Hong Kong Remains a Global Super-Connector City
According to JLL, Hong Kong remains uniquely globally-oriented within China's system of cities. The Special Autonomous Region (SAR) continues to act as a linking point between Mainland China and the world. The 'One Country, Two Systems' framework has allowed Hong Kong to act as a transparent and business-friendly gateway, not just for China but across Asia Pacific and globally. Due to these strengths, Hong Kong is firmly positioned among the 'Big Seven' most globalized cities, alongside London, New York, Paris, Tokyo, Singapore and Seoul.
As one of the global "Big Seven" cities, Hong Kong plays a key-connecting role between Mainland China and the rest of the world. The report points out that mainland firms have become a driving force in lifting occupational demand, with a huge appetite for real estate in the city these recent years. In terms of total leasing volumes in Central district, market statistics show that office leasing by mainland Chinese firms registered a sharp increase to 48% in 2017 from 18% in 2011.
Moreover, Hong Kong is a major location for firms to raise capital overseas. This has helped Hong Kong maintain its status as a leading global financial centre, and it firmly sits among the "Big Seven" most globally connected cities with the deepest concentrations of international capital, business and people.
Meanwhile, the Belt and Road Initiative also offers Hong Kong another opportunity to build on its gateway function, by leveraging its financial services strengths in terms of financing, RMB internationalization and risk management.
Joseph Tsang, Managing Director at JLL in Hong Kong says, "Hong Kong holds a peculiar position in the city network of China and in this 'new era' of change. As one of the 'Big Seven' cities in the world, Hong Kong's strengths as a super-connector, its critical mass of business functions and its attractive business operating environment will continue to secure the city's position among the top city group."
"With the Belt and Road Initiative emerging as a key tenet of China's future development, Hong Kong, being a leading global financial centre, is also expected to benefit from the growing demand for its broad-ranging expertise in financial and professional services to support the roll-out of the Initiative, acting as connection points and facilitators between China, western firms and 'Belt and Road' countries."
Having said that, there still are factors that may comprise Hong Kong's position in the world order of cities. Among which, high costs for both residential and commercial space are a concern. JLL's Premium Office Rent Tracker shows that occupancy costs for premium space in Central district are two-thirds higher than its nearest rivals of New York and London. Geographical constraints stand as a longer-term problem that cannot be easily solved.
Despite the fact that increasing integration and connectivity within the Greater Bay Area may ease supply pressures, but there will remain frictions in terms of flows of people and capital due to Hong Kong's unique status. As a consequence, Hong Kong is unable to fully leverage its position as the natural hub for a mega region of over 70 million people with a $1.6 trillion economy.
Furthermore, what is worth noting is that while Hong Kong's business operating conditions, market transparency, environmental quality and cultural offer mark it out as possibly China's most attractive city, the city is at risk of falling behind for innovation. As the global economy evolves, even the most traditional sectors, in which Hong Kong's main strengths lie, will be under pressure to innovate and digitize.