Chief economist of CLSA Dr Jim Walker gives an upbeat assessment of Asia's new Boomtown
Boomtown: Re-enter the Dragon, CLSA's bullish report which points out that Hong Kong will benefit from China's modernisation

Hong Kong is uniquely placed to become the business capital of the world, thanks to China's emergence as a dominant global economic powerhouse. That's the upbeat finding of a recent report by investment banking brokerage CLSA.

In Boomtown: Re-enter the Dragon, co-author and chief economist Dr Jim Walker says the report's bullish title "tells a story of a magnitude we think is much bigger than the boom years of the 1980s". This is because capital coming from China is being spent in Hong Kong, raising Hong Kong's profile and economic activities, he says.

Dr Walker adds: "The real key is understanding that Hong Kong institutions are not likely to be replicated in China tomorrow, namely: free capital movement and a convertible currency, a legal system based on contract law, free and unrestricted flow of information, low taxes and a privately owned, well capitalised banking system."

Fundraiser for the mainland

The Boomtown report is optimistic about Hong Kong playing a hard currency capital-raising role for the mainland, and foresees a continued expansion of Hong Kong's financial services sector as the co-ordinating centre for much of this activity. The report also notes that far from being marginalised, Hong Kong will be an "increasingly large beneficiary of China's modernisation".

"There had not been much capital coming from the mainland to Hong Kong for 20 years, and now all of a sudden it is flooding in. There is a pressure of capital forming on the mainland and Hong Kong is able to help Beijing release its capital surplus," says Dr Walker.

The report points to increasing opportunities for Hong Kong's services sector to invest in China. As China opens its services sector under WTO commitments, opportunities will arise in hitherto restricted services such as commercial banking, insurance, law, accounting, engineering, education and medicine. Hong Kong companies and foreign companies based in Hong Kong are destined to benefit, notes the report.

Major services sector

"Hong Kong is on the verge of becoming a services sector investment attractor similar in magnitude to New York and London, if not larger," states Boomtown.

Dr Walker gave his upbeat view of Hong Kong at a recent CLSA Forum where, he said, it was well received by investors around the world. "They have been attending our CLSA Forum for the past 11 years and for eight years have not seen much economic activity. Now, all of a sudden there is this boom. They see crowds of people in the retail shops, in restaurants, and spending money. There's activity in equity and property markets. They see it happening and they believe in Boomtown."

Related link
CLSA