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OpEdNews Op Eds    H4'ed 7/3/17

HK's role for next 20 years? Silk Road "super-connector"

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Hong Kong appears to have lost its unique position as a gateway to China, and then attempted to rebrand itself as a glitzy entertainment/shopping/tourism hub. But that's just not enough.

The numbers tell only part of the story. Hong Kong is a founding member of the WTO; total trade (as of 2016) stands at US$978 billion.

Hong Kong benefits from the world's second-largest inflow of foreign direct investment (FDI), after the US.

GDP jumped from US$177 billion in 1997 to US$321 billion today, while foreign reserves jumped from US$93 billion to US$390 billion. Only six mainland firms were present in Hong Kong in 1997; now there are over 1,000. There was no yuan trade settlement in 1997 (it was launched in 2004); now turnover is at 4.5 trillion yuan.

Crucially, Hong Kong is also one of the 70 members of the Asia Infrastructure Investment Bank (AIIB), and has joined BRI.

Hong Kong leaders are very much aware that China is the top trading partner for no less than 124 nations. Europe already does more trade with Asia than the US$1 trillion it does with the US -- and that's even before the EU has struck free trade agreements with most of Asia, and before the BRI infrastructure bonanza has really taken off.

The China Development Bank (CDB) and Export-Import Bank of China (EXIM) have already given US$200 billion in loans -- sweeping away what Xi himself has characterized as a "prominent challenge" to BRI.

So far, BRI-related loans have been mostly government-to-government, with very low interest rates and very long repayment schedules. But BRI needs more -- much more. And that's where Hong Kong fits in -- as an all-encompassing environment capable of handling finance, investment and even dispute resolution across Eurasia. Nothing could be more natural; after all, Hong Kong has learned plenty of facts on the ground as mainland China has developed.

Hong Kong companies are about to form a consortium to build infrastructure and industrial parks in BRI-related nations such as Thailand and Vietnam. The Hong Kong Trade and Development Council (HKTDC) has already identified eight nations as initial targets for Hong Kong investment: Vietnam, Thailand, Indonesia, Saudi Arabia, United Arab Emirates, Poland, Hungary and the Czech Republic.

MTR Corp, meanwhile, which operates Hong Kong's public transport network, is partnering with China Railway to bid for a contract to build the Singapore-Kuala Lumpur high-speed railway.

Peter Wong, deputy chairman and chief executive at HSBC Asia-Pacific, stresses how "enterprises from the Chinese mainland 'going out' are accessing Hong Kong's capital markets, bank liquidity, private equity funds, treasury services and professional talents across a range of sectors... As the Belt and Road Initiative promotes greater international use of the renminbi for trade and investment, Hong Kong is ideally positioned to benefit as the world's leading offshore renminbi centre."

That fits in with the argument made by Andre Sheng, a fellow of the Asia Global Institute at Hong Kong University, that Hong Kong must "become the 'super-connector' for China and Asia, thanks to BRI, setting up 'its own 'infrastructure for infrastructure,' creating the deep knowledge of the One Belt, One Road region that mainland companies, banks and officials badly need."

Don't forget the Pearl River Delta

And then there's Hong Kong's new role as a key node of the immensely ambitious Guangdong-Hong Kong-Macau Greater Bay Area, an 11-city cluster which also includes the tech innovation hub of Shenzhen and Zhuhai, with their combined GDP of US$1.36 trillion in 2016 and estimated population of 66.71 million.

The "Greater Bay Area" here is in fact the Pearl River Delta, which has its own infrastructure/connectivity crown jewel: the US$10.6 billion, 55 km-long Hong Kong-Zhuhai-Macau bridge, set to be finished by the end of 2017 and jointly financed by the central government in Beijing along with Hong Kong, Macau and assorted bank loans.

Premier Li Keqiang himself has described the Delta as a model of sustainable development: in fact, the key link for China's immense global supply chains. The Pearl River Delta is one of China's three big clusters of the future, along with the Yangtze River Delta and the Beijing-Tianjin-Bohai corridor.

Andre Sheng is correct when he stresses the leadership in Beijing sees Hong Kong as "a source of valuable economic-development 'software', including an independent judiciary, a robust anti-corruption regime, a stable currency, and world-class capital markets." And this software will be essential to building BRI's hardware.

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Pepe Escobar is an independent geopolitical analyst. He writes for RT, Sputnik and TomDispatch, and is a frequent contributor to websites and radio and TV shows ranging from the US to East Asia. He is the former roving correspondent for Asia (more...)
 

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