Visitors walk along the Hong Kong Observation Wheel in Central, Hong Kong on August 19. Photo: Lu Wenao/GT

Hong Kong is irreplaceable in its prominent role in the nation's economic development, given its unique system and strong complementarities with the Chinese mainland, though it faces rising downward pressure due in part to persistent unrest and intensifying competition from some mainland cities, officials and analysts said. 

Hong Kong is not afraid of rising competition from mainland cities such as Shenzhen in South China's Guangdong Province and Shanghai, which have been rising rapidly, Hong Kong Finance Secretary Paul Chan Mo-po said in an exclusive interview with the Global Times on Wednesday. 

"We have to take a strategic perspective to continuously increase our competitiveness, so that we won't be afraid of competition. Hong Kong has always been an open market, we don't need to fear rivalry - only incompetence," Chan told the Global Times.

Hong Kong has been suffering from months of social unrest, which hurts its pillar industries and dents its reputation as a global finance and trade hub. Economic statistics are showing signs of recession, as street violence weighs on small and medium-sized enterprises (SMEs), drives away tourists and investors and paralyzes public transport systems.

With Hong Kong under downward pressure, the central government has issued new policies to boost several mainland cities, fueling speculation that the role of Hong Kong would become less important in the national-level development mega projects.

Such speculation began after Shenzhen surpassed Hong Kong in terms of GDP for the first time in 2018, which marked 40 years of China's reform and opening-up. Shenzhen was the frontier of China's reform and opening-up policies started four decades ago.

Irreplaceable role

However, some prominent economists and officials strongly believe that GDP alone doesn't define the positions of different cities, and Hong Kong is irreplaceable considered its unique advantages under the "one country, two systems" principle. 

There are both commonalities and fundamental differences between Hong Kong, with its capitalist system, and Shenzhen and Shanghai, with their socialist market economy systems, as financial, trade, economic and transport hubs, said Huang Qifan, former mayor of Southwest China's Chongqing Municipality.

"That is the significance of Hong Kong's status. It's not about GDP," Huang said, adding that even if the GDPs of mainland cities such as Shanghai and Shenzhen reached five times that of Hong Kong, "Hong Kong's stature will still be irreplaceable."

Hong Kong's economy remains among the freest worldwide and the city has served as a gateway for foreign direct investment (FDI) into the mainland. According to the UNCTAD World Investment Report 2019, global FDI inflows to Hong Kong amounted to $115.7 billion in 2018, ranked third globally, only behind the mainland with $139 billion in Asia. 

By the end of 2018, actual utilized FDI from Hong Kong was $1.1 trillion, accounting for 54 percent of all FDI the mainland has received from all over the world, according to the Ministry of Commerce. 

Rising competition

However, Hong Kong is now facing rising competitors, especially when central and local governments recently unveiled more favorable policies to accelerate Shanghai's opening-up as global financial center and make Shenzhen a pilot demonstration area of socialism with Chinese characteristics.

In spite of this rising competition, however, analysts and officials said that there are more complementary developments between Hong Kong and the mainland, and neither will substitute for the other. 

Yi Gang, governor of the People's Bank of China, the country's central bank, said in June that he supports a Shanghai-based plan to end ownership restrictions on foreign financial firms, accelerating the development of Shanghai as yuan-denominated asset allocation center.

"Shanghai could be a major onshore market, giving access for investors to tap into the significant potential of the lucrative mainland market. Meanwhile, Hong Kong would remain as the important offshore hub, as it has advantages in the legal and services sectors to become a key fundraising venue for mainland companies, and the two markets are highly complementary," Shen Jianguang, chief economist with JD Digits, told the Global Times. 

Hong Kong and mainland cities see increasing complementarity in not only finance but also in science and technology. For instance, Shenzhen has strength in terms of manufacturing and supply chains. It is home to the headquarters of some leading technology companies, while Hong Kong has the advantage of research at its universities, Chan said August.