As Hong Kong continues to explore ways to maintain its competitive edge as an international business and financial hub, the government has pledged to give ‘full play’ support to the next era of economic growth by establishing the special administrative region as China’s international innovation and technology (I&T) centre.
John Lee Ka-chiu, who became Hong Kong’s new chief executive on 1 July, has undertaken to place more emphasis on the ‘development of Hong Kong into an international innovation and technology hub’ as part of his ‘starting a new chapter’ slogan. While the news is hardly headline-grabbing considering the government has poured more than HK$150bn (US$19bn) into the I&T sector over the past five years, the intent has been ratcheted up several notches by an endorsement from President Xi Jinping.
Large sums are being channelled towards biomedicine research, engineering, big data and artificial intelligence
International hub
During his two-day visit to Hong Kong to mark the 25th anniversary of the creation of the Hong Kong Special Administrative Region, President Xi Jinping told scientists and researchers that he envisages Hong Kong as China’s international I&T hub. This vision has been enthusiastically interpreted as being ‘monumental’ and ‘a shot in the arm for Hong Kong’s I&T development’ schemes as well providing a welcome opportunity for economic diversification.
The innovation and technology initiative is being stepped up at a time when Hong Kong’s economy has contracted for two consecutive quarters year on year. That meets the technical definition of a recession for the second time since the initial impact of the Covid-19 pandemic in 2020.
To cement Hong Kong’s status as China’s international I&T hub, funding has been earmarked for developing infrastructure, promoting research and development, pooling talent, supporting enterprises and promoting reindustrialisation. In particular, large sums are being channelled towards biomedicine research, engineering, big data and artificial intelligence. The intention is to benefit areas such as diagnosis and prevention, drug discovery, advanced treatment and rehabilitation.
While Hong Kong’s success in areas such as biotechnology, drone technology and digital health has been encouraging, even with strong government support, it still has work to do. According to experts familiar with the sector, ensuring Hong Kong is on track to become China’s I&T hub will require I&T activities to more than treble in size and the workforce to expand by thousands.
Nasdaq equivalent
There is also the issue of raising capital for startup enterprises. Currently Hong Kong is home to about 3,800 startups, according to the 2021 Invest Hong Kong Startup Survey. The majority are focused on growth industries such as fintech, e-commerce, logistics and supply chain technology, as well as data analytics, edtech, healthtech and green technologies.
To tap into the IPO potential of local, mainland China and international tech startups, the Chamber of Hong Kong Listed Companies (CHKLC) advocates setting up a Nasdaq-style board with listing requirements different from the main board of the Hong Kong stock exchange. Nasdaq uses revenue multiples instead of profitability to measure a business’s listing eligibility, and the CHKLC believes a Hong Kong equivalent could also create an alternative set of eligibility criteria that more accurately reflects the potential of tech companies.
An additional silver lining could be demand for flow-on services such as accounting
At present, a three-year aggregate profit of not less than HK$80m (US$10.2m) and a capitalisation of HK$500m is required for an enterprise to list on the main board of Hong Kong’s stock exchange. As well as benefitting startups and the investment community, the CHKLC believes that a welcoming fundraising environment could encourage more tech companies to set up offices and undertake R&D in Hong Kong or the Greater Bay Area (GBA), creating more job opportunities. An additional silver lining for Hong Kong could include demand for flow-on services such as accounting and legal advice.
Locals will be aware that every few decades Hong Kong successfully transforms itself. The question being asked by many is: is I&T going to be one of those transformations?
