Published in Kerry Properties’ The Dress Circle September 2006
When Michael Enright co-wrote The Hong Kong Advantage in 1996, he and his co-authors concluded that Hong Kong had a strong, resilient economy that was unlikely to be derailed by anything that they could see on the horizon – a conclusion that has proven accurate today.
Since the book was first published, Hong Kong has lived up to this conclusion and showed its matchless resilience several times, first bouncing back successfully from the Asian Financial Crisis in the late nineties which, according to Prof Enright, was the worst period in the last 30 years, and then from the Sars-induced downturn in 2003.
“The Hong Kong economy has performed strongly. We think Hong Kong can maintain its unique status and affluence as long as it chooses to,” said Prof Enright, currently a professor at the University of Hong Kong School of Business and director of strategy consulting firm Enright, Scott and Associates in Hong Kong.
In late 1995, Prof Enright and his co-authors were approached by members of Hong Kong’s business community, who sought their help to gain a deeper understanding of the Hong Kong economy. They wanted a keener insight into the underlying factors that caused Hong Kong industries to be competitive or uncompetitive in international markets.
This took place in the run up to the British handover of Hong Kong in 1997, and the business community was anxious for more information on the fundamental competitiveness of Hong Kong’s economy and its prospects during the transition, which they felt would form an essential part of their business planning.
Michael Enright was then a professor at the Harvard Business School and had done similar studies in 17 economies over five continents. He had jointly completed a book on the competitiveness of the Venezuelan economy with co-author Edith Scott. After concluding the Hong Kong study and the book, Prof Enright was sufficiently convinced of Hong Kong’s dress circle seat in the future world economy, so much so he made the decision to relocate to Hong Kong.
According to The Hong Kong Advantage, a big factor in Hong Kong’s economic success is China. As the authors detailed in the book, “The economic opening that began in the late 1970s triggered a transformation of the Hong Kong economy that has left it more prosperous and more interdependent with the Mainland.”
“China’s rise on average and in total has been a great advantage for Hong Kong,” remarked Prof Enright. The agility with which Hong Kongers are able to capitalise on China’s fast-track growth has meant that Hong Kong has been a direct beneficiary of China’s economic explosion.
Both economies are interdependent to a very large degree. Mainland China is a substantial investor in Hong Kong and much of its overseas investment is intermediated through Hong Kong. While China leverages off Hong Kong’s position as an international business and financial centre, Hong Kong benefits from its links with the mainland and its role as mediator between China and the rest of the world.
Hong Kong’s location in the centre of Asia and right on China’s doorstep has given it a great boost in terms of doing China business, said Prof Enright. The 1-country 2-systems policy adopted by China has also been of tremendous advantage to Hong Kong with the well-established legal and financial systems in Hong Kong critical to its success, he added.
While Hong Kong is often viewed as just a middle-man, Prof Enright was quick to point out that this was not an altogether accurate representation because it suggests a passive economic role.
“What most people don’t realise is that Hong Kong identifies sources of demand, consumer tastes, trends – what is going to be valued in the marketplace and then matches this with the supply, which come primarily from China,” said Prof Enright. “This is a very active undertaking. And it’s not an easy one as well.” This role is one that will become more important as manufacturers take advantage of globalisation to fragment their supply chain.
Prof Enright is definitely optimistic about Hong Kong Whichever direction China moves, he says, Hong Kong stands to benefit. If China becomes more market oriented with stronger links of its own to the world economy, Hong Kong may lose some marketshare but the pie will be much larger so in terms of affluence, Hong Kong will not be affected.
And if China were to move the other way and become less market-oriented, then Hong Kong’s uniqueness will become even more marked so it will continue to do well. “It’s almost a no-lose scenario for Hong Kong,” declared Prof Enright.