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Opinion | Late to the game, Hong Kong’s big splash on tech must pay off
- Forced now to diversify its economy, Hong Kong is moving forward on giving its industrial base the talent, land and funding that it needs
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National industrial strategies, the subject of intense study and debates in the 1980s in the wake of the phenomenal success of Japan’s industrial economy, have returned to the centre stage of global attention. Much of this stems from the fact that two of the world’s largest economies, the US and China, have focused more on industrial policy.
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In August 2022, US President Joe Biden signed into law two pieces of legislation, the Chips and Science Act and the Inflation Reduction Act, which provided billions of dollars of subsidies, loans and tax incentives to revitalise American semiconductor manufacturing and accelerate the country’s green transition.
China has been agonising over the need to enhance productivity, and hence the profit earned from every piece of good produced, ever since it became a manufacturing powerhouse. Why not earn more by making your own smartphones than by making or assembling parts for Apple’s smartphones? China has long strived to move up the technology ladder to generate more socio-economic benefits as well as strengthen national security.
The adoption of “new quality productive forces” has become the centrepiece of China’s economic credo ever since Chinese President Xi Jinping started touting it as the locomotive of high-quality growth in September 2023. The goals are to promote the development of “strategic industries” and the “industries of the future”. In pursuit of these goals, China put together its largest ever investment fund amounting to US$47.5 billion to support the semiconductor industry.
Hong Kong had few incentives to invest in technology or selected industrial sectors when its free-market economic model built upon free trade was working well. But a major shock came during the 1997 Asian financial crisis. By that time, after Hong Kong’s light manufacturing industries had migrated to mainland China, the city had become a predominantly service-oriented economy. When local consumption and regional demand for Hong Kong’s services cratered, the economy nosedived into a recession.
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Beijing came to Hong Kong’s rescue in 2003 by sending the city waves of visitors and quality enterprises from the mainland for listing on Hong Kong’s stock exchange. Mainland China enjoyed a prolonged period of unbroken, high-speed growth after joining the World Trade Organization in 2001. Riding on the surge of service demand from the Chinese mainland’s newly prosperous society, there was arguably no need for Hong Kong to relearn how to make anything.
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