IFA's thinkpad: 2010

Hong Kong

Hong Kong is a small city with a big reputation. As mainland China has become an ‘economic powerhouse’ Hong Kong has taken a route of development of its own, flourishing as an entrepot and a centre of commerce and finance for Chinese business, then as an industrial city and subsequently a regional and international financial centre.

This volume examines the developmental history of Hong Kong, focusing on its rise to the status of a Chinese global city in the world economy. Chiu and Lui’s analysis is distinct in its perspective of the development as an integrated process involving economic, political and social dimensions, and as such this insightful and original book will be a core text on Hong Kong society for students.

Stephen Chiu is Professor of Sociology at the Chinese University of Hong Kong, Hong Kong.

Tai-Lok Lui is Professor of Sociology at the Chinese University of Hong Kong, Hong Kong.

Asia’s Transformations

Edited by Mark Selden

Cornell University, USA

The books in this series explore the political, social, economic and cultural consequences of Asia’s transformations in the twentieth and twenty-first centuries. The series emphasizes the tumultuous interplay of local, national, regional and global forces as Asia bids to become the hub of the world economy. While focusing on the contemporary, it also looks back to analyse the antecedents of Asia’s contested rise.

Contents

List of figures xii

List of tables xiii

Acknowledgements xv

Introduction 1

1 Global connections: centre of Chinese capitalism 15

2 An industrial colony: Hong Kong manufacturing from boom to bust 25

3 The building of an international financial centre 56

4 A divided city? 81

5 Decolonization, political restructuring and post-colonial

governance crisis 103

6 The return of the regional and the national 129

7 A Chinese global city? 152

Notes 163

Bibliography 167

Index 182

Figures

1.1	Map of Hong Kong	17
2.1	Gross output of major sectors in Hong Kong’s electronics industry
	at 1990s constant price, 1979-1995	35
2.2	Gross output of electronics manufacturing in Hong Kong at 1990s
	constant price, 1978-1995	37
2.3	Hong Kong domestic exports of semiconductor devices at 1990s
	constant price, 1978-1996	41
3.1	Sectoral share in GDP of manufacturing and major service
	sectors (%)	77
5.1	The major business groups, 1982	118
5.2	The major business groups, 1997	119
5.3	The major business groups, 2004	120
6.1	Map of the Pearl River Delta	135
6.2	The Pan-Pearl River Delta region	151

Tables

1.1	Hong Kong and Shanghai Banking Corporation branches and
	agencies, 1918	23
2.1	GDP and employment by industry (percentage), 1961-1981	28
2.2	Relative scale of major sectors of the electronics industry in
	Hong Kong, 1979-1995	36
2.3	Leading domestic export items in Hong Kong electronics
	industry, 1978-1996	43
2.4	Industrialists’ evaluation of public support of industries (%)	48
2.5	Industrialists’ evaluation of support from the banking sector	52
2.6	Distribution of employment by sectors (%), 1981-2001	54
2.7	Gross domestic product (GDP) by economic activity, 1980-2000
	(percentage contribution to GDP at factor cost)	55
3.1	Number of licensed banks and local branches, 1954-2004	64
3.2	Distribution of bank assets, 1961-1984	66
3.3	Distribution of bank liabilities, 1961-1984	66
3.4	Number of listed companies by industry group, 1957-1977	68
3.5	Value in stock turnover, 1948-1980 (HK$ million)	68
3.6	Value in stock turnover volume and market capitalization,
	1986-2000	71
3.7	World ranking of equity market capitalization, turnover volume
	and number of listed domestic companies, 1995	72
3.8	Exchange rate regime for the Hong Kong dollar	74
3.9	Ranking of Hong Kong as an international financial centre	77
3.10	Major statistics on Hong Kong’s service sector, 1991-2004	78
4.1	Working population by occupation, 1991 and 2001	83
4.2	Median monthly income from main employment of working
	population by occupation, 1991 and 2001	85
4.3	Percentage change in decile points of median monthly income from main employment of working population by industry,
	1991-2001	87
4.4	Ratio of selected monthly income deciles of working population
	by industry, 1991 and 2001	88
4.5	Working population by occupation and sex, 1991-2001	90

4.6 Gender gap in income by occupation, age group and educational attainment, 1991 and 2001 91

4.7 Proportion of working new migrants from the mainland China by occupation, 1991 and 2001 94

4.8 Distribution of new migrants from the mainland China in

income deciles, 1991 and 2001 95

4.9 Proportion of working ethnic minorities by ethnicity and

occupation, 2001 97

4.10 Number of foreign domestic helpers (FDHs) in Hong Kong,

1987-2006 (year-end figures) 98

5.1 Number of interlocks per company, 1982-2004 116

5.2 Multiple directorships held by individual directors, 1982-2004 116

5.3 JardineMatheson’s scope of activity, 1961-1997 121

5.4 Composition of the four major Hong Kong Chinese

business groups 123

6.1 Foreign direct investments (FDIs) in Guangdong: growth

and sources 134

6.2 Information on regional headquarters and regional offices established by overseas companies in Hong Kong, 1991-2007 (selected years) 139

