Hong Kong economy surpassed by neighbour Shenzhen for first time in 2018 as China’s hi-tech hub soars
- Finance chief Paul Chan Mo-po confirmed during Wednesday’s budget economic growth in Hong Kong rose by just 3 per cent to HK$2.85 trillion last year
- Shenzhen’s gross domestic product grew by 7.6 per cent to 2.42 trillion yuan or HK$2.87 trillion based on last year’s official exchange rate
Shenzhen’s economy surpassed Hong Kong’s for the first time in 2018 after the city played an instrumental role in helping transform its neighbour and once rural backwater into China’s hi-tech hub.
Economic growth in Hong Kong rose by just 3 per cent to HK$2.85 trillion (US$363.09 billion) last year, hurt by the effects of the US-China trade war particularly in the last quarter of the year, according to the annual budget revealed by Hong Kong finance chief Paul Chan Mo-po on Wednesday.
Shenzhen’s gross domestic product (GDP) last year, announced early this month, grew by 7.6 per cent to 2.42 trillion yuan (US$361.24 billion), or HK$2.87 trillion based on the 2018 official exchange rate from Hong Kong’s Census and Statistics Department.
The southern Chinese city previously said that its GDP in 2017 was larger than Hong Kong’s, but was forced to withdraw the claim after taking into account the exchange rates.
The comparison between the two economies also showed how the hi-tech sector has become the engine driver for growth, underscoring Hong Kong’s challenge to further embrace technology, which has helped Shenzhen thrive and expand.
Hong Hao, managing director and head of research at Bocom International, said the different economic structures of the two cities would decide that Shenzhen’s economy will remain ahead of Hong Kong’s in the coming years, even though by per capita terms, it lags behind.
“Hong Kong is heavily reliant on traditional industries such as finance and real estate, which covers about 70 per cent of the economy. Shenzhen’s economy is mainly supported by manufacturing and technology, which contributes about 70 per cent,” Hong said.
He added that Hong Kong’s model has its limitations in the sustainability of growth and high housing prices, while Shenzhen’s tech-driven model can maintain its growth faster and for a longer.
“Hong Kong is used to letting the market drive where its economy is heading. But if you solely rely on the market, it will make some short-sighted decisions,” added Hong.
“The market will tilt the structure even more toward those strong sectors like finance and real estate. But sometimes the government needs to intervene and lead.”
Shenzhen’s value-added hi-tech sector was valued at 613 billion yuan (US$91.5 billion) last year, and banks on research and development to expand its economy to 2.6 trillion yuan (US$388 billion) by 2020.
It has invested more than 4 per cent of its GDP annually into research and development.
Hong Kong’s expenditure on research and development, in contrast, accounted for around 0.8 per cent of its GDP, or HK$21.28 billion (US$2.7 billion) in 2017, which is the most recently available official data.
On Wednesday, finance chief Chan said the Hong Kong government would set aside more than HK$50 billion to boost innovation and technology development.
This includes a HK$20 billion injection into the Research Endowment Fund to fund research, and the launch of a HK$2 billion Re-industrialisation Funding Scheme to help industries to upgrade.
