Generation 40s – 四十世代

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Four challenges ‘Greater Bay Area’ planners must overcome to ensure success

CommentInsight & Opinion

Feng Da Hsuan and Liang Hai Ming highlight some issues for planners to consider for the Greater Bay Area, including how to tackle the complexities of the massive project, attract talent and prevent a brain drain in smaller cities, and ensure a safety net for failure

The release of a “Greater Bay Area” development plan for linking Hong Kong and Macau with nine cities in Guangdong province is expected to be released early this year. The plan may be a sign of China’s ascent, but this area will be starkly different from, for example, the San Francisco, New York and Tokyo bay areas. While it is all within one nation, it also links two “systems”, three currencies and multiple cities. This makes the plan highly convoluted, and such complexity could pose far more challenges than those found in other bay areas.

Here are four potential issues. First, because the Greater Bay Area consists of cities in Guangdong province, plus Hong Kong and Macau, any kind of amalgamation will be one of multiplicities, rather than natural affinities, and this could mean additional obstacles to the flow of talent, finance, logistics, information and so on.

It has been suggested that the euro-zone experience could provide a good lesson where, to coordinate nations of vast differences as seamlessly as possible, it was necessary to jointly organise and empower a “coordination team” to overcome the difficulties. Indeed, having such a team, at least in principle, should lead to greater affinities. This is why a single currency, the euro, and a single political system known as the European Parliament were established.

One obvious difficulty that the euro zone faced is that the economically weaker nations within it, such as Greece and Portugal, raised their debt levels greatly while under the euro-zone protection umbrella. The actions of these nations resulted in a series of debt crises which led to doubts about the sustainability of the euro zone, roiling financial markets, including those outside Europe. The European debt crisis and Brexit, plus the drama of potential exits by Greece and the Netherlands, have been directly or indirectly due to such actions.

These nations have chosen to leave, or have considered leaving, the euro zone so they can individually decide on exchange rates in order to increase exports and promote economic development. How to overcome or prevent the same fate in the Greater Bay Area is something that needs to be addressed upfront.

Also, the Greater Bay Area may not be able to attract talent within China and worldwide for sustainable development. It will take much more than just money and new projects to make the area a global centre of technological innovation, advanced manufacturing and maritime, finance and trade; what is needed is talent across the board and a global mindset.

There are two main issues to address in this respect. The first is to understand that the vision and ideas of foreign talent, especially people from Europe and North America, are quite different from those in China. Besides requiring high-paying jobs, comfortable living conditions and a pleasant working environment, these people also want a clear project mission, a step-by-step plan and well-designed project funding.

Unfortunately, this is the opposite of how Chinese operate. Generally speaking, while Chinese may have an initial grand vision, they tend to “plan along the way” rather than long-term and without already designated funds. The leadership of this grand development scheme will need great wisdom to bridge the gap.

Second, in euro-zone nations, due to workers’ low wages in the “have-not” nations, talent and indigenous finance tend to flow naturally toward the “haves”, causing a downward spiral for the others, making them even poorer. A similar situation may occur in the Greater Bay Area, where talent in cities outside Guangzhou, Hong Kong and Macau could flow towards those three. This could force such cities to institute favourable policies to retain indigenous talent, which could widen the gap between rich and poor in those cities, resulting in social instability.

The Greater Bay Area could also affect the surrounding regions. Developing the bay area could have a beneficial effect on surrounding, less-developed areas. However, an undesirable “echo effect” may occur; that is, production in those areas could flow back into the Greater Bay Area because of the emphasis on its development, causing the surrounding regions to suffer a loss of resources and production.

Finally, to become a truly successful world-class technological region, there must be a safety net for failure.

Across the world, whether in science, technology or entrepreneurship, failure is the norm and success the exception. If a region allows innovators to fail without a safety net to allow them to rebound, it will not only destroy innovation but also the innovative spirit. This safety net could be in the form of the protection of company dissolution, bank arrears as well as tax burdens. In the United States, San Diego is a successful biotech innovation centre, and one reason for its success is its robust safety net.

It is also important to underscore that the Greater Bay Area will not be the sole new innovation centre in China. Without a safety net, those who want to and are able to rebound may be attracted to other centres. It must be remembered that failure is not forever. After all, innovators who are willing to try again probably have enough energy, creativity and wisdom to succeed in the future.

It is our earnest hope that the Greater Bay Area development plan will address some or all of the challenges mentioned here.

We firmly believe that the designers have the wisdom, experience and vision to create a successful Greater Bay Area with Chinese characteristics, and propel it into the ranks of world-class bay areas internationally.

Feng Da Hsuan is senior adviser of the China Silk Road iValley Research Institute. Liang Hai Ming is chairman and chief economist of the institute


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Hong Kong will embrace mobile payments – eventually

CommentInsight & Opinion

Ken Chu says it will take time for Hongkongers to adapt to using mobile phones to pay for goods and services, as they need to overcome the habit of using the Octopus card, as well as security concerns


I often hear people deplore that Hong Kong is lagging so far behind mainland China in technology because mobile payments like Alipay and WeChat Pay are not widely available. More accurately, Hong Kong has just started to play catch-up in mobile payments.

