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Monday, November 21, 2016, 00:43

SAR will ‘continue to be the mainland’s gateway’

By Cheng Chen

Hong Kong should continue to stay in the groove and develop its services sector which it excels in, and not to be too perturbed at competing or catching up with Shenzhen, says a top mainland economist.

Xu Xiaonian, an economic and finance professor at the Shanghai-based China Europe International Business School, affirmed that he’s confident the SAR will remain as the top gateway city to the mainland and warned against “overheated enthusiasm” in applying new technologies to business.

Hong Kong should continue to stay in the groove and develop its services sector which it excels in, and not to be too perturbed at competing or catching up with Shenzhen, says a top mainland economist

“Hong Kong is a services-oriented city and ought to move on doing what it’s good at,” he said on the sidelines of a business forum in Hong Kong on Sunday, adding that there’s no room for reviving manufacturing in Hong Kong.

“Every city has its strongest suit. Shenzhen cannot beat Hong Kong in services as Hong Kong enjoys synergy with the rest of the world on many fronts, especially its established legal system which the Chinese mainland lags behind,” he said.

The forum, organized by the Hong Kong Wenzhou Enterprises Association, kicked off an incubator fund called “Hong Kong Wenzhou Youth Entrepreneurship Ambition Fund” to support youth entrepreneurship in the city and strengthen ties between Hong Kong and Wenzhou, home to “the Jews of the Orient”.

According to recent surveys, Hong Kong has been trailing its regional peers in terms of innovation, fueling fears that the world city might be marginalized amid stiff competition in the internet era.

More than 300,000 Wenzhou people are engaged in businesses across the Pearl River Delta area, with over 30,000 of them living in Hong Kong and striving to tap into overseas markets.

Xu said the private sector, in which Wenzhou businessmen are famous as being the first to adopt the market economy in China, serves as the nation’s powerhouse in the process of economic restructuring.

“One shouldn’t overlook the unstoppable trend of the Chinese companies seeking an international presence,” said Xu, who had headed the research departments of various prominent financial houses, including China International Capital Corporation Ltd and Goldman Sach Group Inc’s China venture Gao Hua Securities Co, and is well known for his sharp views and laissez faire stance on government policies.

In his opinion, both domestic and overseas entrepreneurs should plan their businesses on the actual demands of industry when riding on the internet and new technology wave, such as big data and cloud computing.

For financial firms, the key to successful operation is risk-management and for retailers, it’s the supply-chain, which ought not to be overwhelmed by internet and new technologies despite its growing importance, Xu said, adding that new technologies are expected to facilitate the operations of enterprises.

A company’s core competitiveness, he said, lies in research and design and this is what makes high-tech firms like Apple and China’s Huawei stand out from their competitors.

Xu also allayed fears over the yuan’s downward swing, saying although its depreciation may have slowed the pace of the Chinese currency’s internationalization, it will not deter the country from further opening up its capital account, and the renminbi spot market would reach an equilibrium sooner or later.

He explained that it’s the demand in overseas markets, such as the US, that determines an economy’s export performance, and the currency’s depreciation is comparatively insignificant.

“As far as I’m concerned, the US has led economic reform in the aftermath of the financial crises, and has been successful in doing so,” he said, predicting that the US dollar will continue to strengthen in the near future.
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