effects and substitution effects in the development relationship between different regions in the same region: the relationship between Hong Kong and the mainland cities of the Guangdong-Hong Kong-Macao Greater Bay Area to jointly build an international science and technology innovation hub through complementary advantages and dislocation synergy belongs to the former, while the relationship with Singapore, which is also the financial and commercial center of the Asia-Pacific region and the most representative open economy, is closer to the latter, which can also be reflected in the trend of the two places in terms of internationalization indicators. Recently, Hong Kong has been surpassed by Singapore in attracting international authoritative rankings in terms of attracting multinational company headquarters, international direct investment, high-end talents, technology-based industries, data infrastructure, etc., and it is Singapore that has lost the most resources from Hong Kong in many fields. Singapore's policy and institutional innovation in building an internationally friendly ecosystem can provide practical experience for Hong Kong.
3. Seek strategic support and institutional guarantee from the top
The HKSAR's authority over external affairs derives from the authorization of the Central Government, so the path of Hong Kong's international development must be subordinated to the country's overall foreign policy, and any adjustment of authority must also rely on the authorization of the state. In order to ensure the stability of Hong Kong's international status, it is necessary to strengthen the status of a separate customs territory stipulated in the Basic Law from the level of national foreign affairs, send a strong signal to the international community to firmly defend Hong Kong to take the path of internationalization, support and promote Hong Kong in the international arena, support Hong Kong in establishing close economic and trade relations with the member countries of the Belt and Road Initiative and the Regional Comprehensive Economic Partnership (RCEP), and create a positive environment for Hong Kong to engage in international exchanges. At the same time, the country should give Hong Kong more unique missions and resources in its international economic, trade and technology strategy, and give Hong Kong more special institutional arrangements in offshore renminbi, international cross-border data, international cutting-edge technological innovation and application, and digital assets.
(2) Path suggestions
1. Safeguard Hong Kong's unique advantages at the institutional level and strengthen the confidence of international investors
"Hong Kong of the world" is Hong Kong's greatest value, and its most unique core advantage is that it is able to navigate the system of all major economies in the world but is different from any other economy. The Central Government must provide a solid institutional guarantee for Hong Kong's internationalisation.
First of all, it is necessary to unswervingly demonstrate Hong Kong's tolerance for multiculturalism, send a signal of goodwill to non-ethnic Chinese residents, correct the xenophobic populist tendencies that have recently emerged in Hong Kong's underclass, take the initiative to enhance understanding of the relatively weak cultures in the world, such as ASEAN, the Middle East and Latin America, expand and balance the diversity of Hong Kong's cultures, and incorporate multicultural factors into policy arrangements. Second, we will encourage and support Hong Kong in signing economic and trade agreements with more countries or regions, and support the establishment of more economic and trade institutions stationed abroad. On the one hand, we will continue to consolidate and deepen exchanges with the United States and EU countries, maintain the advantages of Hong Kong's economic and judicial system in line with those of the West, so as to consolidate the confidence of Europe and the United States in Hong Kong, and provide an encouraging and supportive environment for the development of multinational corporations and international organizations headquartered in Europe and the United States in Hong Kong. On the other hand, it will create opportunities for Hong Kong to play an advantageous role in the "Belt and Road" national strategy, and further authorize Hong Kong to "Belt and Road" major infrastructure and industrial project demonstration parks, "Belt and Road" special investment funds, "Green Transformation Service Solution Resolution Center", "Belt and Road" International Commercial Dispute Resolution Center, etc., to support Hong Kong and ASEAN, Central and Eastern European countries and other countries with a higher degree of freedom. Finally, we can explore the application of economic and trade agreements signed at the national level in Hong Kong on a pilot basis, so as to make up for the current shortage of economic and trade agreements signed by Hong Kong on a separate basis.
2. Improve the offshore financial ecosystem and help the internationalization of RMB in an orderly manner
Hong Kong has the only offshore economic ecology in China that has no trade barriers with overseas and is closely connected with China, and in the context of the heightened risk of decoupling between China and the United States, it is necessary to strengthen Hong Kong's role in fully integrating into the global economic system, ensuring that the mainland's external circulation is not blocked, and always participating in the global supply chain.
