Hong Kong’s Economy Overtaken by Shanghai in 2009
March 5 (Bloomberg) -- Shanghai’s economy exceeded the size of Hong Kong’s for the first time in at least three decades after stimulus spending helped China skirt the global crisis and lead the world out of recession.
Shanghai’s gross domestic product grew 8.2 percent to the equivalent of $218.3 billion in 2009 compared with a 2.7 percent contraction to $210.7 billion for Hong Kong, according to data compiled by Bloomberg. The preliminary reading on Shanghai was published in January and Hong Kong’s release came last week.
The figures highlight 30 years of free-market policies that have spurred China to become the world’s third-largest economy and its No. 1 exporter. Shanghai’s rise may fan concern in Hong Kong that the mainland city will regain its position as China’s dominant financial center, after surpassing the former British colony as the nation’s biggest port and stock-market operator.
“Hong Kong’s role as the bridge linking China and the West is diminishing due to the further opening up of China,” said Hubert Tse, 36, a partner at law firm Boss & Young in Shanghai, who moved to the city from Hong Kong in 2003. “I’m witnessing history as China continues to power ahead.”
Bloomberg data giving U.S. dollar comparisons for the cities’ economies back to 1981 showed Hong Kong previously leading Shanghai. David Cohen, an economist at Action Economics in Singapore, said “based on those nominal figures, converted at the prevailing rates, it would appear that the Shanghai economy is slightly larger.”
Provincial Data
At the same time, China’s data may have less credibility. Jian Chang, a Hong Kong-based economist at Barclays Capital Asia Ltd., said there are “always doubts and questions,” because provincial numbers fail to tally with national figures.
Both cities have benefited from China’s opening up after then leader Deng Xiaoping began unfettering the Communist Party’s hold on the economy in 1978, following decades of self- imposed isolation under Mao Zedong, the founder of the People’s Republic of China.
Tse, a Hong Kong native, is wagering that Shanghai, the birthplace of HSBC Holdings Plc and American International Group Inc., will regain its prewar role as China’s financial capital. HSBC was co-founded in Hong Kong.
“Shanghai has a population of around 19 million people, which is almost three times that of Hong Kong, and a fast- growing economy, so it is not surprising” that the mainland city’s gross domestic product is now larger, Hong Kong Government Economist Helen Chan said in an e-mail yesterday.
Historical Context
From the late 19th century until communists took rule of the mainland in 1949, Shanghai was “an international city hooked into the world economy” and Hong Kong was only a “colonial outpost,” said Kerrie MacPherson, a University of Hong Kong professor who specializes in urban history. Their positions “reversed after 1949 with the anti-capitalist policies of the newly minted” People’s Republic of China, MacPherson said in an e-mail yesterday.
Hong Kong trounces Shanghai on output per person. The most recent per-capita GDP figures, for 2008, show Hong Kong with $30,977 and Shanghai at $10,713.
Hong Kong’s attractions include a U.K.-based legal system, lower tax rates and the free flow of funds. China hasn’t allowed full convertibility of the yuan, limiting its international use, and Hong Kong itself is serving as a test bed for such transactions.
“It’s very hard for Shanghai or any other cities in China, even in Asia” to replicate the strengths of Hong Kong, Mark Clifford, executive director of the Asia Business Council, said in Hong Kong.
Mainland Rivals
Hong Kong ranked No. 3, compared with Shanghai’s tenth place, in the September Global Financial Centers Index, compiled by consultants Z/Yen Group and based on cities’ attractiveness to financial-services professionals.
“A degree of competition between Hong Kong and other major Chinese cities like Shanghai is bound to exist, and this is natural and indeed healthy,” said Chan, the government economist. “But there is also plenty of room for cooperation between the two cities.”
Hong Kong has helped mainland firms get international listings, while Shanghai has an edge in tapping domestic Chinese funds, the Financial Services and the Treasury Bureau said in a statement yesterday.
Shanghai will let foreign companies list on its stock exchange “as soon as possible,” Mayor Han Zheng said, according to a Feb. 1 report in the Hong Kong Economic Journal.
Hong Kong Exchanges & Clearing Ltd. said yesterday it plans to introduce new products linked to the “increasing internationalization” of the Chinese currency. The city stock market operator aims to tackle “more intense” competition from global and regional exchanges, it said in a statement.
The figures indicate Shanghai’s economy surpassed Hong Kong’s seven years earlier than projected by the government- backed Hong Kong Trade Development Council in a 2001 report.
source: bloomberg
