Asian cities vie to take Hong Kong's place as financial center
Asian cities vie to take Hong Kong's place as financial center
Asian cities vie to take the place of Hong Kong as the
region's financial center. Yojana Sharma of Inter Press Service
reports.
HONG KONG (IPS): Singapore and Taipei are gearing up to take
over from Hong Kong as a regional financial center and
international gateway to China after Hong Kong reverts to China
in 1997, but it is Shanghai that may finally steal the limelight.
Singapore's senior minister Lee Kuan Yew surprised some Asian
financial analysts recently when he said Singapore was
liberalizing some of its policies to attract more investment
banks and international fund managers.
"Several financial centers in the region are emerging to
compete in financial services. We have to change and liberalize
to stay ahead," Lee said, sending alarm bells ringing loudly in
Hong Kong.
Rising property prices, high inflation and a labor shortage,
coupled with the realization that Hong Kong is unlikely to remain
the free-wheeling financial center it is now has meant serious
contenders are emerging to take on some of the international
business that has preferred Hong Kong for decades.
Hong Kong has felt that in the constant rivalry with Singapore
it has been winning out by offering a more investment-friendly
environment, but the tide may well be turning.
Taipei has also made noises that it would like to inherit some
of Hong Kong's international and China-related business,
political tensions with the Mainland not withstanding.
But banking analysts in Hong Kong note that Taiwan is not
considered a serious contender, with action falling far short of
words. "Taipei has been left behind in the race to reform
financial system to take on more international business," says
one Hong Kong-based banker.
Not only Singapore, but Kuala Lumpur, Bangkok and even Tokyo
are gearing up to be more attractive to foreign financial
investors, not merely in the hope of attracting business from
Hong Kong in the run-up to 1997 but because the immense growth of
the region needs financial services to match, say analysts here.
As they upgrade to meet their own regional needs they pose
more of a threat to Hong Kong. But what all of them lack is
proximity to China, seen as the great engine of growth in Asia.
Hong Kong has always been smug in the knowledge that for
proximity and infrastructure links with China and the rest of the
world no one can beat it as a conduit for China trade.
So far. But even Hong Kong is now becoming more nervous about
the emerging colossus that is the newly-modernizing Shanghai with
its Pudong New Zone under construction.
Daimler-Benz, Germany's largest car maker caused a
considerable stir recently when it announced it would list on the
Shanghai stockmarket rather than Hong Kong.
"If you want to go for China you have two alternatives, Hong
Kong or Shanghai. These are two centers of competition," said
Daimler Benz's chief financial officer Gerhard Liener.
Despite restrictions, Shanghai is the fastest growing banking
center in the region attracting myriads of banks in an officially
sanctioned bid to turn city into a major financial center.
U.S. companies complain about infrastructure bottlenecks in
Shanghai. Unlike Hong Kong which sets aside 20 percent of urban
land for roads, Shanghai allocates only five percent. The city is
also short of power, with only 85 percent of demand being met,
although economic zones and foreign enterprises, residential and
office complexes are given priority.
Yet Japanese companies are flocking to the city making up
almost 12 percent of total foreign investment in Shanghai.
More telling, many Japanese companies that had originally set
up retail and manufacturing outlets in Beijing are moving to
Shanghai, which is considered to have a much larger consumer
market and better education and managerial ability than Beijing.
Shanghai authorities with political backing from Beijing are
developing a strategy to turn Shanghai into a regional, financial
and trading powerhouse within 15 years -- reversing the decline
of the last 40 years since the Communists took power.
State of the art office towers, superb infrastructure and
communications and -- most important -- its own power generation
plant characterize the Pudong New Zone, a satellite business city
now being constructed across the river from Shanghai, with
billions of dollars in state fund and foreign money.
By the turn of the century, Pudong will be able to tempt
companies away from Hong Kong with an increasing about of top
class commercial space, say analysts.
"Although it was only in the late 1980s that Shanghai started
to embark upon major infrastructure and economic developments,
she has since made remarkable achievements," noted Quo-Wei Lee,
chairman of Hong Kong's Hang Seng Bank, in a recent speech.
"While Hong Kong has also made considerable progress during
the period, its pace is lagging behind Shanghai," he added.
Some experts fear Hong Kong's competitive edge may be reduced
after 1997 because China will pressure Hong Kong banks to favor
China over international companies -- reducing transparency and
laissez faire principles that are Hong Kong's hallmark.
Even now Hong Kong tends to be affected strongly by political
events on the Mainland, making Hong Kong and Shanghai virtually
equal contenders after 1997 for those who would have otherwise
preferred Hong Kong for its political stability.
Singapore may gain from those seeking political stability in
the region, but even Singaporean bankers point out that political
stability may not be as important as it once was for investors
given the ability of companies to domicile in offshore centers.
While Hong Kong has a head start, by the end of the first
decade of the next century its position may well be seriously
challenged.
"Shanghai is already the national center (for China
business)," says Henry Tsang, a Hong Kong-based investment banker
with Merrill Lynch. "The question is how quickly the national
center can do more of the international work. That is what Hong
Kong is doing."