6.3 Hong Kong companies’ local and mainland operations 142

6.4 China’s stake in Hong Kong’s banking sector (HK$ billion) 147

6.5 Market capitalization by H-shares and red chips in the Hong

Kong Stock Exchange 148

6.6 World top ten new issue markets (US$ billion) 149

7.1 Domestic market capitalization in Hong Kong and Shanghai,

2001-2007 (US$ millions) 156

7.2 World concentration of financial activities 157

Acknowledgements

The research for this book is an outcome of several smaller projects and has received financial support from the HKSAR Research Grants Council (HKUST6054/02H) and the Department of Sociology, The Chinese University of Hong Kong. We would also like to thank Mark Selden and David Levin for their comments and suggestions for improving the text. Winnie Chan’s assistance in data analysis and editorial matters is gratefully acknowledged. The maps were prepared by Kelvin Cheung. Alex Po Lun Chung kindly allowed us to adopt his work entitled ‘Tourists’ Hong Kong’ for our book cover. We are grateful to the Census and Statistics Department for giving us access to the public use data file and generating statistical tables for our analysis in Chapter 4. The continual support and understanding of the editorial staff at Routledge is also critical in allowing this book to see the light of the day during this ten years’ gestation.

Parts of Chapter 4 and Chapter 5 have been published as journal articles in Urban Studies and The China Review respectively. Chapter 4 is a revised version of ‘Testing the global city - social polarization thesis: Hong Kong since the 1990s’ (Urban Studies Vol. 41, No. 10, 2004: 1863-1888). Chapter 5 is based upon ‘Governance crisis in post-1997 Hong Kong: a political economy perspective’ {The China Review Vol. 7, No. 2: 1-34). We thank the editors and publishers of these journals for their permission for reproducing parts of these articles in this book.

Introduction

Since its inception, Hong Kong has been a key intersection of different worlds, forever a strategic exchange node for firms from China to the rest of the world and from the rest of the world to China, as well as among all the overseas Chinese communities.

(Sassen2001: 174)

At the top we find the cities that are [the] subject of Saskia Sassen’s researches: the command and control centres of the global economy, New York, London, and Tokyo. After that, the going becomes more contentious because we lack unambiguous criteria for assigning particular cities to a specific place in the global system. There are cities that articulate large national economies into the system, such as Paris, Madrid, and Sao Paulo; others have a commanding multinational role, such as Singapore and Miami; and still others, such as Chicago and Hong Kong, articulate important subnational (regional) economies.

(Friedmann 1995: 23)

The centralization of intelligence and control resulting from the annihilation of space by modem means of communication has given to individual cities or chains of cities specialized roles as collectors and distributors of different kinds of information. The great produce and financial exchanges centralize in strategic cities or groups of cities and thereby create primary and secondary centers of dominance with respect to the differentiated functions.

(McKenzie 1968 [1927]: 211)

Hong Kong: a small city with a big reputation. Its total area is only 1,104 square kilometres but, according to the Hong Kong Special Administrative Region Government, in 2007 it was the world’s 11th largest trading economy, the 15th largest banking centre according to external banking transactions, the sixth foreign exchange market on the basis of turnover, and the seventh worldwide and third largest stock market in Asia in terms of market capitalization (Hong Kong Special Administrative Region Government 2008: 66). Almost 4,000 international corporations have established regional headquarters or offices in Hong Kong.

Hong Kong is resilient. Many projected a grim outlook for this city before 1997. In 1995, Fortune magazine predicted that the return of Hong Kong to China would bring about the demise of the city as an international hub. The title of the magazine

article was simply ‘The death of Hong Kong’ (Fortune 1995). Fortune published another leading article on Hong Kong in 2002. This time the question was ‘Who needs Hong Kong?’ {Fortune 2002). Fears of Hong Kong’s political regression from an open and liberal polity as a result of integration with a socialist regime might have proved unfounded, its economic vitality, however, was called into question by recession. Yet, on the eve of the tenth anniversary of Hong Kong’s return to China, Time magazine (2007), Fortune's sister publication, ran a cover story on Hong Kong, with its special report entitled ‘Sunshine with clouds, 1997-2007’. Hong Kong was congratulated for staying in ‘great shape’. Of course, whether Hong Kong has really bounced back is still open to discussion. But clearly it has weathered the storm of a major economic recession and a period of political adjustment. Furthermore, it reappeared, again, on the cover of Time magazine in 2008. This time the heading was ‘Ny-lon-kong’, referring to New York City, London and Hong Kong - three connected cities, exemplars of globalization, which have ‘created a financial network that has been able to lubricate the global economy’ (Time 2008: 32).