Hong Kong's rapid development of fintech has laid a good foundation for building an offshore financial system, maintaining the separation between Hong Kong's offshore economy and Chinese mainland's onshore economy through electronic fence supervision. In this way, offshore finance can be fully internationalized, open and innovative in Hong Kong without worrying about affecting the systemic financial security of Chinese mainland. Hong Kong's offshore financial centre can play a sandbox role and carry out some pilot pioneering explorations, such as digital currency and blockchain technology, green bonds and investment funds, to provide a richer range of investment and financing products for the global financial market. At the same time, Hong Kong is backed by the huge financial market of Chinese mainland, which can fully tap the potential of the mainland's financial supply and demand, and make use of its advantages as an offshore center to provide global solutions. For example, we will expand professional financial services such as wealth management, cross-border investment, foreign exchange trading, capital market operations, and derivatives trading to provide hedging, reserve and value-added places for China's huge overseas offshore financial assets, and maintain the safety of overseas assets; In the future, Hong Kong can explore replicating this experience in new economy fields such as artificial intelligence, integrated circuits, green energy, etc., which also have a long R&D cycle and large upfront capital requirements, and improve the relevant information disclosure and risk liability systems to attract Chinese mainland and global high-tech growth enterprises to list in Hong Kong. In addition, Hong Kong can play a more active role in the internationalization of the renminbi, first, by building a renminbi settlement center for cross-border trade and investment, second, by making full use of the world's largest offshore renminbi center to actively develop a variety of offshore renminbi use scenarios and financial products, and third, calling on the country to further liberalize the scope of interconnection of "Shanghai-Hong Kong Stock Connect", "Shenzhen-Hong Kong Stock Connect" and "Cross-boundary Wealth Management Connect", so as to introduce more mainland and overseas investors to Hong Kong, and further consolidate Hong Kong's scale advantage of offshore renminbi.
3. Pilot relaxation of restrictions in the Bay Area to strengthen the influence of international legal service centers
In particular, the enactment and implementation of the Hong Kong National Security Law has laid a solid legal foundation for Hong Kong's society to restore stability and bring order from chaos to order. According to the World Bank's World Governance Indicators, Hong Kong's rule of law index has risen significantly from 69.85 in 1996 to 91.83 in 2020. As the only common law jurisdiction in the world with Chinese and English as the equivalent legal language, Hong Kong provides irreplaceable services for the settlement of commercial disputes between the Mainland and overseas. In the future, Hong Kong's unique advantages in connecting the two jurisdictions will be further extended to the global market.
First of all, we will make full use of Hong Kong's professional legal talents and advanced electronic hearing technology to build an electronic commercial dispute resolution service platform and expand the radius of legal services. The online hearing and virtual hearing platforms used in Hong Kong during the pandemic can be used as a prototype to further enrich the functions and integrate functions such as litigation risk assessment (case sharing), online mediation and arbitration, and online litigation, so as to become the preferred arbitration venue for global commercial contract negotiations and disputes. Secondly, the annual conference on international investment dispute practice exchange can be held to invite Chinese and foreign business, investment and legal professionals to exchange and share the concepts and regulations of different jurisdictions in resolving international commercial disputes, jointly discuss strategies conducive to global collaborative dispute resolution, build a bridge between laws and regulations, and enhance Hong Kong's influence as an international dispute settlement centre. Thirdly, explore the pilot scheme of allowing mainland legal persons to use Hong Kong's arbitration services in the Greater Bay Area. According to the current domestic laws, two Chinese legal persons are not allowed to arbitrate in Hong Kong, which will cause domestic enterprises to be passive due to the lack of understanding of foreign legal systems and international arbitration rules when encountering commercial disputes in the process of going overseas, and with the rapid growth of economic and trade cooperation between the mainland and countries along the "Belt and Road", domestic enterprises urgently need to solve this problem. The Guangdong-Hong Kong-Macao Greater Bay Area can be used as a pilot to relax the restrictions on the use of Hong Kong's arbitration services for disputes between mainland legal persons, so that enterprises can gradually learn the international arbitration rules and go overseas more safely.
