Why Shanghai Might Eclipse Hong Kong

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Shanghai
Introduction
Shanghai is China’s largest city with a population of 24.18 million people as of 2017. Since time immemorial, the city has served as a major trading spot as well as a gateway to the mainland China and this has been the case since after the Opium War. When China began its new economic agenda that aimed to transform the country and project it higher globally, Shanghai grew rapidly and has so far been able to sustain its growth. Yang (2002) notes that “during 1978-2000, Shanghai’s GDP achieved a 6.5 times increase and reached 48.749 billion U.S. dollars, with an annual rate of 9.5%” (1). Starting as only an industrial as well as a small commercial city, Shanghai has grown to become the mainland’s financial center, and a look at what is happening in China and in the world suggests that the city is yet to reach its limits. In the Global Financial Centres Index 24, Shanghai was seen to do well and had risen several points to overtake Tokyo. In the list, Shanghai is positioned at number five with the likes of Hong Kong, Singapore, London, and New York as those before it. Such a position shows that the city’s growth is progressive and the 25 point gain it got as per the list is a testament to that. In China, Shanghai is currently the largest city and financial center of the mainland China. Hong Kong, however, still holds pole position when all the cities of China are ranked. Currently, Hong Kong comes in at 3rd place in the global financial centres index. However, one cannot be faulted if they try to make a case for a time when Shanghai will eclipse Hong Kong and assume pole position as China’s largest financial center. Looking at the list of the global financial centres one notices something that is commonplace among the top four cities. Apparently, all these cities have either stagnated or are experiencing stunted growth. Of the four (New York, London, Hong Kong, and Singapore), Singapore is the one that gained the most points, and it got only 4 points. Shanghai, on the other hand, has maintained a positive outlook and with its 25-points increase, compared to Hong Kong’s two shows that its growth is happening rapidly. So, this article seeks to explore the notion of Shanghai eclipsing Hong Kong to become China’s largest financial center and eventually assuming pole position to become a global financial center.
Being a global financial center comes with a lot of advantages to a city and a country. Some of these advantages include an influx of investors and the shift of the world’s focus to the business possibilities of the region or city. What happens when the world focuses on a single region is that it grows and its opportunities are explored. Shanghai is a major player in the world today but attaining pole position in the global financial index means that the city is being stretched and pushed towards its full potential. A city that gains by 25 points while in the top 10 of the global financial center index is a city that has not yet reached its potential. Hong Kong appears to be stalling, and the future does look bright for Shanghai.
Why Shanghai Might Eclipse Hong Kong
There are various reasons why Shanghai might eclipse Hong Kong in the future to become China’s largest financial center. These include:
* Government support – a government is key in the development and growth of any city in the world. Without government support, a city cannot attain its full potential or attract investors. Governments support their cities through various means which include offering an enabling environment for business expansion and growth, subsidies, and political stability. Currently, the government of China is doing its best to ensure that China not only remains relevant but that it continues to grow and favorably compete with the likes of the U.S., Germany, and the U.K. In her article, Zukin writes of how the British and U.S. governments have been at the forefront when it comes to helping their cities grow and become major financial centers in the world. She notes the U.S. and British governments have revamped their efforts in helping their cities grow. She continues to say that these two countries are currently offering “official support for the expansion of financial markets – and an inevitable struggle between New York and London over priority of place.” Here, she meant that the governments of these countries are using their influence and positions in the world to help propel their cities to higher positions in the world rankings. So, governments do play a big role in helping their local cities grow to assume global status. Zukin continues to say that some governments also adopt policies and measures which propel their cities further. Like the U.S. and British governments, Shanghai has been getting immense support from the Chinese government. In 2013, for example, the Chinese government launched the Shanghai Free Trade Zone and this was widely touted as its push to have the city assume pole position as Asia’s global business hub. This support has so far worked to position Shanghai closer to Hong Kong. However, today, Hong Kong still remains to be Asia’s largest financial center but looking at what the government is doing and what is happening all round, the days with Hong Kong as Asia’s financial center are numbered. From the Global Financial Centre’s Index, Shanghai is only a few steps behind and should soon be expected to assume pole position.
