Ten years on, confidence soars (hktdc.com)


	For countless businesspeople with vision, Hong Kong has seen the fulfillment of an entrepreneurial dream

	Timothy J. Peirson-Smith, Managing Director, Executive Counsel Limited, outlines Hong Kong’s ability to rise above its challenges

	Jack Maisano, President, AmCham, says Hong Kong’s stability and predictability keeps confidence high

	Dr Jim Walker, Chief Economist, CLSA, says Hong Kong has proved the sceptics wrong

	Brigadier Christopher Hammerbeck, Executive Director, BritCham, says Hong Kong’s resilience has served the city well

A decade after China resumed from Britain its sovereignty over Hong Kong, the city's economy is booming, its stock market is nudging record highs and confidence among international businessmen is stronger than ever.

The ride has been anything but smooth, as the newly created Special Administrative Region (SAR) endured a rollercoaster 10 years that included financial and public health crises. But Hong Kong has emerged flexing its financial muscles. Real GDP grew 7.5 percent in 2005 and 6.8 percent in 2006, with growth of around 5 percent expected this year. Investors now firmly view the city as a stable place to do business.

"Hong Kong is very robust and it has proved that every day since the Handover*," said Timothy J. Peirson-Smith, Managing Director of public relations and public affairs consultancy Executive Counsel Limited. "Hong Kong always seems to ride on a wave out of its challenges. It goes from adversity to opportunity."

Financial comeback

Many media and political analysts had written Hong Kong's obituary as a financial centre long before the ceremonial handover at midnight on June 30, 1997, brought an end to 156 years of British colonial rule. Under the Basic Law and China's late paramount leader Deng Xiaoping's principle of "One Country, Two Systems", Beijing pledged to maintain political and economic freedoms.

"It was completely untried and untested, but it has been an experiment that has worked incredibly well," said Mr Peirson-Smith, who has lived in Hong Kong for 17 years.

"Hong Kong continues to enjoy the rule of law, freedom of information, free flow of capital, a low tax regime, clean government and a level playing field," agreed Jack Maisano, President of the American Chamber of Commerce in Hong Kong (AmCham). "With these freedoms has come stability and predictability. These all combine to keep business confidence at near all-time highs in Hong Kong."

In reality, the biggest challenges Hong Kong faced came from unexpected sources. Just a day after the Handover the Thai baht collapsed, triggering a lengthy Asian financial crisis that impacted Hong Kong and saw the city endure five years of deflation that finally ended in 2004. As Hong Kong battled to recover, Severe Acute Respiratory Disease (Sars) broke out in 2003, hitting the economy hard again, especially SMEs and the tourism sector.

Reaching new heights

"Back in 2002 international investors thought Hong Kong was finished," said Dr Jim Walker, Chief Economist at investment banking brokerage CLSA. "The past few years have proven that view was wrong." Hong Kong is now home to 69 of the world's top 100 banks and hosts 3,800 regional headquarters of overseas companies.

"The Asian Financial Crisis put Asia and Hong Kong on notice that a new level of financial sophistication would be necessary to secure Asia's future development. They have risen to that challenge," said Mr Maisano.

Brigadier Christopher Hammerbeck, Executive Director of the British Chamber of Commerce in Hong Kong, viewed the rebound as "a testament to the resources and ingenuity of Hong Kong citizens," citing a resilience that has served the city well in all sectors.

Being on the doorstep of the Chinese mainland as the country recorded double-digit growth proved a boon. "Over the past 10 years barriers have come down. It's easier to do business in China," said Brigadier Hammerbeck.

"There is no doubt our economy has done tremendously well in the past decade and in the last few years in particular, on the back of a strong global economy and mounting interest in the China growth story," said Ronald Arculli, chairman of the Hong Kong Stock Exchange.

Booming bourse

On May 14 this year, the Hang Seng Index (HIS) hit a record high of 20,974 – compared with a low of 6,660 in the dark days of August 1998 – and daily turnover totalled HK$94.99 billion, making it the busiest trading day ever. Hong Kong's stock market is now the world's sixth-biggest, up from eighth in 1997 - and in little over a decade from the end of 1996, its market capitalisation has risen almost fourfold to more than US$1.8 trillion outpacing London or New York.

Because the Chinese yuan is a non-convertible currency, Hong Kong has found a highly profitable role helping mainland companies raise funds overseas. Last year it overtook New York to become the biggest market after London for IPOs (initial public offerings), including the biggest float in history for the Industrial and Commercial Bank of China (ICBC).

Since then, China's premier footwear company Belle International Holdings has overtaken ICBC as the largest IPO, raising HK$434 billion (US$55.6b) on the back of global luxury brands owner LVMH Moet Hennessy's US$30 billion share purchase. Since 1993, mainland enterprises have raised more than US$190 billion in equity capital in Hong Kong.

World's freest economy

China has left Hong Kong's economy, rated the freest in the world by the Heritage Foundation, untouched. As China firms and investors pour funds into mainland markets in Shanghai and Shenzhen, the bourses there are seen as potential competition for Hong Kong. But Dr Walker said Hong Kong's decades of "understanding what it takes to create an international finance centre" sets it apart. Not least among them is its rule of law, still based on the English common law system.

"Hong Kong has improved its competitiveness as a regional base because of the unparalleled access to China that Hong Kong provides," said Mr Maisano. "In addition, there is more business from China coming to Hong Kong, which is especially evident in the financial services and tourism sectors."

Dr Walker said regardless of concerns the economy will prove cyclical, prompting the current bubble to burst, China's growth was likely to gather force and Hong Kong would benefit. "Hong Kong has found its place in China, and China realises the place of Hong Kong," said Dr Walker.

* "The Handover" refers to Hong Kong's return from British to Chinese rule on July 1, 1997.