Hong Kong embarks on ambitious reform agenda to revitalise economy and strengthen global position

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10th July 2024 – (Hong Kong) As Hong Kong emerges from a period of turmoil into an era of stability, there is a growing consensus among policymakers, business leaders, and citizens that comprehensive reform is not just desirable, but essential for Hong Kong’s continued prosperity and relevance on the global stage. The call for reform echoes from the highest levels of government to the streets of Mong Kok. President Xi Jinping’s statement at the 25th anniversary of Hong Kong’s return to Chinese sovereignty in 2022 set the tone: “The central government fully supports Hong Kong in its active and steady pursuit of reform, breaking through the barriers of vested interests, and fully unleashing the enormous creativity and development vitality of Hong Kong society.”

This mandate for change comes at a critical juncture. Hong Kong has successfully navigated the challenges of the past few years, including social unrest and the COVID-19 pandemic. The implementation of the National Security Law and electoral reforms has ushered in a new era of political stability. Now, with a solid foundation in place, the city is poised to address long-standing economic and social issues that have simmered beneath the surface for decades.

The reform agenda facing Hong Kong is both broad and deep. It encompasses everything from economic diversification and housing affordability to governance structures and international competitiveness. The city’s leaders recognize that maintaining the status quo is not an option if Hong Kong is to thrive in an increasingly complex and competitive global environment.

Several factors are propelling the need for reform in Hong Kong: The city’s economic dependence on finance, real estate, and trade has exposed it to external shocks and global shifts, highlighting the urgency to diversify into innovation and technology sectors. Additionally, deep-rooted social inequalities such as the severe wealth gap and housing crisis demand attention to ensure social stability and economic sustainability. Although the “patriots administering Hong Kong” principle has brought some political stability, further enhancements are needed in governance and public service efficiency. Moreover, with Asian cities like Singapore and Shanghai emerging as strong competitors in global business, Hong Kong must innovate to remain competitive. Furthermore, the integration with the Greater Bay Area presents significant opportunities, necessitating adaptive changes to strengthen Hong Kong’s regional integration and development.

The Hong Kong government, under the leadership of Chief Executive John Lee, has outlined an ambitious reform agenda that touches on multiple sectors of society and the economy. Some of the key areas of focus include:

Hong Kong is doubling down on its efforts to become a hub for innovation and technology. The government has allocated significant resources to develop the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop, aiming to create a world-class research and development centre.

Additionally, there’s a push to leverage Hong Kong’s strengths in finance to become a leader in fintech and green finance. The city is also exploring opportunities in biotechnology, artificial intelligence, and smart city technologies.

Paul Chan, Hong Kong’s Financial Secretary, emphasizes the importance of this shift: “We must move beyond our traditional economic pillars and embrace new industries that can drive sustainable growth. Innovation and technology will be key to Hong Kong’s future competitiveness.”

The housing crisis remains one of Hong Kong’s most pressing issues. The government has set ambitious targets for increasing housing supply, including plans to build 430,000 public housing units in the next decade.

More controversially, there are discussions about reforming land use policies, including potentially developing portions of country parks and streamlining the process for land reclamation. These proposals have sparked debate, highlighting the delicate balance between development needs and environmental concerns.

Efforts are underway to streamline government processes and improve public service delivery. This includes digitalizing government services, enhancing cross-departmental coordination, and implementing performance-based management systems in the civil service. There’s also a focus on nurturing a new generation of civil servants who are not only loyal to the “One Country, Two Systems” principle but also innovative and responsive to public needs.

Recognising that human capital is Hong Kong’s greatest asset, the government is revamping the education system to better align with future economic needs. This includes strengthening STEM education, promoting vocational training, and enhancing national education to foster a stronger sense of Chinese identity among young Hong Kongers. Furthermore, talent attraction schemes have been expanded to lure top-tier professionals from around the world, particularly in fields like finance, technology, and healthcare.

While reaffirming its commitment to the “One Country, Two Systems” framework, Hong Kong is actively working to reposition itself on the global stage. This includes efforts to strengthen its role as a super-connector between China and the rest of the world, particularly in the context of the Belt and Road Initiative. The city is also seeking to diversify its international connections, looking beyond traditional Western partners to build stronger ties with emerging markets in Southeast Asia, the Middle East, and Africa.

The journey towards reform in Hong Kong is fraught with challenges and controversies. Key among these is the tension between maintaining national security and preserving the city’s openness to international business and talent, particularly in light of concerns that the National Security Law may tarnish Hong Kong’s global standing. Additionally, proposed reforms in critical areas such as land use and economic policy encounter opposition from established interests that benefit from maintaining the current system. The question of how to sustain Hong Kong’s distinctive identity and lifestyle continues to spark debate as the city further integrates with mainland China. Moreover, the global economic landscape, influenced by factors like US-China tensions and the impact of the COVID-19 pandemic, presents a difficult backdrop for executing significant reforms. Compounding these issues is the need to restore public trust following periods of social unrest, a crucial but challenging endeavour.

Despite these challenges, there is a palpable sense of optimism in Hong Kong about the potential for meaningful reform. The city’s resilience, adaptability, and strategic importance to China’s long-term development plans provide a strong foundation for positive change. Regina Ip, a prominent pro-establishment politician, reflects this sentiment: “Hong Kong has always thrived on change and innovation. The reforms we’re undertaking now are not just about solving immediate problems; they’re about securing our place in the future global order.”

The effectiveness of Hong Kong’s reform efforts hinges on several critical elements: First, the political determination from both the local government and Beijing is essential for the initiation and continuity of long-term reforms. Second, engaging a broad spectrum of stakeholders, including those with opposing views, is vital for gaining widespread acceptance and legitimacy for these reforms. Third, the capacity to modify reform strategies based on evolving situations and feedback is crucial for their success. Additionally, while deepening integration with mainland China, Hong Kong must also preserve and enhance its international relationships to maintain its status as a global city. Lastly, achieving a careful equilibrium between preserving Hong Kong’s distinct identity under the “One Country, Two Systems” framework and fostering closer ties with the Mainland is paramount.

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