Hong Kong in the Shadow of China by Richard C. Bush

Author:Richard C. Bush
Language: eng
Format: epub
Publisher: Brookings Institution Press

Regina Ip makes the interesting observation that whereas the most advanced countries engage in “original innovation, China excels at making use of secondary innovation to stimulate economic growth.” Hong Kong, she says, needs its own approach, presumably somewhere in between.38

Some in Hong Kong point to cultural or psychological factors impeding the greater role for innovation in the economy. Peter Guy, a financial journalist, has written that Hong Kong business has cultivated a conservative culture that depresses a willingness to take risks. Such a culture leads to a “steep learning curve [when it comes to] fostering innovation and entrepreneurship.” What is needed, he says, is “a core brain trust” that fosters the sharing of experience, both positive and negative. Many of the areas cited by the WEF as Hong Kong’s relative weaknesses for innovation stem from government policies. Ron Hui Shu-yuen stresses that innovation is hard if students in universities, from which start-up talent often emerges, do not have “the ability to think freely.”39

The entrepreneur Rex Sham Pui-sum, who had two start-up failures before he succeeded in building a successful robotics firm, agrees on the importance of an innovation culture and mind-set. “Hong Kong lacked an acceptance of failure” and an environment to “confront and discuss” projects that did not succeed.40 But Sham also understands that as important as culture is, institutions and policies have a greater impact than culture on cultivating innovation. “Hong Kong’s high rents, combined with relatively fewer opportunities compared to the 1980s and 1990s, and a plateauing economy, posed challenges for young people—the city’s most well-educated generation.”41 For example, the Federation of Hong Kong Industries asked its members with operations in Guangdong’s Pearl River Delta about the option of moving their R&D activities back to Hong Kong. Twelve of the 641 respondents had such plans, but they did not follow through because “the lack of land and high operating costs make it difficult.”42

The best illustration of the limitations of Hong Kong’s business environment for high-tech manufacturing is the Chinese company DJI—it’s the “one that got away.” In 2015 DJI sold more civilian drones worldwide than any other company. It was founded by Frank Wang Tao, who grew up in Shenzhen but graduated from Hong Kong University of Science and Technology, and wanted to start his company in Hong Kong. But, wrote George Chen in the South China Morning Post, “Wang’s efforts went nowhere, due partly to a lack of funding, lack of government policy support and other operational issues in the city.” Big banks would not lend him money in the early days. Also, mainlanders who graduate from a Hong Kong university cannot work in the Hong Kong SAR for more than a year without an employer’s sponsorship and have difficulties registering a company or getting a bank account. Unable to surmount these obstacles, Wang relocated across the border in Shenzhen, and the rest is history.43 Eden Woon Yi-teng, a vice-president at Hong Kong University of Science and Technology, offers a number of specific suggestions for creating

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