To be fair, Hong Kong is not an innovation and technology backwater. It may be true that we do not have a robust innovation and technology industry and market, or giant e-commerce and tech companies. But, as far as innovation, science and technology are concerned, we do quite well.

Indeed, our universities, two of which are among the top 50 in the world, often achieve groundbreaking discoveries in scientific research projects. Sadly, ordinary folks are unaware of them.

Hong Kong is also among the top innovation start-up hubs globally, according to a world-leading US research group. The issue here, then, is not so much whether Hong Kong is lagging behind in innovation and technology but how quickly mobile payments can dominate the consumer market.

Secretary for Commerce and Economic Development Edward Yau Tang-wah attributed our attitude to mobile payments to our successful Octopus card.

Launched in 1997, the Octopus card was hailed as a pioneer in contactless, cashless payment methods. Over the years, Hongkongers became accustomed to using the card to pay public transport fares, buy goods at supermarkets and pay at fast-food stores. It is also easy to top up the value of the card at any convenience store in the city. Old habits die hard, and it will take time and incentives to get people to change.

Decades ago, “Don’t leave home without it” was a popular advertising slogan for a credit card commercial, summarising the usefulness of such a card. Today, smartphones have acquired the same status and become a daily necessity. In mainland China, it is even said that it wouldn’t be a problem to leave a wallet at home but one absolutely cannot leave home without a mobile phone; they can be used to buy almost anything, anywhere in the country. The ubiquity of mobile phones provides fertile ground for the growth of the mobile payment market.

Hong Kong boasts one of the highest mobile phone penetration rates in the world, yet its mobile payment market is still in its infancy. One reason often cited is security; in fact, the secretary for innovation and technology once said in a radio interview that he preferred an Octopus card to any e-wallet because of the security risk. However, stored-value smart cards like Octopus are not as convenient and versatile as most mobile payment apps and methods. With the latter, there’s no need to carry a card; instead, just use an enabled mobile phone to make the payment.

There is another challenge to the growth of the mobile payment market in Hong Kong: privacy concerns. Some people shudder at the idea that an electronic mobile payment service provider can learn when and where a user has made a purchase or transaction, as well as what they bought.

The mobile revolution is sweeping the globe because of its tremendous convenience. A thriving mobile payment market will surely empower the fintech industry. If Hong Kong is to hang on to its status as an international financial centre and innovation hub, the city must embrace mobile payment technology, to bring benefits to the government, economy and individuals. For the government, tax evasion and money laundering can be largely eliminated. For businesses, a more attractive and effective consumer incentive scheme can be structured to expand its market share. And, for individual consumers, convenience is the biggest benefit.

It will take time for Hong Kong consumers to truly appreciate the convenience of mobile payment apps but I am confident that the scheme will soon be widely adopted in the city; after all, Hongkongers are highly receptive to new things.

Dr Ken Chu is group chairman and CEO of the Mission Hills Group and a National Committee member of the Chinese People’s Political Consultative Conference

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Cashless societies seem convenient, but Hong Kong should think it through first

CommentInsight & Opinion

Peter Kammerer says we need a debate over going cashless, which benefits shoppers, stores and governments, but also has some worrisome implications for privacy, individual financial security and also government debt

Fintech Week in Hong Kong may not seem the right occasion to raise questions about rushing headlong into a cashless future. But there are as many downsides for all the benefits of ditching banknotes and coins. They involve privacy, choice, security and, for financially troubled governments, survival. As much as we should embrace a hi-tech way of life, there’s also a need to debate what’s best.

Not being able to see makes me a natural convert to electronic payments. Give me an app or a card over a handful of notes of uncertain denomination any day. The Octopus card was a blessing when introduced in 1997 and the day of the shop that Amazon envisages, with no checkouts and apps linked to bank accounts, and where sensors deal with transactions, can’t come soon enough for some of us.

Tech giants like Alibaba and Apple see their apps driving such a future and a visit to the mainland or Sweden, where cash accounts for 2 per cent of transactions, shows just how willing some are to embrace the idea. Try to use cash in some Shenzhen restaurants and you’ll get a worried frown; some no longer accept it. It’s all about convenience and there is a concerted push for Hong Kong to follow, in order to – as Jack Ma, the founder of Alibaba, said recently – be “more fashionable, modern and efficient”. (Alibaba owns The South China Morning Post). Hong Kong’s government has embarked on a course of promoting innovation, science and technology.

Credit card companies, and now those involved in electronic payment systems, portray cash as backward and inefficient. It’s difficult to argue against industries that aim to make life easier and create jobs. But as the cashless supermarkets Amazon is trying out in the US show, it’s as much about job creation as making jobs redundant.

Governments may see such losses as inevitable or negligible when compared to the advantages. Going cashless eradicates money-laundering. Their most effective tools to crack down at present are resource-heavy monitoring of currency and bank accounts or scrapping the high-denomination banknotes criminals favour. They can also track transactions by having access to records and more easily shut down money supplies, as in Uganda in February last year to keep funds out of the hands of the opposition during elections.

