Q In fDi magazine’s most recent Asia rankings, Hong Kong retained its number-one status but Asia is a very competitive region for inward investment. What are you doing to differentiate yourself from the competition?

A We typically pitch Hong Kong as a good place to do business because of its market access at four levels – the local, backyard, national and regional markets.

First, Hong Kong is a good place to do business for its own local market. We have 20 million visitors a year and seven million people reside here, using a highly developed retail market. Second, Hong Kong is excellent as a co-ordination centre for mainland China. We know that Chinese ports are up and coming but the management and procurement is still largely done through Hong Kong. Third, we see Hong Kong used as a springboard for the whole of China. Although Shanghai is emerging as a competitor, it does not yet compare with Hong Kong as an international finance centre. On the fourth level, Hong Kong is used by many companies as a base for regional operations throughout Asia.

We are now seeing two further levels coming through. The first of these is Hong Kong’s emergence as a springboard for companies expanding out of mainland China. At the final level, there is some evidence beginning to emerge that we are starting to get global operations in Hong Kong as companies move into 24- hour operations. For all of these areas you have competition and need to pitch appropriately for the market.

Q What is the main competition at the national level?

A At the national level in China we are competing with Beijing and Shanghai, but some markets naturally belong in Beijing or Shanghai and some naturally belong in Hong Kong.

An example of this is financial services: Hong Kong clearly has more sophisticated financial services and management than its regional competitors. To be an international financial centre you need to have four things: a convertible currency with no restrictions on the movement of capital; a very strong banking system, which is regulated by the government to keep a level playing field, but where the government does not participate and create a conflict of interest; total free flow of information, in both political and economic news; and a legal system built on internationally accepted norms.

Typically, no-one looks beyond the first of these as important. Although the switch of the renminbi to a convertible currency may happen in the next few years, private ownership of the banking system has been ruled out by the Chinese. Certainly, this is a policy decision that could be changed, but free flow of information and legal systems are entrenched issues in the mainland. Hong Kong is the only international financial centre that China has, and is likely to have for a long time.

Q What about regional competition, such as with Singapore?

A In terms of competition for the regional role, there are really only two places competing: Hong Kong and Singapore. And as far as we can tell, Hong Kong is number one and Singapore is number two.

In fact, I often stress the similarities that we have with Singapore, such as low levels of crime and corruption, a well-educated population, and sophisticated financial systems. However, Singapore is much smaller than us and the advantage that Hong Kong has over Singapore is its geography. North Asia markets are close to Hong Kong, and south-east Asia markets are close to Singapore. Hong Kong is the most efficient location for business, especially because we have behind us the world’s fourth largest economy, soon to be third largest.

CITY PROFILE

Hong Kong

Population: 7 million

Pop. growth rate: 0.56%

Area: 1042 sq km

Real GDP growth: 5.8%

GDP per capita: $42,000

Current account: $19.87 bn

Key sector: (as % GDP) Services 91.8%

Labour force: 3.6 million

Unemployment: 4.2%

_{Source: CIA World Factbook, 2007}