Do Not Mix Up The Degree of Progress with The Rate of Progress

Stephen Chung

Executive Director

Zeppelin Real Estate Analysis Limited

February 2003

Lately, there have been numerous media reports and comparisons on Hong Kong with several major cities in China / Asia, most notably Shanghai. This is understandable and may be essential in that one has to know where one stands in order to compete and thrive. Some seem to think that Hong Kong has / is being / will soon be taken over by Shanghai (and a few other cities in the region), while others think this has not happened yet though the other cities are fast catching up. Both sides seem to have some points in their claims, yet it is not the intention here to dwell into which side is winning the debate. Rather, your humble author has observed a few assumptions and / or  misconceptions behind some of the commentaries. Here are a few:

a)      The Degree of Progress = this refers to the levels or standards ALREADY achieved including such items as financial infrastructure, banking system, rule of law, literacy, skills training, social culture, the arts, entertainment variety, and the like. Naturally, hardware-wise, this would also include the built quality of buildings, the road networks, the telecommunication systems and so on. While some facts and figures (statistics) could throw a light on the level attained by any economy or society, certain less quantifiable aspects could perhaps be only felt via actual onsite observations and interactions. Overall, one measure of progress is to ascertain the level of business efficiency and if the environment is cluttered with unnecessary or unreasonable bureaucracy, while noting the existence of an efficient business environment is by no means a fool-proof guarantee that the economy will perform well as other / macro factors have to be favorable too. In this sense, Hong Kong is (still) more advanced than Shanghai and many other cities in Asia.

b)      The Rate of Progress = this refers to the improvement made in any given period. Normally, developing economies and cities are likely, when and if they are growing and progressing, to demonstrate a higher rate of progress than developed economies and cities. This in turn makes people feel that they are more energetic, going somewhere, and filled with opportunities (business-wise to supply certain goods and services). Money may be made and at times in enormous amounts. Nonetheless, the fact that financial rewards could be huge and the degree (not rate) of progress are (at times) two separate issues. In terms of these business opportunities, perhaps Hong Kong takes a backseat.

c)      Competition and Cooperation Exist Simultaneously = some reports seem to assume a either you or me approach when looking at prospects of seemingly competing economies and cities. This could very well be the case if the cake is getting smaller, yet may not be the whole truth when the cake is getting / can get larger. For instance, the inclusion of California into the United States long time ago did not spell the end of New York City nor did it mean the non-emergence of San Francisco and Los Angeles. In general, economies and cities, much like business and corporations, need to compete and cooperate; at times simultaneously, at times depending on issues, at times with one or the other prevailing, at times depending on circumstances etc. In essence, how much cake an economy can obtain depends on its ability.

d)      There is No Need to be a / the Leading Dragonhead (for its own sake) = as some media put it, noting that Hong Kong has lost its lead role even in the Delta Region, let alone in China. If leading here refers to making sure that Hong Kong offers the best quality / performance / efficiency in certain industries, services or goods that Hong Kong has an edge in offering, then this is not only understandable but vital. If leading simply means wanting to take the lead for some undefined pride or as a matter of fact i.e. for its own sake, then your humble author would doubt if there is really a need to (or if resource-wise could be fulfilled effectively). This is NOT a self-degrading inclination, and if one's products, services, and goods are the best anywhere, one will become some sort of a leader like it or not. The reason is that business is done to make a profit and / or to create wealth, and becoming a leader is of secondary importance.  

Back to real estate aspects, it seems from the various news and reports, China is considering various ways e.g. REITS / MBS etc to expand and increase the liquidity for her real estate markets, though whether vehicles would become popular and viable remains to be seen. Yet from another angle, Hong Kong has the necessary financial and legal infrastructures to help create, manage, and offer such investment vehicles. Just one example of mutual cooperation (or synergy being the popular word nowadays) = Hong Kong manages a Mainland China real estate investment portfolio.

Notes: The article and/or content contained herein are for general reference only and are not meant to substitute for proper professional advice and/or due diligence. The author(s) and Zeppelin, including its staff, associates, consultants, executives and the like do not accept any responsibility or liability for losses, damages, claims and the like arising out of the use or reference to the content contained herein. 

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