4. Do a step-by-step classification and grading review to support Hong Kong to build an international data center
Data is not only an important strategic resource for national scientific and technological innovation and economic development, but also directly related to national security. As a prerequisite infrastructure for the development of the digital economy, data centers have also become an important productivity tool for global competition. Both Singapore and the Hong Kong SAR are aiming for Asia-Pacific data centres in the new round of technological development, and Singapore's competitive advantage is gradually becoming apparent. Not only have international technology giants Google and Facebook set up their first data centers in Singapore, but Chinese mainland IT giants China Mobile, Alibaba, Tencent and Byte have also set up data centers in Singapore, and Singapore continues to attract multinational technology companies to set up regional headquarters, further strengthening its position as a data center hub in Asia.
Reliability, security, and cost-effectiveness are often the core evaluation metrics for data centers. In terms of reliability, both the Hong Kong SAR and Singapore have advanced and reliable communication and power infrastructure, and the aggregation and flow of global data is highly efficient. In terms of automation and data analytics, there is little difference in the technical maturity of service providers in both places, in terms of cost-effectiveness, the cost of land and electricity is relatively high in both places, and Singapore has continued to promote green data centers through investment subsidies to improve energy efficiency for many years, and in the medium to long term, the cost-effectiveness and sustainability advantages may be further advanced, and security is an important consideration for international investors in the comparison between the two, Singapore and Hong Kong have strict data protection laws, and the relative stability of the international political environment facing Singapore may be more secure。
Hong Kong's development of an international data centre will inevitably dispel investors' misgivings and establish a secure and independently regulated data and privacy protection mechanism. With the substantial advancement of the Guangdong-Hong Kong-Macao Greater Bay Area, the cross-border integration of resources, including data, will become a major trend, and the signing of the Memorandum of Cooperation on Promoting Cross-border Data Flow in the Guangdong-Hong Kong-Macao Greater Bay Area sets out a timetable for cross-border data cross-border. As one of the three major international centers, Hong Kong has a large amount of overseas data, and cross-border data will inevitably cause concern for foreign-funded enterprises and foreigners. For example, in the first phase, the relatively independent firewall mechanism between the mainland and Hong Kong will be maintained, and the one-way flow of data will be implemented in a "southbound" rather than "northbound" manner, so as to support more domestic data to go south to enrich the scale of Hong Kong's data centers, and in the second stage, the data collected in Hong Kong will be classified, and the data of foreign-funded enterprises and foreigners in Hong Kong will not be cross-border, in accordance with Hong Kong's Personal Data (Privacy) Ordinance In the third stage, the data will be graded according to its sensitivity, and the circulation of non-sensitive data within the scope of limited use will be promoted with the explicit and voluntary consent of the parties. At the same time, on the premise of safeguarding national data security, we will draw on the advantages of Hong Kong's data protection and privacy laws in line with international standards, and actively promote the convergence of national data protection-related laws with international standards, so as to achieve a balance between data circulation and data regulation, so that Hong Kong's status as an international data center can gain a long-term and stable international trust environment.
5. Improve the closed-loop ecology of science and technology innovation, and build an international advanced technology R&D and application center
Hong Kong's basic scientific research capabilities are world-leading, with a complete range of subjects, including universities, scientific research institutions, State Key Laboratories and industrial application promotion institutions, and the level of academic research has reached the international advanced level. Since the handover, the state has vigorously supported the construction of basic scientific research conditions in Hong Kong, and 23 basic frontier projects of the National Key Research and Development Program and the Outstanding Young Scientists Fund of the Natural Science Foundation of Hong Kong have been opened to Hong Kong, and at the same time, Hong Kong has been supported to build a cluster of State Key Laboratories and National Engineering Technology Research Centres with the highest unit area density. However, due to the hollowing out of the manufacturing industry, Hong Kong lacks the conditions for the transformation and implementation of scientific research results, and cannot feed back the front-end basic scientific research in terms of funding, academic direction and technical iteration needs. The integrated development of the Guangdong-Hong Kong-Macao Greater Bay Area can enable Hong Kong to rely on the most advanced manufacturing system in Chinese mainland to make up for the lack of science and technology innovation ecology to a certain extent, but new problems arise in the common shortcomings of the two sides, as well as the asymmetry in the process of exchanging resources and siphoning capacity between the two sides.
