Hong Kong’s third phase as a superconnector requires tech innovation

This important role has evolved in three distinct stages. In the first phase, Hong Kong established itself as an information hub, providing valuable trade and product information that helped mainland China understand global market needs.

However, despite its historical prominence, Hong Kong’s once-dominant port has experienced a decline. It dropped out of the world’s top five busiest shipping container terminals in 2019, then fell to 10th place in 2023 amid heavy competition from the mainland. While this decline is not the end of Hong Kong’s role in trading and shipping, it highlights the city’s diminishing significance in this domain.

The second phase of Hong Kong’s evolution involved attracting mainland Chinese companies to the international capital market. Tsingtao Brewery became the first Chinese company listed on the Hong Kong stock market in 1993, paving the way for others to follow suit. The city emerged as a critical connector between Chinese companies and global markets as mainland firms sought capital for their development.

Guests toast the successful listing of Tsingtao Brewery on the Hong Kong stock exchange on July 15, 1993. Photo: SCMP

By 2023, the number of mainland Chinese companies listed on the Hong Kong stock exchange had reached 1,447, accounting for 77 per cent of market capitalisation. Hong Kong became an attractive avenue for Chinese companies to access global capital. However, the recent decision by Alibaba to abandon its Hong Kong IPO plan for its logistics arm Cainiao exposes the challenges faced by Hong Kong’s financial market.

While Hong Kong will continue to play a crucial role in attracting global capital for Chinese companies and providing investment opportunities for investors outside China, its significance in connecting mainland China with the world is changing. Foreign direct investment into mainland China decreased for the first time since 1998 in the third quarter of 2023, while outbound investment is on the rise.

Hong Kong now finds itself in the third stage, where it must embrace a crucial role in technological innovation. Geopolitical tensions have created significant barriers for China to collaborate with the West in the field of science and technology. This presents a new opportunity for Hong Kong to become a hub for scientific research.

Hong Kong’s higher education system is world-class, with five universities ranked among the top 100 by QS. This accomplishment highlights Hong Kong’s potential to create a robust innovation ecosystem. The city’s strengths in higher education and research provide a solid foundation for conducting the basic research crucial to scientific and technological advancement.

A visitor tries out a photo booth at an exhibition on China’s space programme at the Science Museum in Tsim Sha Tsui in November last year. Photo: Sam Tsang

However, despite these strengths, Hong Kong’s current state demands a critical assessment. The city must recognise the urgency of the situation and take bold steps to develop its talent pool.

Hong Kong’s success in the era of innovation will rely on its ability to attract and retain top talent. Heightened scrutiny of Chinese scientists and academics in the United States has created an opportunity for Hong Kong to position itself as an attractive destination for these people.

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However, it is crucial for Hong Kong not to solely focus on scientists and academics. The government’s talent acquisition strategies have already resulted in an influx of professionals. This diverse talent pool will enrich Hong Kong’s workforce and contribute to its economic landscape.

Hong Kong’s prosperity has always been tied to its openness, which includes the free flow of information, people and capital. This openness has been instrumental in the city’s success and must be safeguarded to ensure future prosperity. Hong Kong needs to reassure the world that it remains committed to its fundamental principles and values, including the protection of civil liberties and freedom of expression.

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Equally important is Hong Kong’s willingness to embrace new ways of doing things. Innovation requires breaking away from past successes and embracing new ideas. It is crucial for Hong Kong to foster an environment that encourages experimentation, creativity and disruptive thinking.

Protectionism poses a significant threat to an open society such as Hong Kong. It hampers the integration of talented people from around the world and fails to serve the interests of residents. Hong Kong must actively combat protectionist tendencies and use the advantages that come with a diverse and international talent pool. Embracing diversity will enhance innovation and contribute to a vibrant, inclusive society.

Hong Kong must also strive for greater efficiency. The city often faces self-imposed boundaries and bureaucratic red tape that hinder progress and discourage innovation. To break out of these limitations, Hong Kong must foster a growth mindset that embraces challenges and is willing to change the status quo.

The city must adapt to an evolving global landscape and find new avenues to maintain its relevance. Only through adaptability, a willingness to embrace change and a commitment to encouraging innovation can Hong Kong navigate towards a prosperous and vibrant future. The story of the journey ahead must be one worth telling, and Hong Kong has the opportunity to shape its narrative through bold decision-making.

Ningrong Liu is associate vice-president at the University of Hong Kong, and the founding director of HKU Institute for China Business

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