China12: Hong Kong – A Unique Competitive Position
As China's economy and society enter a "new era" of innovation, internationalisation and global influence, these 12 cities are at the forefront of this movement and are set to become drivers of change, extending their influence and forging ever-deeper linkages abroad.
HONG KONG, May 8, 2018 – JLL has lately published its research report on China, discussing the country's leading cities – the China12 – on their transformation into major hubs of innovation, global interaction and influence. The report also highlights Hong Kong's unique position in the network of Chinese cities, in particular its relationship with the China12 cities as a super-connector with the world. Additionally, Hong Kong is well-positioned to play a key role in the "Belt and Road Initiative" as put forth by the Chinese central government. Entitled China12: China's Cities Go Global, the report is the fifth volume of the China Cities series, in which JLL has charted the rise and development of China's key urban cities over the last 10 years.
As China's economy and society enter a "new era" of innovation, internationalisation and global influence, the China12 cities, namely Beijing, Shanghai, Shenzhen, Hangzhou, Guangzhou, Xi'an, Nanjing, Wuhan, Tianjian, Chengdu, Suzhou and Chonging, are at the forefront of this movement and are set to become drivers of change, extending their influence and forging ever-deeper linkages abroad.
Hong Kong - A Global Super-Connector
In this regard, Hong Kong has remained uniquely globally-oriented within China's system of cities. The Special Autonomous Region continues to act as a linking point between mainland China and the world. The 'One Country, Two Systems' framework has allowed Hong Kong to act as a transparent and business-friendly gateway, not just for China but across Asia Pacific and globally. Due to these strengths, Hong Kong is firmly positioned among the 'Big Seven' most globalised cities, alongside London, New York, Paris, Tokyo, Singapore and Seoul.
As one of the global "Big Seven" cities, Hong Kong plays a key connecting role between mainland China and the rest of the world. The report points out that mainland firms have become a driving force in lifting occupational demand, with a huge appetite for real estate in the city these recent years. In terms of total leasing volumes in Central district, market statistics show that office leasing by mainland Chinese firms registered a sharp increase to 48% in 2017 from 18% in 2011.
Moreover, Hong Kong is a major location for firms to raise capital overseas. This has helped Hong Kong maintain its status as a leading global financial centre, and it firmly sits among the "Big Seven" most globally connected cities with the deepest concentrations of international capital, business and people.
Meanwhile, the Belt and Road Initiative also offers Hong Kong another opportunity to build on its gateway function, by leveraging its financial services strengths in terms of financing, RMB internationalisation and risk management.
Joseph Tsang, Managing Director at JLL in Hong Kong, says: "Hong Kong holds a peculiar position in the city network of China and in this 'new era' of change. As one of the 'Big Seven' cities in the world, Hong Kong's strengths as a super-connector, its critical mass of business functions and its attractive business operating environment will continue to secure the city's position among the top city group."
"With the Belt and Road Initiative emerging as a key tenet of Ching's future development, Hong Kong, being a leading global financial centre, is also expected to benefit from the growing demand for its broad-ranging expertise in financial and professional services to support the roll-out of the Initiative, acting as connection points and facilitators between China, western firms and 'Belt and Road' countries."
Having said that, there still are factors that may comprise Hong Kong's position in the world order of cities. Among which, high costs for both residential and commercial space are a concern. JLL's Premium Office Rent Tracker shows that occupancy costs for premium space in Central district are two-thirds higher than its nearest rivals of New York and London. Geographical constraints stand as a longer-term problem that cannot be easily solved.
Despite the fact that increasing integration and connectivity within the Greater Bay Area may ease supply pressures, but there will remain frictions in terms of flows of people and capital due to Hong Kong's unique status. As a consequence, Hong Kong is unable to fully leverage its position as the natural hub for a megaregion of over 70 million people with a US$1.6 trillion economy.
Furthermore, what is worth noting is that while Hong Kong's business operating conditions, market transparency, environmental quality and cultural offer mark it out as possibly China's most attractive city, the city is at risk of falling behind for innovation. As the global economy evolves, even the most traditional sectors, in which Hong Kong's main strengths lie, will be under pressure to innovate and digitise.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 90,000 as of December 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com