Hong Kong and Shanghai: a tale of two cities in China

Abstract

This research discusses Hong Kong’s long-run role as a preeminent international finance centre in the greater China with a view of Shanghai’s rapid growth. Using a synthesis approach of politics and economics, rather than pure economic analysis and forecasting, it is argued Shanghai is not likely to overtake/replace Hong Kong as an international finance hub in the region. Hong Kong will still keep its position in many years to come even if Shanghai has made enormous efforts to rebuild its financial industry. Due to their diverging industry structure, sheer size of the country, and most importantly different positioning by the central and local governments, the two cities are not necessarily rivals, but can actually be complementary partners, serving two non-overlapping hinterlands. This research also asserts that Hong Kong’s integration with the mainland economy is essential for its increasing competitiveness, while putting emphasis on policy reform for Hong Kong to maintain a strategic advantage over Shanghai.