3 minute read
Richard Hext
Opportunity knocks
Richard Hext on what linking up with neighbouring cities means for Hong Kong’s future
There are few places that can match Hong Kong in terms of its overall connectedness in the world of international shipping. The most important reason is that Hong Kong is the primary gateway between China, the dominant force in shipping, and the rest of the world.
China’s economy now represents nearly 17.5% of world nominal GDP, a figure that has risen rapidly in recent years. In 1997, the year that China resumed sovereignty over Hong Kong, China’s economy represented 3% of world GDP. The relative importance of China’s economy is likely to grow given the education level and industriousness of its people, its access to capital and its relatively low starting point measured as current income per capita compared with the developed West.
China is even more relatively significant in the world of shipping. China imports by far more bulk cargoes, and exports more containerised cargoes than any other country. China’s shipyards produce more ships than any other country. Chinese shipowners are the second largest in the world while the combined flags of Hong Kong’s and China’s registered fleets are the largest in the world.
Beijing and Shanghai and, increasingly, Shenzhen all enjoy impressive international connections. But Hong Kong’s unique history, rule of law and deep infrastructure of financiers, lawyers and insurers (thus sophisticated capital market connections) make it easily China’s most international city. At the end of September, Hong Kong’s stock market had a gross market capitalisation of more than $6trn, of which a major portion was made up of major Chinese SOEs. Hong Kong also has a very successful bond market: in 2020, the amount of bond issuance arranged by Hong Kong was $196bn, ranking first in Asia for international bond issuance. One of China’s most important policy priorities is to internationalise the RMB so as to free itself from the dominance of the US dollar and New York in global market transactions. Hong Kong is crucial to China in this respect. Given this, it is perhaps not surprising that Hong Kong is a flashpoint in the continuing geopolitical tussle between China and the US.
Hong Kong is currently working hard to exploit a myriad of opportunities in the Greater Bay Area (GBA) by more closely integrating its economy with its ten closest neighbouring cities .The potential is great. The other 10 cities in the Greater Bay Area have a population of more than 70m people and an annual GDP of about $1.3trn. Including Hong Kong’s $370bn of GDP, the GBA’s total GDP of $1.67trn is equivalent to the GDP of Canada, the ninth largest economy in the world. These eleven cities each have their own strengths but Shenzhen deserves a special mention.
Shenzhen (pictured) was a small village in 1978 but now has a population believed to be well over 15m and a GDP that exceeds Hong Kong’s. It is dubbed China’s Silicon Valley and hosts the headquarters of TenCent and Huawei as well as many technology startups. From a shipping perspective, the techgenerated wealth of Shenzhen suggests opportunity for Hong Kong’s shipowners and financiers wishing to expand their fleets. From a tech entrepreneur perspective, shipping assets represent great diversification potential.
The Greater Bay Area cities are situated on the Pearl River Delta and are connected by numerous maritime links. As trade within this area grows, we can expect opportunities for more waterborne opportunities. A recent example of Hong Kong exploiting such opportunities is that during much of the time from 1992 to 2004 Hong Kong was the world’s largest container port; now the GBA ports collectively (using significant amounts of Hong Kongprovided capital and expertise) are the largest cluster of container ports in the world.
