It has been 27 years since Hong Kong was handed over to the People’s Republic of China. In recent times, the city, once known as “Asia’s World City,” has faced numerous setbacks, including political unrest and the subsequent global pandemic, which have exacerbated its detrimental effects. Despite all these challenges, the city has managed to bounce back, albeit with a slight economic prudence. Nevertheless, Singapore, a city-state, is gaining greater traction due to the prevailing issues in Hong Kong. Its rapid rise is attributed to shifting geopolitics and domestic instability in Hong Kong. Whatever the cost may be, the city will have to overcome the challenge posed by the “Lion City.” Apart from the strong open market and capitalistic nature both share, Hong Kong has an institutional advantage with a strong footprint to further consolidate and maintain its position in the global sphere amidst various challenges.
For the time being, Hong Kong still leads the city-state in key macroeconomic indicators. First, due to fiscal prudence by the SAR government, Hong Kong has a significantly lower debt-to-GDP ratio compared to Singapore. In 2022, Hong Kong’s debt-to-GDP ratio was 4.27%, while Singapore’s was much higher at 141.11%, illustrating greater consciousness in the spending of the HK government financing their budget through taxation rather than debt. Second, Hong Kong ranks higher in entrepreneurship compared to Singapore. In the current times, quality labor with a skillset that outshines through comprehensive education in tandem with entrepreneurial aspirations is of great vitality. The competitive edge that Hong Kong has in this arena is beneficial in the long run for the city compared to Singapore, which underperforms compared to Hong Kong in terms of overall competitiveness. Third, dominance in the services sector. The focal point in terms of production in Hong Kong is still services, contributing nearly 94% to the overall GDP, further highlighting its prowess as a financial center. The above indicators show a sign of hope. In spite of MNCs shifting their Asia Pacific operations out of Hong Kong and opting for the city-state.
It will be important for Hong Kong to increase its investment in the depreciated infrastructure and improve the situation of equality, speeding up social mobility, so Hong Kong excels in output that is of great quality rather than common goods that are of no uniqueness to the global market. Most importantly, it must use its key demographic advantage of being the gateway to China, a bridge for the whole world, to access the vast market. Hong Kong must remain the re-export hub, which has been a major contributor to its huge output in absolute terms. The tide may shift any way; the future of the city lies in the hands of policymakers. May they make the most competent decision, keeping in mind the benefits for the city both in the short and long run.
