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What About Hong Kong?

Posted in China Travel

Hong Kong International Airport
In the Dragonair lounge waiting for Asiana Flight 724
Eating peanuts (h/t to the Silicon Hutong)
2319 hrs
I am just wrapping up my one week visit to Hong Kong. I am (was?) here to cover eight depositions in a case pending in Kentucky Federal Court in a case I was brought in on as international counsel. Co-blogger Steve Dickinson came here as well to assist with the depositions and to make sure the Mandarin to English interpretation remained on the up and up. The opposing side had one China and two U.S. lawyers.
I do not purport to know Hong Kong terribly well as my firm now does very little work there. There was a time where we fairly frequently helped our clients (mostly non-American clients) form companies in Hong Kong, but that work started dropping off around three years ago. Now when clients talk about wanting to form a Hong Kong company to go into mainland China we tell them doing so will in most cases do little more than increase their costs. Rarely does it make sense to do anything other than to just go into China directly by forming a company there.
This was only my third time in Hong Kong and it was my first time here in more than five years.
Here are my highly subjective thoughts:
1. This is truly an international city. That term is probably applied too often, but it definitely fits Hong Kong. By international I mean there are people from all over the world who appear to be living here comfortably and who influence its culture. If I had to name the top three most international cities, I would say New York (America), London (Europe) and Hong Kong (Asia). Hong Kong just feels way more international than Shanghai or Beijing.
2. This city is more orderly than any mainland city. It is clean and efficient. Things just work. Service is with a smile. The taxi drivers are polite and they know where they are going. Its public transportation is as clean and efficient as any in the world. Hong Kong feels accomplished while Shanghai and Beijing feel like they are still striving. At one point, Steve told me some of his friends from Shanghai like coming to Hong Kong for three to four days just to get away from the chaos/stress of Shanghai. Steve said he understands why.
I admit I never went too “deep” into the city so I never saw the parts of Hong Kong that are very much like the mainland. Just never had time.
3. Hong Kong is more open than the mainland. I know there are those who assert Hong Kong’s press has been muzzled by the mainland powers and I know that politics here are not wide open, but I can tell you that reading the English language newspapers here feels like reading a real newspaper and not like government propaganda.
4. Hong Kong is a food city. I have eaten Japanese three times, Thai twice, French, Italian, Hong Kong, Phillipino, and Sichuan, and all were really good. I see Chinese as a food culture and Hong Kong’s wealth puts that on steroids. The Lan Kwai Fang [restaurant] District is just flat out cool.
5. Man, but Hong Kong hotels are expensive, or at least they are when the huge conventions are in town. We started out in the $300 a night Renaissance Hotel and it was not at all luxurious. My room had a great view, but it was tiny and the service was mediocre. I stayed there two nights but fled when I could no longer handle its less than stellar internet connection. I also did not appreciate how the workout facility was in another building. I moved to the JW Marriott on Queensway, which was even more expensive, but only minutes away by foot from the building in which our depositions were taking place. The rates we got were actually quite good as most hotels were booked or charging hundreds of dollars more. It certainly did not help that Hong Kong’s massive yearly home show is taking place right now.
6. Hong Kong International Airport (a/k/a Chek Lap Kok) is about as nice as they come and the Wi-Fi is free.
7. There are securities firms and banks everywhere here and Hong Kong is still the financial center (or should I say centre?) of Asia. Its combination of no capital controls, an independent judiciary, low taxes, a free press, and good communications has put it safely out in front in this arena and I do not see Shanghai catching up for some time, if ever. I have a lawyer friend from Seattle, Steve DeGracia, who is a finance lawyer at Paul Hastings’ Hong Kong office, which is the base of one of the strongest corporate finance departments in Asia. Steve and I were supposed to meet up at some point in Hong Kong but I ended up without a spare moment. Amazingly enough, by sheer coincidence, I ran into Steve and his lovely wife (whom he met while working in Seoul a few years ago) and 20 month old daughter during a lunch break between depositions. What are the odds of that?
As always, the comment lines are open. Is Beijing’s handling of Hong Kong a portent of what Beijing would like to see happen on the mainland? Is Hong Kong a portent for China’s future? Is it even relevant?

