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Thread: Document: Shanghai-YangZi River Delta vs. HongKong-Pearl River Delta

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[quote=GUEST97164,471394]Shanghai is likely to become like Tokyo or perhaps New York, whereas, Hong Kong is increasingly more similar to London. The two centers basically complement each other more than being competitors. Technically, one can describe the difference between an “international financial center” (onshore) and a “global financial center” (offshore). Even when China opens up capital account convertibility for the RMB, there will be more than enough room for both cities to prosper as Shanghai or HK alone would not have the capacity to become both onshore and offshore. In addition, they have their own unique competitive advantages that are insurmountable.

If we take Tokyo, for example, it is primary a market place for domestic participants to which foreign players are granted access to Japan. With London, it is characterized by foreigners trading with each other. With New York, it has both largely because the importance of the USD and the US economy, but it is really much more domestic driven (a byproduct of the sheer size of the US domestic market).

Hong Kong is moving towards the London model (offshore, a platform to coordinate regional/global activities as well as being a springboard for Chinese companies to expand overseas). It is gaining significant scale with its integration into the rest of the Pearl River Delta. This basically fortifies Hong Kong as the offshore center given the region’s leading role in trade. In addition to Hong Kong's advantage with its "software" (international recognized legal, accounting and regulatory framework as well as liberal media), as a former British colony, Hong Kong is inherently more outward looking and more cosmopolitan. The official use of both English and Chinese in the business community also gives it a unique edge as an offshore center. These are attributes that Shanghai cannot replicate. Shanghai’s advantages are geography, size and mainland Chinese business practice, giving it natural access to the rest of China. It is also aggressive and savvy, but in its own unique way. Shanghai will end up being more like Tokyo and perhaps New York, (onshore, the key platform for companies to coordinate their activities within China). Shanghai will continue to be bigger, in terms of both population and the size of its financial markets. Just like New York and Tokyo are larger than London, but the latter being more global.

Basically each has its own unique characteristics. Over the coming years, it should become clear that London and Hong Kong are global financial centers that dominate offshore activities. The likes of Tokyo, Shanghai, Paris and Frankfurt are onshore international financial centers for their respective economies. New York falls somewhere in between, but really more domestic onshore driven. Singapore and Switzerland are the leading centers for private banking and wealth management.

http://www.theatlanticcities.com/politics/2012/06/one-mega-city-many-systems-evolution-hong-kong/2335/

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