Published: 01:00, June 3, 2024
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City can export its public wealth management skills
By N Balakrishnan

As Hong Kong embarks on its journey to remake its economy and reposition itself in the global economy, it is important to remember that it is essentially a service-based economy. Its small land mass and expensive real estate, combined with a small and declining labor force, mean that the city cannot compete with the other cities in southern China in manufacturing and other technical industries.

But not all is lost. Hong Kong has something that the other cities on the Chinese mainland do not have; namely, a freely convertible currency and, from there, a labor force well trained in world-standard financial services. The value-added in financial services is very high, and if this sector can be enlarged, it can result in a dynamic local economy and high wages for the local population.

Thus far, Hong Kong’s financial-services sector has exploited its locational advantages with a philosophy of “If you build it, they will come.” This playbook worked well in Hong Kong’s favor for many decades; therefore, there has been little incentive to change it or “market” Hong Kong’s financial services abroad. This greatly contrasts with the Hong Kong Trade Development Council (HKTDC), which has a tradition of aggressively marketing its “trade” through its global network of HKTDC offices.

It is true that HKTDC’s mandate now includes marketing “services” of Hong Kong. Still, the increasing complexity of financial services worldwide, including derivatives, exchange-traded funds, and the like, means that financial services need a dedicated marketing organization rather than a small department in an organization focused on enlarging trade and marketing manufactured goods.

Hong Kong indeed abounds in private bankers, people dedicated to investing and increasing the wealth of Hong Kong and those in the surrounding region and beyond, attracted by Hong Kong’s low taxes and a sophisticated platform to invest anywhere in the world, not just in China.

The policymakers of Hong Kong should realize that not just the private sector but also the public sector has great, globally marketable talent too. As they say, even a journey of a thousand miles has to start with a single step, and trying to look up where Guyana is on the world map

But sometimes it is easy to forget that there are also “public” bankers such as, e.g., the Hong Kong Monetary Authority (HKMA) and the public-savings program regulator, the Mandatory Provident Fund Schemes Authority, to name just two. The assets of the HKMA were $425.1 billion as of the end of February, larger than all private fund managers in Hong Kong, and a respectable size relative to the global giant managers such as BlackRock and Vanguard in the United States. The other public sector giant of Hong Kong, the Mandatory Provident Fund (MPF), had HK$1.14 trillion ($145.9 billion) by the end of 2023.

Hong Kong residents may take the services of these well-run and corruption-free institutions for granted. Still, there are many areas where such institutions are unheard of, and where Hong Kong’s expertise can be marketed for mutual benefit.

A country that has been in the news recently is Guyana, a former British colony that was known as British Guiana until its independence in 1966. It is an English-speaking country of just over 800,000 people and was poor until Exxon Mobil discovered oil in 2005 within its borders.

Guyana’s GDP per capita was until recently among the lowest in South America. However, rapid economic growth since 2020, averaging 42.3 percent over the past three years, brought GDP per capita to over $18,199 in 2022, from $6,477 in 2019. Under current projections, Guyana’s GDP per capita is expected to overtake that of the US in a decade or so.

Guyana follows British common law and banking methods. However, this country of less than 1 million people, struggling to save and invest its newfound wealth, can benefit from the expertise of the HKMA and the MPF in such matters.

Of course, Guyana, situated in South America, is far away both geographically and psychologically from Hong Kong, located in southern China. But in the current situation, Guyana could do with skills that are in abundance in Hong Kong. If a dedicated and sophisticated organization is formed in Hong Kong to market its services to “emerging” financial powers such as Guyana, it can be financially rewarding, not just for Hong Kong and Guyana.

A manager in Georgetown, Guyana’s capital, will naturally look to London or New York because of their historical and geographic proximity. But Hong Kong has a good track record in such matters, too, and a manager in Guyana trying to diversify away from the “usual” financial centers can be persuaded.

However, all pioneering efforts require heroic effort and some amount of luck. And the policymakers of Hong Kong should realize that not just the private sector but also the public sector has great, globally marketable talent too. As they say, even a journey of a thousand miles has to start with a single step, and trying to look up where Guyana is on the world map.

The author is a former foreign correspondent, an investment consultant focused on the Global South, and an entrepreneur.

The views do not necessarily reflect those of China Daily.