Mainland means a lot for HK
Updated: 2013-04-24 05:22
By Thomas Chan(HK Edition)
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If food stopped coming at low cost from the mainland to Hong Kong, there would be food price inflation. To replace freshwater from Dongguan, Hong Kong would have to build more reservoirs and water desalination plants on limited available land which would cause water bills to rise.
Hong Kong currently receives a substantial portion of its electricity from a nuclear plant across the border in Guangdong. The cause for local air pollution comes mainly from the inefficiency of local coal-firing power plants. If the supply of electricity or natural gas from the mainland were stopped, electricity bills in Hong Kong would rise further from the existing high levels, and the health-hazardous air pollution could only be worsened.
Half of all current retail sales in Hong Kong are a result of purchasing power from the mainland, which helps to provide employment for the predominately low-skilled labor force in the city. The near full employment that Hong Kong enjoys now has not only contributed to local economic growth through income and consumption. It is also the economic foundation for local social and political stability. Labor shortages from full employment create pressure for local industrial upgrading and innovation. If mainland tourists stop coming to Hong Kong, there would be a domino effect on local services. Hotels, restaurants, travel agencies, and even luxury shops in the shopping malls will be half-emptied, and there will be a massive layoff of employees. The chain-reaction will not stop at tourism-related services, but be amplified in the entire economy; it will cause an immediate recession and serious erosion of economic confidence.
Although it is illegal, mainland demand has helped to sustain sales of insurance and other financial service products in the saturated market of Hong Kong. Before the clampdown by the government, the local property market had also been lifted by mainland demand and the faith that more mainland demand was in the offing.
Local private hospitals were boosted by the massive influx of pregnant mainland women for delivery in Hong Kong. The rigid ban imposed by the government practically emptied the wards in private hospitals, whose fortunes may come down from boom to bust if similar bans were to be extended to other mainland patients seeking local medical services.
Even local tertiary education relies on outstanding students from the mainland. From 10 percent to 20 percent the quotas in local universities are filled by the best performing mainland students. Their impact on the local students' study environment is beyond measurement. They set good examples of hard work and enhance competition for excellence in the student population. The majority of local postgraduate students are also from the mainland. They provide strong support to research at local universities.
If the mainland restricts border crossings, the quarter of a million Hong Kong residents working on the mainland will either lose their jobs or have to permanently relocate to the mainland, vacating their homes in Hong Kong. The daily flow of more than 400,000 persons across the border will cease, causing redundancy of all cross-border transport services, and related services catering to the needs of cross-border travelers.
As Hong Kong has now had re-exports mainly to and from the mainland larger than its GDP, once Hong Kong is segregated from the mainland, its port, shipping, logistics and business services will be more than half closed down. Even the world No 1 freight volume of the Hong Kong International Airport will shrink beyond imagination. As transport and logistics are sectors of increasing returns for the economy, the shrinkage will have disproportionately large damage. If the ports and airport businesses slide, the overall economic competitiveness of the free-trade port will also be vastly evaporated. The service economy depends directly and indirectly on the free trade of products and services. Without the mainland factor, which has become the foundation of the free-trade activities of Hong Kong, the very essence of Hong Kong prosperity will be destroyed.
Hong Kong is a society of immigrants: people immigrate and emigrate. In past decades, there has been mass out-migration, which has been compensated by even larger scale mass immigration from the mainland. Another drastic economic downturn, if sustained over a period, will definitely trigger another round of mass-emigration. Without immigrants from the mainland, Hong Kong's population will drop and aging of the society will leave more elders in poverty. Without new immigrants, the world renowned entrepreneurial spirit of Hong Kong will dry up.
Would the above scenarios happen in Hong Kong? People bet the central government in Beijing will treasure Hong Kong and would not abandon it. But when Hong Kong has openly become hostile to the central government and issued all kinds of anti-integration proposals, would the central government continue to be accommodative and tolerating?
Even if the central government would not give up Hong Kong, the above scenarios would still happen, if an epidemic broke out and is worse than the last outbreak of SARS.
Integration and links with the mainland is the bloodline for Hong Kong's economy and society.
Everybody should be sober about it.
The author is head of the China Business Center, Hong Kong Polytechnic University.
(HK Edition 04/24/2013 page1)