Thirteen years later, Mike Rowse is still rolling his eyes over a Fortune magazine article. The piece in question, headlined “The Death of Hong Kong”, ran in June 1995. It detailed how one of the world’s key business centres was losing its groove and the return to Chinese rule in July 1997 would accelerate the city’s demise.
“Here we are over a decade later and look around you—things are booming,” says Rowse, the head of Invest Hong Kong.
Fortune wasn’t alone in predicting Hong Kong’s passing. Countless observers and journalists—myself included— questioned its relevance. The feeling was that, soon enough, investors wouldn’t need a gateway to China. Hong Kong’s middleman role would be eliminated by cities such as Shanghai.
Investors haven’t made much money betting against Hong Kong. The city has been quite adept at overcoming challenges, including the Chinese handover, the 1997 Asian crisis, the US recession of the early 2000s, the Sars outbreak in 2003 and the bird flu scare a couple of years later.
Yet the next 15 years will arguably be harder on Hong Kong than the past 15. It will need to work harder than ever to maintain its standard of living and relevance in a rapidly changing and increasingly competitive world.
On Friday, the same day I had coffee with Rowse in Hong Kong, the city’s benchmark stock index closed below 20,000 points for the first time since April 2007 as the global credit crisis worsened.
Goldman Sachs lowered its outlook for Hong Kong developers to “cautious” and cut its growth forecasts for the economy in 2008 and 2009 to 4.2% and 4% from 5.2% and 5%.
This story is bigger than Hong Kong, of course. The ongoing swoon in stocks on Friday drove Asia’s benchmark index to its largest weekly drop in 13 months.
Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co. Llc., last week said the US needs to start using more of its money to support markets to stem a burgeoning “financial tsunami.”
By the weekend, it seemed US treasury secretary Henry Paulson had come to a similar conclusion. He brought Fannie Mae and Freddie Mac under government control to halt the crisis of confidence in the companies that make up almost half the US mortgage market.
Hong Kong’s highly open economy is on Asia’s frontlines. The city of seven million people is routinely voted the world’s pro-business haven by the Heritage Foundation and The Wall Street Journal in their annual “Index of Economic Freedom”.
Does Hong Kong have the stuff to stand its ground as global markets swoon? Can it continue reinventing itself to remain relevant amid competition from Shanghai, Singapore and Dubai? “Absolutely,” says Rowse, 59.
Rowse is an old Hong Kong hand, having been here since 1972 in roles ranging from English tutor to journalist to anti-corruption activist to head of its investment promotion agency.
What’s the secret of Hong Kong’s success? You won’t be surprised to hear that Rowse, who is paid to sell Hong Kong, is at the ready with myriad reasons.
One, of course, is innate industriousness. It’s a highly capitalist economy that’s proved nimbler than many expected. Hong Kong’s location, energy, skilled workforce and linear focus on business often help the city confound sceptics.
“We don’t have to chase the money—Hong Kong has plenty of it already,” Rowse says. “We do want the jobs and the new ideas, though—the technology foreigners bring. It all adds to the colour of Hong Kong.”
The more intriguing observation is this: China’s determination to maintain Hong Kong’s international status.
In the run-up to Hong Kong’s return to China, executives and investors fretted what Beijing would do with the place. Would China’s Communist Party tie a noose around its so-called Golden Goose? Would it meddle with the low taxes, lively press, free flow of capital and laid-back visa policies that made Hong Kong unique?
An attempt to impose laws to muzzle dissent had 500,000 protesters marching in Hong Kong’s streets in 2003—and the government backing down. China disappointed democracy activists by saying that the process of allowing Hong Kongers to elect all other leaders won’t begin until 2017. Yet as of Monday morning, pro-democracy parties appeared to maintain enough seats to veto new laws in an election on Sunday.
Pollution remains a worry for investment banks looking to attract foreign talent. Educating the leaders of tomorrow is another challenge. It’s fair to wonder if Hong Kong is too reliant on financial services and real estate for growth. Its pegged currency is boosting inflation.
Yet Rowse’s optimism rests in his faith that Beijing won’t mess with the commercial pillars that make Hong Kong what it is. He also thinks it will be decades before China has a city that offers all the attributes that drive this place.
“My job is often to turn around perceptions about Hong Kong,” Rowse says. “But really, the city’s continued success speaks for itself.”