* A large pool of investors in the mainland compared to those in Hong Kong –Being the largest mainland city in China makes it easier for investors to take advantage of opportunities within the city. Additionally, government support of the city is also something that offers investors relief as they try to find investment spots. Investors look for areas and cities which offer them the best odds at being profitable. This means that they assess the vulnerability of a city as well as the readiness of the government to either support or offer them an enabling environment. As indicated before, the government of China has publicly been endorsing Shanghai as the financial center of Asia. While Shanghai is yet to eclipse Hong Kong, it remains to be seen whether the city will continue on its upward trajectory.
* Shanghai’s large population – as noted earlier, Shanghai boasts of 24.18 million people. This large population comes with its advantages which include a large pool of investors who can take advantage of the investment opportunities within the city. As of 2017, the population of Hong Kong was 7.392 million which means Shanghai is almost triple the population of Hong Kong. A large population means that a city’s consumer buying power is high. In Shanghai, the population can easily consume the goods produced within the city. Additionally, having grown with a 6.5 GDP margin means that the city’s population do enjoy the luxury of high incomes as well as a higher purchasing power compared to other cities in China. While there might be concerns for an increasing population, the benefits to be accrued from a bulging population are quite many. Aside from increasing markets, demand will also be on the rise and this lays the groundwork for growth of businesses. The population of Shanghai is thus one of its important assets which the city has been using as a stepping stone to reach higher ground. As indicated, a large population can indeed be a problem for a country and a city, but for Shanghai, its population has complemented the development initiatives undertaken there.
* Increased competition from firms – with its rise to prominence, Shanghai has attracted a number of multinationals which have established their headquarters there. An article from the China Daily (2016) notes that more than 500 multinationals have so far set up their regional headquarters in Shanghai. The number continues to rise as the city continue to offer investors reasons to erect their centers there. In their 2001 article, Beaverstock, Hoyler, Pain, and Taylor note that the presence of financial and business services firms in a city does help to encourage growth. The researchers also indicate that even though these firms help propel or ensure the development agenda of a city is realized, they also encourage rivalry between the cities. So, currently, Shanghai could be said to be a great rival of Hong Kong because of its increased allure or appeal in the eyes of investors.
It is also essential to note that almost all multinationals interested in the Chinese market are using Shanghai as the inlet. This further propels the city further and increases its global significance. The fact that it is being seen as the inlet shows that investors do recognize its potential.
* Shanghai is also growing as a tech hub – China today is considered as a real rival to the Silicon Valley. Two cities have been touted as being the main ones to be spearheading the Chinese tech revolution, and these are Shanghai and Beijing. These two cities continue to rise in prominence in the world stage, and reports suggest they just might be able to rival Silicon Valley in the future. In a 2017 report by KPMG, Shanghai was said to be among one of the cities that might be leaders in technological innovation in the next four years. Like information, technological innovation spreads fast, and so far, there are talks of another Silicon Valley being conceived, and Shanghai appears to be among the cities that may take over. In his 2002 article, Castell talks of how the current constitution of cities is as a result of technological influence, networking, and globalization. He continues to say that the new organization of cities is highly dependent on the interdependence of different factors one of which is technological innovation. Shanghai has continued to evolve and to integrate these factors while growing to become an important piece in the international scene. Its growth as a technological hub makes it possible to integrate its other facets to help the city exploit its maximum potential. Currently, Shanghai holds the number 5 position in the global financial center index, and from the list provided by KPMG, the city still has a long way to go to reach its potential.
Challenges to Shanghai Eclipsing Hong Kong
While the road to eclipsing Hong Kong might now seem clear, there are a few challenges which may make it impossible for Shanghai to finally be the financial center of Asia and the world. Some of these include:
* The important issue of information – it is widely known that the government of China is serious on the issue of censorship. The government makes sure that the country receives that which it considers appropriate. This means that anything that passes it has to have passed a particular group of people who deem it appropriate for the Chinese population. For a city to grow and ove...