It’s why the Swiss have been so worried about the introduction of an equivalent of the Octopus card for trains; they fear authorities will spy on their travel patterns. Many shops in Switzerland also prefer cash to credit cards and there have even been pushes by lawmakers to make the use of banknotes and coins permanent, the thinking being, as Swiss people’s party member Manuel Brandenberg put it to Bloomberg last year, “cash is property and cash is freedom. It empowers the individual because it’s tangible wealth.”

There’s another matter that the wealthy Swiss government doesn’t have to worry about, but others may fear; a cashless society will prevent a government from printing banknotes to get out of debt or induce inflation. Robust security systems are also needed to lock hackers out.

A printer watches over a press printing US$1 bills at the Bureau of Engraving and Printing in March 2015, in Washington, DC. One side-effect of going cashless would be that governments could not print money to get out of debt or devalue currency. Photo: AFP

Such discussions aren’t taking place on the mainland in the scramble to be modern. Nor have we heard much in Hong Kong, although the idea that cash is king also has firm adherents here, as in Japan, where credit card use is low, too.

That reticence is still seen at bank counters, among taxi drivers who prefer tips in cash and in the surprising number of shops and restaurants that demand cash only. Such restraint offers hope for those worried about the drive to go cashless, and space for a much-needed debate of the issues.

Peter Kammerer is a senior writer at the Post

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How Hong Kong can maintain a competitive edge in fintech development

CommentInsight & Opinion
Kenny Shui and Jonathan Ng say Hong Kong should learn from Singapore, Australia and elsewhere to create a more helpful regulatory environment for foreign and start-up financial technology developers

Hong Kong is a well-known international financial centre, and financial technology is one of the major trends affecting the global financial community. Two weeks ago, the Hong Kong Monetary Authority outlined a plan to launch an enhanced fintech supervisory sandbox this year. It’s clear the government is taking fintech seriously.

The HKMA’s sandbox, along with the Securities and Futures Commission’s and the Insurance Authority’s new sandboxes are all examples of a “safe place” for fintech entities to test products in a restricted environment without the usual regulatory consequence of pilot activities.

We recently presented an advocacy study highlighting four aspects of the existing fintech supervisory sandbox that could be improved: collaboration, inclusivity, facilitation and scalability. It is encouraging to see that the HKMA’s enhanced sandbox reflects our considerations in at least three areas, but we still believe improvements can be made.

The first aspect is in collaboration. Plans to link the SFC’s and Insurance Authority’s new regulatory sandboxes with that of the HKMA, creating a single point of entry for cross-sector fintech, is welcome.

But because Hong Kong has separate regulators, time and effort may still be needed to assess the viability of linking the three sandboxes. Thus, the government should consider a new administrative office, perhaps under the existing Financial Stability Committee. This would allow multiple inputs from different regulators, so the administrative office could ensure cross-sector regulatory procedures are more streamlined and efficient.

Second is inclusivity. We appreciate that the HKMA is taking the needs of fintech firms into account, establishing a “fintech supervisory chat room” to provide direct feedback, but they still need to collaborate with banks to participate in the fintech supervisory sandbox. Sandboxes in jurisdictions such as Australia, Singapore and the UK are even accessible for fintech start-ups.

Therefore, a more inclusive approach for fintech start-ups should be considered. The administrative office should grant eligible start-ups up to 24 months for product testing.

The third aspect is facilitation. While the plan to set up a single point of entry to facilitate cross-sector fintech product testing is welcome, further improvements are possible. More specifically, there is no single point of contact in Hong Kong to assist overseas fintech companies in obtaining operating licences.

Take as an example Lufax, one of China’s largest internet finance platforms, which chose Singapore over Hong Kong to set up its first overseas platform. The decision can be attributed to the fact that Singapore has a single regulator to deal with, while Hong Kong’s various regulators made the licensing process more time-consuming.

Hence, the new administrative office should act as a one-stop shop to assist large and overseas fintech companies get the appropriate licences by dealing with the different regulatory bodies if they want to establish a platform in Hong Kong.

Lastly, while the HKMA has made attempts to address the three aspects above, scalability needs to be considered. Once the testing period ends, successful fintech start-ups can either obtain a full licence or consider reapplying for the sandbox if a licence has not yet been granted. However, those eligible to reapply may want to expand their market reach.

To rectify this aspect, upon successful completion of sandbox testing, the start-up could be allowed to apply to have their initial testing restrictions lifted, such as by expanding the number of customers.

Improving Hong Kong’s regulatory sandboxes does not necessarily mean we will succeed in fintech. However, if we don’t try to improve, the chances of success will be diminished. In light of Hong Kong’s comparative advantage in finance, we should seize this opportunity and maintain our competitive edge in fintech development.

Kenny Shui is a senior researcher and Jonathan Ng is an assistant researcher at the Public Policy Institute of Our Hong Kong Foundation