Slowing trade and high labour costs is dragging Hong Kong’s competitiveness.
Hong Kong’s economic dominance may be soon coming to an end as the region is poised to be overtaken by Shenzen in terms of economic size by 2018 due to its declining competitiveness in trade, according to BMI Research.
Hong Kong’s high terminal handling fees and insufficient application of automation to its ports is causing it to fall from grace as one of the leading ports for the Pearl River Delta region in the coming years.
“In contrast, Shenzen is transforming itself by shifting away from its dependence on the export sector towards its next phase of development in technology and innovation, which will enable it to continue to outperform Hong Kong and China’s national growth rate over the coming years,” BMI added.
Shenzen’s focus on the information technology is poised to narrow the GDP per capital gap between the two with data from BMI Research estimating that GDP per capital of Hong Kong versus Shenzen has fallen to 1.7x in 2016 from a peak of 11.4x in 1994.
The tier 1 Chinese city houses big technological giants like Tencent and Huawei.
Although Hong Kong is gradually losing competitiveness to its Mainland neighbors, BMI notes that its long-term growth prospects remain positive largely due to its robust financial sector that connects investors to the wide Chinese market.
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