Hong Kong eyes competition from Chinese mainland

The opening of free trade zones in Shanghai and Qianhai is challenging Hong Kong's stature as a "gateway" to China. Our reporter Cathy Yang in Hong Kong takes a look at how these free trade zones change the investment playing field in Hong Kong.

Hong Kong has long benefited from being the "gateway" to China. The city's proximity to the Mainland as well as its open economy make it attractive to foreign companies.

That role is now being challenged, as free trade zones in Qianhai near Hong Kong -- as well as Shanghai open for business. Economists say the Shanghai Free Trade Zone is the one to keep an eye on.

"Very clearly the central government would like to use, would like to see RMB internationalization type of activity to take off in Shanghai." Louis Kuijs, Chief China Economist, RBS said.

It's still too early to tell, says InvestHK's Andrew Davis. InvestHK helped Hong Kong in June mount its largest-ever promotion campaign in the United States, where over 600 US firms expressed interest in doing business with Hong Kong.

"How does Hong Kong keep competitive with the emergence of rival cities like Shanghai?"

"Well it's about innovation. Hong Kong needs to keep innovation, to keep reinventing itself. And of course, you look at the history of Hong Kong, we have innovated ourselves a number of different times." Andrew Davis, Associate Director-General, InvestHK said.

One of those is global professional network LinkedIn. It recently opened an office in Hong Kong, as it equally considers the city and the Mainland as fast-growing markets, with a total of three million members so far.

"Shanghai will become a stronger competitor in the sense become a gateway to China. You know I think if Hong Kong manages this well, it should still continue to be able to benefit from China's overall rise." Louis Kuijs said.

"It all depends now on how Beijing implements rules and policies within the Shanghai Free Trade Zone, and only then will investors see whether they're likely to be the game changer that could fast-track Hong Kong rival Shanghai on the global investment map."