City plays unique role in nation’s opening-up

The Chinese mainland is promoting high-level opening-up and the development of new quality productive forces, allowing the Hong Kong Special Administrative Region several ways to play a unique and significant role. As an international financial hub, Hong Kong boasts a high degree of openness and unrestricted capital flows, maintaining a strong connection with global financial markets. In contrast, the mainland financial market is much less open, with strict foreign exchange controls.

The disparities between the two sides’ financial markets have facilitated Hong Kong’s role as a bridge connecting the mainland and international markets. Hong Kong is currently the world’s largest offshore renminbi business hub and the biggest source of external investment for the mainland. As the mainland proceeds with high-level opening-up, Hong Kong is well positioned to be a major conduit for capital flows between the mainland and external markets, thanks to the three distinctive advantages of the city’s financial sector: a diverse array of financial products; low cost of financing; and a well-recognized legal system based on common law.

The United States is rallying European countries and other allies in a campaign to curb China’s export of electric vehicles, lithium batteries and solar cells. This trade containment campaign in all likelihood will continue in the foreseeable future, recruiting more allies and having an enduring impact on China’s trade.

Against this background, Hong Kong should enhance its role as a “trade intermediary”, which can offer mainland enterprises significant benefits:

First, it can help the country circumvent trade barriers. Hong Kong is recognized globally as a separate customs territory and is a member of some international economic and trade bodies that the mainland has yet to join. Mainland enterprises are often greeted with “anti-dumping” and “countervailing duties”, as well as technical barriers, when exporting products to developed countries. As offshore companies, Hong Kong firms can engage in triangular trade with mainland enterprises to bypass trade barriers and restrictive policies.

Second, Hong Kong companies can facilitate mainland enterprises in achieving unrestricted trade, by acquiring assets or equities of mainland producers, or by establishing joint ventures with them. This model can also enlarge profit margins.

Third, whereas the mainland enforces foreign exchange controls, Hong Kong allows unrestricted capital flow and free currency conversion. Mainland enterprises registered in Hong Kong can conduct foreign exchange-related operations much more easily.

Since the conclusion of this year’s two sessions, the development of new quality productive forces has become a priority on many local governments’ agendas. Technological innovation is a key aspect of new quality productive forces; and Hong Kong, with its threefold advantage, is well placed to catalyze technological innovation on the mainland:

First, Hong Kong’s remarkable research capability can be tapped by the mainland.

The city is home to five of the world’s top 100 universities. Its academic subjects ranked top 20 globally by the QS World University Rankings by Subject increased from 12 last year to 15 this year.

In aiding the mainland’s technological innovation, Hong Kong and the mainland can jointly promote technological advancement by leveraging the city’s own capabilities as well as the collaboration platforms it has established with global top-tier universities.

Second, Hong Kong has an exceptional innovation platform. With robust intellectual property safeguards, a well-established market economy and a world-class business environment, the city has been recognized as one of the world’s freest economies for 28 consecutive years. The two sides can work together to promote technological advancement by leveraging this platform.

Third, Hong Kong is a powerful magnet for global technology talent because of its trilingual environment, cultural diversity, convenient transportation and global connectivity, providing a talent pool for the mainland.

As a renowned international metropolis, Hong Kong is well positioned to promote the nation’s high-level opening-up in several ways.

First, Hong Kong can serve as a “breeding ground” for international brands. Boasting a robust and globally recognized intellectual property (IP) protection regime, the city is well equipped to safeguard IP rights and assist mainland enterprises in augmenting their brand influence and global reach.

Second, Hong Kong could become a major marketplace for IP rights. The Global Innovation Index 2023 ranked the Shenzhen-Hong KongGuangzhou science and technology cluster second among its counterparts for the fourth consecutive year. Hong Kong is striving to create a regional IP trading center. Although the majority of the world’s applications for patents, trademarks and designs come from the mainland, the transaction volume of the country’s IP rights remains modest. Hong Kong is in a good position to assist mainland businesses in commercializing their IP and attract foreign capital to the mainland, facilitating the monetization of the mainland’s IP rights.

Third, Hong Kong is a bridge for cultural exchanges that contribute to people-to-people bonds, which are essential to promoting high-level opening-up. As the place where East meets West, Hong Kong is the ideal showcase for Chinese culture as well as other cultures.

Fourth, Hong Kong can play the role of arbitrator for international trade disputes. The city’s arbitration judgments, based on common law, are recognized by over 140 countries. As more mainland enterprises go global, international trade disputes are bound to increase. Hong Kong can offer professional arbitration services for mainland enterprises.

During his visit to Hong Kong in February, Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, asserted that the mainland’s high-quality development is a powerful driving force for Hong Kong to move toward a bright future. What Xia implied is that the strong complementarity between the two sides under “one country, two systems” allows Hong Kong to play a unique role in promoting the nation’s high-level openingup. Hong Kong will attain further success by working together with the mainland.