First of all, in the most cutting-edge technology field in the world, due to the prudent regulatory attitude of Chinese mainland, foreign investment cannot get involved, and the industrial chain has not yet been fully established. For example, the development and application of human stem cells, genetic diagnosis and treatment technology in the field of biology and life science and technology. These are areas in which Hong Kong has significant advantages in scientific research. Due to Hong Kong's lack of manufacturing capacity, sufficient clinical trial resources, and the local market demand, it is difficult for Hong Kong's R&D advantages in these fields to be translated locally. As a result, the GBA has failed to form a synergistic innovation synergy in these advanced technology areas, resulting in a waste of scientific research results.
Second, there is an asymmetry in the exchange of resources in the scientific and technological cooperation between Hong Kong and the Greater Bay Area, which has increasingly aroused the concern of some Hong Kong people. In the course of my exchanges with Hong Kong's public research institutes, universities and relevant departments, I have sometimes heard their concerns about the future of Hong Kong's participation in collaboration. Taking Shenzhen-Hong Kong cooperation as an example, Shenzhen has introduced scientific research achievements from universities from Hong Kong to transform in Shenzhen, introduced technology-based start-ups to develop and expand in Shenzhen and produce them on a large scale, and introduced scientific and technological talents to provide intellectual support for Shenzhen enterprises.
To this end, the author suggests that the state's support for Hong Kong's science and technology innovation ecosystem should be transformed from focusing on basic scientific research to covering the whole chain of "small, pilot" and application scenario construction, especially focusing on the significant gap between Hong Kong's vision of "new industrialization" and the shortcomings of reality. Through financial, technical and manpower support, we will vigorously support Hong Kong in building new industrialisation infrastructure such as digital factories, intelligent production lines, big data centers, software and hardware ecological adaptation laboratories, manufacturing innovation centres, technical vocational colleges, and testing and verification platforms. At the same time, it will draw on Singapore's science and technology development model to provide a series of financial and tax incentives for Hong Kong local enterprises to engage in R&D and transformation activities, and strengthen the development and introduction of international STEM (science, technology, engineering and mathematics) cutting-edge courses at the basic education stage, so as to cultivate a steady stream of talents for science and technology development. In addition, to relax restrictions on foreign investment in the Guangdong-Hong Kong-Macao Greater Bay Area, we can first use the Shenzhen-Hong Kong Science and Technology Innovation Co-operation Zone in the Loop as a pilot to try to carry out the industrial development of international cutting-edge technologies such as human stem cells and gene diagnosis and treatment in Hong Kong-funded enterprises in the Shenzhen Park of the Loop, and support Shenzhen and Hong Kong to jointly use R&D achievements and industrial chain resources to build an international advanced technology R&D and application center, and strive to maintain international standards and synchronization in the field of cutting-edge technologies, so as to better support the mission of the Guangdong-Hong Kong-Macao Greater Bay Area to build an international science and technology innovation center.
epilogue
Hong Kong is gaining momentum and taking off in internationalisation, and its future development destiny is also closely related to internationalization. From the perspective of the larger picture, Hong Kong is not only China's Hong Kong, but also the world's Hong Kong, and Hong Kong will always be at the forefront of the integration and mutual trust between Chinese and Western discourse systems, and is an important force in expanding the common discourse between China and the world. Unswervingly supporting Hong Kong on the path of internationalisation is the key to Hong Kong's long-term prosperity and stability.
(The author, Liu Zihao, is the deputy secretary-general and associate researcher of the Center for Hong Kong and Macao Studies at Tsinghua University.
"Hong Kong and Macao Studies" is a comprehensive academic and theoretical journal supervised by the Hong Kong and Macao Affairs Office of the State Council and sponsored by the National Association of Hong Kong and Macao Studies, aiming to build a platform for experts and scholars in the field of Hong Kong and Macao studies and members of the National Association of Hong Kong and Macao Studies to communicate, discuss and contend, covering Hong Kong and Macao politics, law, economy, society, culture and the relations between Hong Kong and Macao and the mainland.
- Think Tank in China's Practice: Based on China's practice, dialogue with Chinese think tanks. (Thematic Planner: Qin Qiansong)