  • http://www.beijingboyce.com boyce

    Dan,
    You forgot one thing – the backdoor of the cab opens automatically. *That’s* civilization.
    Cheers, Boyce

  • http://twofish.wordpress.com/ Twofish

    In the areas of commercial law and finance, Hong Kong is definitely the direction that the Mainland wants to push things in. Shanghai and Hong Kong are very complementary, and there won’t be any real competition between them until capital controls on RMB are lifted and that won’t be for another generation.
    The real competition for Hong Kong at this moment is Tokyo, and things are moving from Tokyo to Hong Kong.
    Something that is very interesting is the legal history of securities law in Hong Kong. The Hong Kong financial markets were a mess in the 1960′s, and it wasn’t until the 1970′s after a series of major scandals that some order was put into the system.
    The low taxes in Hong Kong are something of a fudge. The reason Hong Kong can get away with such low taxes is that the government owes all land and makes money by very carefully selling land.

  • http://badbadchina.blogspot.com nanheyangrouchuan

    Hong Kong is light years ahead of China just in terms of social development. You can walk around anywhere and not be stared at, even up in the Territories. Personal hygiene and public order are a reality and not some foreign devil fabrications used to look down on Chinese people.
    Lastly, Hong Kong natives have successfully blended UK institutions into Chinese culture with an international outlook. This alone makes the uber-villagers in Beijing’s leadership circles cringe and twist. The idea that a newspaper can make fun of and criticize leading city leaders! Pssshaw and bah mantou!
    But HK is on the decline, its shipping industry and gateways to China all but shuttered to benefit filthy potemkin villages like SH, SZ and BJ. I was in HK during the pro-democracy rallies in 2003 and even individual HKPD members were unhappy with Chinese big bosses slinking and creeping their way into HK.
    The demise of HK started with taking “Tempest in a tea cup” off the air and now even the SCMP is a watered down version of its former glory.
    China and the world can do without “chinese characteristics”.

  • http://www.cdrum.com Chris D

    I’d agree with Lamb Kabob. HK is a successful implementation of an international city, in asia of all places, but is on the decline (I hope we’re both wrong), and it’s a shame.
    I think MNC’s are too eager and rushed to move to China from their original Asian HQs of HK, and even Singapore.
    Yes “let’s move to China so we can be where the action is”. Well, maybe. But lets also think about where we can get capable (and i mean _really_ capable) people to run the operations. In my opinion, China isn’t there yet, large scale at least. It will happen, though…
    I see often MNCs with operations in the mainland have quite a few Hong Kong and Singapore natives in high level positions. Theres a reason for this.
    But do you need to move people to China? Why not keep the HQ operations in HK or Singapore? These two cities are proper “hub” cities (travel). They have real legal protections for companies. English (and other ‘foreign’ languages) isn’t a problem. These cities are well managed and the people (mostly) are well manored.
    I live in Beijing, and it isn’t where people think it is, in terms of business capabilities. Again, it will get there, but I think it will be a while (20 years?).

  • jms

    Your comments on Hong Kong’s strong points are right on the mark. It’s clean and efficient. It’s one drawback though is Hongkongers’ robot like work ethic (I am all for hard work, but it’s really too much). The corporate culture could also be unusually stifling at times — it’s like they combined the worst of the British stuffiness and Chinese hierarchy, really couldn’t stand it.

  • http://www.chinalawblog.com China Law Blog

    Boyce,
    Note how I avoided any loaded words like civilized or civilization in my piece. Had I discussed that, I would have noted how in HK, people do not scream into their cell phones at nice restaurants. Also, if we are going to give civilization points based on cabbies, Tokyo wins, hands down.

