A Paradigm Shift Towards a Green and Sustainable Finance Center

31 Hong Kong in Transition: A Paradigm Shift Towards a Green and Sustainable Finance Center Through the late nineteenth and early twentieth centuries, Chinese trading firms in Hong Kong developed trading ties across much of Asia and to countries outside the continent through the city. The pattern mirrored the HSBC’s branch office network. Other trading firms and financial institutions placed their senior management in Hong Kong making it their Asia-Pacific Headquarters. Within the region, cities like Singapore and Shanghai also gradually grew into important trading and financial centers. The difference is that these two cities housed individuals and organizations with relatively restricted focus and responsibilities. For example, Shanghai’s target was China and Singapore concentrated on neighboring countries. For a long period of time, international firms preferred Hong Kong as a regional headquarters or office for operating in Asia. This was critical to sustain the city’s pivotal role and maintain its networks of capital. Regional headquarters or offices supervised activities outside Hong Kong and took managerial control of other operations in the region. In the 1950s, a large industrial sector fled to Hong Kong from the Mainland. The second half of the twentieth century witnessed an explosive growth of Hong Kong as an Asian economic base—one of the “Four Dragons”. This growth was accompanied by a temporary trajectory in trade and logistic services. With manufacturing seeking lower rent and moving to Guangdong Province from Hong Kong, the city readjusted its role as a management and redistribution center for manufacturing. The changing share of finance, business services and manufacturing in Hong Kong’s economy did not alter its status as an IFC. Instead, it tested the city’s resilience in serving the key networks for capital. In the late twentieth century and the beginning of the twenty-first century, Western capital continued to see Hong Kong as a base for accessing Asian networks. The SAR functioned as a conduit between the global headquarters of these international firms and their localized operations in the Asia-Pacific region. It transferred decisions in exchange of capital and passed through messages about investment opportunities. Between 1994 and 2006, the United States took the largest share of regional headquarters and offices in Hong Kong. The United Kingdom remained among the top three economies in terms of regional headquarters and offices during the period. Germany, France, the Netherlands, and Italy more than doubled their numbers of headquarters and of offices between 1994 and 2006. During this period, Mainland China remained in fourth place. The structural balance between Western and Chinese capital and firms in Hong Kong’s market is embedded in the city’s historical past. To a greater or lesser extent, this balance props up Hong Kong as it is, not only in terms of its status as an IFC, but it also nourishes its unique identity as a center “where East Meets West” encompassing social and cultural aspects, and the “two systems” in the framework of “one country, two systems”. The trend of Chinese capital growing to be the predominant part in Hong Kong’s market broke the balance and potentially further reduces Hong Kong’s attractiveness to the international market, weakening its IFC role and threatening the very existence of the city. The one GBA plan, if implemented, would make the situation even more critical. Furthermore, as shown in the last section, Singapore has taken over from Hong Kong and become the Number Three IFC. Hence, the IFC rejuvenation plan lacks driving force. The fundamentals which used to support Hong Kong’s position as an IFC are also changing in a subtle way. With capital from only one single origin dominating, it is difficult to justify a diversified international market.