By Tu Haiming

The sixth session of the Shanghai-Hong Kong Cooperation Conference, held last Friday in Hong Kong, witnessed the signing of 20 cooperative agreements between entities of the two cities, encompassing sectors such as legal services, trade and commerce, finance, technology, urban development, and culture.

In his address, Chief Executive John Lee Ka-chiu said the conference marked another milestone in cooperation between the two cities, setting a clear course for future joint initiatives and further expanding bilateral cooperation across different sectors.

Looking ahead, Hong Kong will continue to leverage its distinctive advantages under the “one country, two systems” principle to enhance its partnership with Shanghai, as a way to make a greater contribution to the nation’s high-quality development. Speaking at the conference, Gong Zheng, mayor of Shanghai, noted that both cities have been pursuing high-quality development and have undertaken fruitful and pragmatic collaboration since the establishment of the cooperation framework two decades ago.

In terms of finance, economy, trade, science and technology, and culture, Shanghai and Hong Kong have their own unique features. Thus, there is huge potential for cooperation and collaboration between the two cities, which is a major part of overall Hong Kong-mainland cooperation.

Shanghai and Hong Kong are “twin engines” in national development. Cooperation between the two cities can create strong synergy. This is why the central government has consistently supported their collaboration, and is a strong driving force behind their cooperation.

The collaboration between the two cities is premised on the complementarity of their strengths, which creates a win-win situation. Shanghai and Hong Kong can strengthen bilateral cooperation by capitalizing on their synergistic advantages in the following three domains:

First, although both cities are financial centers, they are not pure competitors; rather they cooperate and compete simultaneously. Hong Kong boasts an open financial system with full currency convertibility and free flow of capital. The Hong Kong dollar is pegged to the US dollar through a linked exchange rate system, which greatly appeals to foreign investors. The Chinese mainland, by contrast, enforces stringent financial regulations; as a result, foreign investors are more cautious about venturing into the mainland market. The inception of the Shanghai-Hong Kong Stock Connect in 2014 established a bidirectional financial conduit between the two markets. It can be likened to installing a pipeline equipped with valves between the mainland and international markets, which not only invigorates capital flows between the Chinese mainland and Hong Kong but also effectively safeguards against financial risks to the mainland financial system.

Dovetailing with national development is a broad subject that requires multiple approaches and means; and cooperation between Hong Kong and Shanghai is one of the major starting points, from where collaboration and cooperation between Hong Kong and the mainland can expand indefinitely to the benefit of both Hong Kong’s and national development

By the end of 2023, northbound transactions via the stock connect had benefited the mainland stock market with a net inflow of more than 900 billion yuan ($124 billion), whereas southbound transactions had contributed over 1.5 trillion yuan net capital inflow to the Hong Kong stock market, a win-win for both places. The China Securities Regulatory Commission recently released five measures aimed at enhancing capital market cooperation with Hong Kong, including optimizing the arrangements for the Shanghai and Shenzhen stock connects along with supporting leading mainland enterprises to get listed on the Hong Kong stock exchange. This is expected to usher in new opportunities for financial collaboration between Shanghai and Hong Kong.

Second, Hong Kong’s and Shanghai’s economic and trade sectors each possess unique strengths that complement each other. Shanghai’s advantages lie in its status as the lead engine of the Yangtze River Delta, with influence stretching across the entire region. This is a feature that Hong Kong enterprises value highly. On the other hand, Hong Kong’s strength as a trading hub provides easy access to the international market, conveniently befitting the needs of mainland enterprises. Such complementarity has enabled economic and trade collaboration between Shanghai and Hong Kong to grow significantly since the signing of the Closer Economic Partnership Arrangement in 2003. Last year, for example, the total trade volume between the two cities reached 164.11 billion yuan, up by 17.6 percent year-on-year; 1,697 Hong Kong enterprises established their presence in Shanghai, or a surge of 23 percent from the year before, with a total investment of $17.42 billion. Last year, 313 Hong Kong firms participated in the sixth China International Import Expo, occupying an exhibition area of nearly 54,000 square meters, the second-largest exhibiting zone.

Third, the combination of Hong Kong’s research and development capacity and Shanghai’s production capacity will unleash significant development potential and synergy. Although Hong Kong possesses distinguished scientific research capabilities in multiple areas, commercializing laboratory achievements is proving to be arduous. Shanghai and its adjacent Yangtze River Delta have a competitive edge in high-end manufacturing, demonstrating robust capabilities in transforming scientific findings into production. Cooperation between Shanghai and Hong Kong will create a multiplier effect in terms of strengths and synergy. Last Friday, the Administrative Committee of Lingang New Zone, the Lingang Group, and the Centre of Hong Kong Quantum AI Lab signed a memorandum of cooperation, signaling the commencement of a partnership in the digitization of renewable energy. At the 2024 Shanghai-Hong Kong Entrepreneurs Roundtable on April 27, 14 enterprises from Shanghai and Hong Kong signed memorandums of cooperation in areas such as artificial intelligence, biomedicine, digital economy and the low-altitude economy. These memorandums indicate that there is substantial room for collaboration between the two cities. Moving forward, the next step could involve the creation of a big data platform serving both regions, enhanced collaboration in the big data industry, and promoting the development of digital economy and smart cities.

With a broader vision, we will discover more industries in which Shanghai and Hong Kong can collaborate and cooperate. The differences between the two cities under “two systems” offer vast cooperative opportunities.

When Xia Baolong, director of the Hong Kong and Macao Work Office of the Communist Party of China Central Committee, was addressing the opening ceremony of the National Security Education Day on April 15, he again emphasized the need for Hong Kong to better integrate into national development for the sake of the city’s long-term prosperity, noting that integration with national development is essential to integrating into the global economy and allowing Hong Kong to multiply its unique advantages and strengths.

Dovetailing with national development is a broad subject that requires multiple approaches and means; and cooperation between Hong Kong and Shanghai is one of the major starting points, from where collaboration and cooperation between Hong Kong and the mainland can expand indefinitely to the benefit of both Hong Kong’s and national development.

The author is vice-chairman of the Committee on Liaison with Hong Kong, Macao, Taiwan and Overseas Chinese of the National Committee of the Chinese People’s Political Consultative Conference, and chairman of the Hong Kong New Era Development Thinktank. The views do not necessarily reflect those of Bauhinia Magazine.

Source: China Daily