  • http://www.chinalawblog.com China Law Blog

    TwoFish,
    I agree with you on all points. I was once in the “no need for HK crowd,” now I see it as a vital (with all that word entails) part of the whole region.

  • http://www.chinalawblog.com China Law Blog

    nh,
    Unfair. You are taking HK at probably its lowest point and assuming it never climbed out. Trust me, it has. My views are somewhat biased (of course), but the ultra big time legal work in Asia is still coming out of HK and the firms there are still in the market for bodies. And if you are a huge pan-Asian country and you need an audit done, where ya gonna look?

  • http://www.chinalawblog.com China Law Blog

    Chris D,
    I disagree. HK’s biggest problem is its pollution, which is making some execs and thus some companies want to stay away. But for certain types and certain sizes of company, it is still the place to be. I probably spoke too soon when I said we typically encourage our clients to ignore HK. There are many reasons to consider HK, but since most of our clients are SMEs who have come to us for help with China, the benefits of skipping HK usually make sense.
    To grossly generalize, huge companies and financial companies are still looking to HK. Biotech seems enamored with Singapore (and I can see why), with the rest going to China directly.

  • http://www.chinalawblog.com China Law Blog

    Chris D-E,
    All very good reasons. But since the US does not have the crippling tax laws of so many European countries and since most of our clients are SMEs from the US with no intention of ever going public, going direct in China is almost always the way to go.
    Three years ago, half our calls started out roughly along the following lines: “I want to start making widgets in China so I want to form a company in HK.” That stopped making sense a few years ago and the interesting thing is that HK hardly ever comes up any more.

  • http://www.chinalawblog.com China Law Blog

    jms,
    Interesting. I have to say I do not know enough about HK to comment on the work ethic there, but I will say the folks I know on the mainland are not exactly slackers and I have plenty of lawyer friends in the UK who (at least relative to other lawyers) are pretty wild and crazy guys.
    Others?

  • http://badbadchina.blogspot.com nanheyangrouchuan

    “The real competition for Hong Kong at this moment is Tokyo, and things are moving from Tokyo to Hong Kong.”
    And from what I’ve read and heard there is a growing migration of Asia CEOs to Singapore for many things except direct access to China (where the China exec reports to Singapore). The Hang Seng index is still one of the big global markets and that is probably one of few reasons that HK is still so big, otherwise Singapore seems like the natural right hand of Tokyo.
    Dan,
    Beijing may have worked to cover up its image in HK, but it is still there and HK people know it, why else would they all have Canadian, NZ or Australia passports? The presence of large numbers of Chinese tourists has also degraded HK’s quality of life.

  • http://www.chinalawblog.com China Law Blog

    nh,
    Singapore has its own plusses and minuses, but it certainly has a role.
    Of course Beijing is playing a role in HK and that role is usually not terribly positive. But many of those who fled HK for Vancouver, BC, are now back in HK, but, yes, still with a Canadian passport.

  • Terry

    Well, having lived exactly 12 years in Hong Kong followed by 12 years in Beijing, I guess I should jump in. For all it’s internationalism, Hong Kong used to be very parochial and Cantonese. There is a far greater mix of Chinese from other regions in Beijing than in Hong Kong of old and I think that is a plus. I do concur with all of your comments, except for the convenience of Hong Kong for banking in support of representative offices.
    I agree with JMS as well on the work ethic, though I often thought when there that many people worked late to avoid going home to their packed little appartments. I must admit, I haven’t had the need to go to HK in the past 5 years or so, and am saddened by the air polution that has come across the border. One lovely aspect about Hong Kong of old, was the convenience of their country parks/water catchment areas combined with ready maps of great walking trails. If you love having the sea and mountains in proximity, Hong Kong really can’t be beat as an Asian city, and the seafood ROCKS!!

