This year will see the conclusion of the 13th Five Year Plan.
These Central Government plans are hugely important as they provide the framework for the whole country’s development. At a two-day Forum on 16 and 17 June, expert speakers from government, academia and business shared their thoughts on the outlook for Hong Kong.
Prospects for the 14th Five-Year Plan and Development of Hong Kong’s Economy
Hongbin Cai, Dean and Chair of Economics at the University of Hong Kong, noted that a key aim of the 13th Five Year Plan is to build a moderately prosperous society in all aspects: “The phrase ‘in all aspects’ shows that is it not just about economic growth, it is also about social development such as standard of living, health and education.”
Many of the 13th Plan’s targets have been met, or are close to being met. However, Cai noted, the mission is not yet completed.
“For example, the number of patents filed has exceeded the target, but that does not mean China has an innovation-driven economy. We are far from that point.”
The Second Centennial Goals for 2049 could be a guide to what to expect in the 14th Five Year Plan. If China is to become a prosperous society, it will need around 5% annual growth until 2049, so Cai expects to see a strong push on innovation, a focus on social well-being, and further opening up.
Government Economist Andrew Au highlighted the trade conflict and local unrest that pushed Hong Kong’s economy into recession in the second half of last year, followed by the Covid-19 pandemic that, unlike SARS, is affecting the whole world. “According to the IMF, the global recession is the most severe since the Depression of the 1930s,” he said.
And although Hong Kong has kept infection rates low, there is still a huge amount of uncertainty, he added. “The best we can hope for is that the global economy has hit bottom and will recover in the second half of the year.”
Au said that Government funding to boost innovative sectors would help the economy and that better digital infrastructure would prepare the city for future shocks.
The global move away from multilateralism is a concern, he added, but the growth of China, and Hong Kong’s participation, would balance some of the external pressures.
“The Belt and Road Initiative is highly important and will help to counter the trend of deglobalisation,” Au said.
Thomas Chan, Director of the One Belt One Road Research Institute of the Chu Hai College of Higher Education, also noted the importance of the Belt and Road in Hong Kong’s development. The historical Silk Road is known as a network of global trade routes dating back centuries. What is less well known is that the plan to revive the route is not just a China-driven story, as the project has been discussed in Europe and Asia since the 1990s.
However, the growing influence of China today affects the existing interests of other major powers. “The Belt and Road is not a simple trade initiative, it is a redrawing of the map of the world,” Chan said.
“China will come into conflict with other powers as it expands its economic space,” he added. The new cold war that is developing between the United States and China is not about trade, Chan said, but about ideology. However, despite the potential for turmoil, the growth of China is also an opportunity for innovation and change.
Eric Ma, CEO of NWS Holdings, said that the conglomerate had been one of the trailblazers in cross-border cooperation and partnerships between Chinese and foreign businesses. The company’s business includes toll roads, logistics and insurance, and it has more than 30 years of experience in the Pearl River Delta.
“Post-pandemic, there will be a lot of opportunities for Hong Kong companies in the Greater Bay Area,” Ma said.
This is partly because the Central Government has made the region a priority, but also because the GBA is driving demand in sectors where Hong Kong has expertise, such as healthcare and financial services.
Looking to the 14th Five Year Plan, Ma hopes to see further opening up of the GBA to facilitate cooperation among businesses and universities across the region.
Hong Kong’s Role and Opportunities in the 14th Five Year Plan
KC Chan, Chairman of WeLab Bank and Former Secretary for Financial Services and the Treasury, said that Hong Kong had benefited from its deeper connection with the Mainland in recent years, particularly in its role facilitating international investors.
“In my view, some of the most successful projects have been the Stock Connect and Bond Connect schemes,” he said.
In the future, Chan expects to see decoupling from the U.S. and deglobalisation of supply chains. In China there will be more high quality and sustainable growth, but it will need to increase domestic consumption and cut its trade deficit. China will need foreign investment and Hong Kong will continue as a major source of FDI.
“We should do what we do best: helping foreign investors in risk management when they invest in China, such as exchange rate risk and equity risk.” he said.
Hong Kong is already a private wealth management hub, Chan added, and can help overseas private investors to invest in the Mainland.
Nick Chan, Partner at Squire Patton Boggs, noted that Mainland China’s population is now 60% urban and its middle class has swelled to around 700 million people, creating considerable opportunities. The adoption rate of fintech in the Mainland is already far higher than in Hong Kong, he added.
Chan expects the next Five Year Plan to pursue more self-reliance. In practice, this may mean a focus on areas where Hong Kong is strong, such as IT, robotics, fintech, green energy and aerospace. “For Hong Kong to shine and contribute there are many things we can do,” he said.
The evolution of CEPA is also likely to create opportunities as restrictions on investment are relaxed. For example, Chan noted that American Express had just been approved to operate in China.
“Hong Kong’s strong legal system, low-tax regime and stable environment means it will still be a springboard from the world into China and for Chinese companies going global,” he concluded.
The exhibition sector has been hard hit by Covid-19. But Monica Lee-Müller, Managing Director of the Hong Kong Convention and Exhibition Centre, said that things are looking brighter with the return of the Book Fair in July.
Lee-Müller said that since the 13th Five Year Plan there has been a change in the demographics of trade exhibitions. Traditionally, overseas buyers would come to Hong Kong to source goods from Mainland manufacturers. “This paradigm started to shift in the last 10 to 15 years, and we increasingly have international exhibitors and Chinese buyers.”
More than 200 exhibitions are usually held in Hong Kong every year, including around 120 at the CEC.
“These events bring a lot of travellers to Hong Kong, and over the past three decades the industry has been very resilient,” she said. “Many of the events at CEC are recurring, and we are assured that the majority will return as we are already making bookings for the future.”
Although the aviation sector has also been affected by Covid-19, cargo has not been hit as badly as the passenger segment, explained Wilson Kwong, Chief Executive of Hong Kong Air Cargo Terminals (Hactl).
“Despite the current challenges, we remain optimistic. Freighters are still being built,” he said, noting that air cargo has grown steadily in recent years despite external shocks. “Looking forward, several things are here to stay. One is e-commerce, which will drive the growth of air cargo, not just in Hong Kong but worldwide.”
The 13th Five Year Plan had a clear narrative on how to support the aviation sector, Kwong said, including the launch of the Hong Kong International Aviation Academy and the Maritime and Aviation Training Fund. He expects this support to continue.
Even if the pattern of world trade does shift, this will not affect Hong Kong’s benefits as a cargo hub, he added. “We can service the goods, wherever they come from and wherever they are going.”
Albert Wong, CEO, Hong Kong Science and Technology Parks Corporation, admitted that Hong Kong still lags in terms of innovation, and that Mainland cities were more advanced in many ways.
“We have lost a number of years, and we have a long way to go,” he said.
The Science Park is helping to drive the city’s efforts to catch up. It supports innovative companies from the beginning through to commercialization, and also helps connect start-ups with established businesses and other investors. There is also Government funding available for innovative companies.
To ensure the quality of the companies it supports, all start-ups based at the Science Park must have at least 50% of staff involved in R&D.
What the Science Park hopes to avoid is companies leaving Hong Kong as they become successful, Wong said, such as the drone-maker DJI. Ultimately, the city aims to be an innovation hub for the region.
“In the past, I did not see Hong Kong as a place for technology,” he said. “That is now changing.”