  • http://www.thechinagame.com Paul M

    One comment above stuck me as partially wrong: “Hong Kong is light years ahead of China…you can walk around anywhere and not be stared at.”
    If you sit on the patio of a Lan Kwai Fong restaurant long enough, you’ll soon enough find a pack of Mainland tourists staring at you. Try to enjoy your adult beverage while they take your picture. You can almost hear the tour guide say: “And here is the expatriate in his natural habitat.” Never felt more like I was in a zoo, but then again how can you stop them when you’ve taken so many of their pictures over the years?
    Another reason to love Hong Kong – Delifrance.

  • http://badbadchina.blogspot.com nanheyangrouchuan

    @ Paul M.
    “If you sit on the patio of a Lan Kwai Fong restaurant long enough, you’ll soon enough find a pack of Mainland tourists staring at you.”
    You got me there, but the last time I was in HK was before the, ahem, budget mainland tourists started showing up. The upper crust mainlanders (most of whom had overseas experience) blend in with every other upper cruster.
    The arrival of THOSE tourists is a variable that has probably reduced HK culturally, but probably has little to do with HK as a business city.

  • http://www.thechinagame.com Paul M

    NH – Your comment was just an opportunity to make a point about a changing characteristic of Hong Kong. One good thing about Mainland tourism is that it brought in lots of Yuan (RMB). Frequent appearance of the currency has made it possible for visitors from China to purchase things with RMB (even when the RMB and HKD were not so much in line). If attempting to pay in RMB, HK taxi drivers used to refuse, then they politely complained. Now they simply accept. The exchange rate may be sloppy, but they will do it now where they didn’t before.
    CLB’s original post mentions hotel prices. Seems that they rose sharply around the time Mainland tourists started streaming in. One hotel that was charging US$100 increased its rate to around US$200, and then there was the premium associated with an convention in town. It happened nearly overnight.
    Tourism from China has helped HK. Prior to the handover, everyone worried that the place might become irrelevant (the banks were all going to move to Shanghai – remember? – HK was supposed to turn into a ghost town. We haven’t seen the press repeat the suggestion in a long time).
    In a similar way, Mainland tourism to Taiwan will one day save the day. it’s almost too bad tourism will open up later rather than sooner. By the time they get there in any real numbers, Taipei will not look as impressive to anyone from Shanghai or Beijing.

  • http://www.chinalawblog.com China Law Blog

    Terry,
    Thanks for checking in. Not only does HK have some nature nearby, it also has Macao, which I love, but could not get to this time. I was too cheap to fly and too busy to go by ferry.

  • http://www.chinalawblog.com China Law Blog

    Paul,
    Nobody stared at me in Lan Kwai Fang. I second you on DeliFrance. I had breakfast there three days in a row.

  • http://www.chinalawblog.com China Law Blog

    nh,
    “Reduced it culturally….” Come on.

  • http://www.chinalawblog.com China Law Blog

    Paul M,
    Damn the conventions. Our first hotel wanted to raise the rate 1000 HK dollars on our last two nights due to conventions.

  • http://badbadchina.blogspot.com nanheyangrouchuan

    “Tourism from China has helped HK. Prior to the handover, everyone worried that the place might become irrelevant”
    Yeah, tourism was supposed to make up for the loss of shipping and banking. Which would you rather have as your economic backbone?

  • http://twofish.wordpress.com/ Twofish

    Don’t know anything about shipping, but the finance industry in Hong Kong is massively expanding.

  • http://www.cdrum.com Chris D

    CLB,
    Regarding Hong Kong’s pollution problem…. Show me a major city mainland that is noticeably less polluted…
    :-)

  • Diana Ishii

    Thank you for making so many nice comments on Hong Kong. Being a HongKonger, I am very proud of my city. Especially after I’ve moved from Hong Kong to KL, Malaysia, I appreciate a lot more of the city where I grew up. I miss the efficiency and the work ethic of Hong Kong people, the fast broadband, the great food, as well as the clean and efficient government. Of course, Hong Kong has its own issues but people in Hong Kong are working on them.

  • Emily

    What’s great about Hong Kong is that it is constantly surviving, constantly changing its role, and always dynamic. It’s my favorite city in the world.