Hong Kong as a global city

Hong Kong always appears in writings on the world city or the global city that contain a list of what are considered to be leading cities in the world economy (see Friedmann’s quotation on p. 1). Few observers neglect Hong Kong’s place in this stratified system of global cities even though they differ in what they understand to be its role and significance in the global urban hierarchy. Some view it as a secondary city in the semi-periphery (Friedmann 1986). Others characterize Hong Kong as a high-connectivity gateway city (Taylor 2004: 92). Differences in placement and characterization notwithstanding, Hong Kong was classified as a world city or global city in 13 out of 16 world city research monographs or journal articles reviewed by Taylor (2004:40).

When Hong Kong is cited as an example of a global city in the commonly adopted ‘roster of world cities’ (Beaverstock, Taylor and Smith 1999), little else is usually said about it (a notable exception is Meyer 2000). Hong Kong is mentioned more for the purpose of showing where it fits in the bigger map constructed of the global urban hierarchy than for studying the case in its own right (but see Chiu and Lui 2004; Breitung and Gunter 2006; Chu 2008). Hong Kong quite often appears to be treated merely as a case of honourable mention.

This book makes the case for Hong Kong as a global city. It is not simply just another piece to fit into a worldwide mapping of the global city hierarchy. It is more than just another case of a city with global connectivity and important economic functions. Nor is its significance limited to its phenomenal economic growth and rapid pace of urban development. As Sassen well puts it in the above quotation, ‘Hong Kong has been a key intersection of different worlds’. Going beyond Sassen and other writers, we have a longer and larger story to tell about the making of Hong Kong as a global city. It is longer because we seek to develop a gmunded-under- standing of how Hong Kong has become a global city by examining this process

from an historical perspective. ‘Traders and financiers in Hong Kong always operated in multitiered national, world-regional, and global economies! Recogmfionof that business scope provides one key for unlocking the enigma of Hong Kong as the global metropolis for Asia’ (Meyer 2000: 2). This was the case in the nineteenth century, and very much the same applies to the twentieth century (and perhaps the twenty-first century as well). Chapter 1 opens our discussion of Hong Kong’s path- way to the status of a global city with a macro historical analysis that emphasizes the historical origins of its global connections. We focus in particular on the nature of Hong Kong’s central position in Chinese capitalism or, in Hamilton’s phrase, Chinese-led capitalism (Hamilton 1999:15), a regional and global network of economic ties via organizational and personal linkages facilitated by Chinese migrants in different parts of the world. Our longer historical perspective highlights two issues. The first concerns the historical origin of the rise of Hong Kong as an entrepot, a commercial city and a financial centre. We emphasize in this respect the interactions between its colonial status and connections with the world economy and its regional linkages through Chinese networicsTThe second concerns the deeper roots, as well as the breadth and depth of economic ties, that have led to the structuring of Hong Kong into a global city.

We continue our historical account and analysis of global city formation in Chapter 2, with a discussion of the structuring and restructuring of the Hong Kong economy in the post-Second World War decades. We highlight how Hong Kong quickly became an ‘industrial colony’ by specializing in labour-intensive manufacturing for export as the world economy underwent major restructuring after the war. On the basis of its strong commercial linkages with the regional and world economies, Hong Kong was able to capitalize on new opportunities created by this restructuring to develop a manufacturing sector that was highly responsive to changing market needs abroad. During the 1980s, Hong Kong consolidated its status as a major financial centre and seized the opportunities created by the reopening of socialist China’s economy to move its manufacturing offshore, mainly to the newly established special economic zones and the nearby region of the Pearl River Delta just across the border. The relocation of manufacturing triggered a highly compressed process of economic restructuring that caused a drastic decline in the manufacturing sector’s contributions to Hong Kong’s employment (from 47.0 per cent in 1971 to 4.7 per cent in 2006) and gross domestic product (from 28.2 per cent in 1971 to 3.1 per cent in 2006). These drastic socio-economic changes reflect a major transformation in the economic geography of Hong Kong and its neighbouring region. Hong Kong is the major driving force for a new local and regional division of labour. It also needs to adjust to such changes.

The socio-economic impacts of economic restructuring will be examined in Chapter 4. There we shall look at Hong Kong critically with reference to the debate in the global city literature about whether rising inequalities and growing social polarization are inevitable outcomes of becoming a global city. We draw for this purpose upon our empirical analysis of the changing employment structure and patterns of income inequality in contemporary Hong Kong. And, in Chapter 6, we extend our discussion of economic restructuring with an examination of Hong

Kong’s reintegration, economic as well as political, with China before and after 1997, the year when China resumed sovereignty over Hong Kong. Not only has Hong Kong become a part of China politically, its economic future has also become increasingly dependent on China’s integration with the global economy. Contrary to the expectation that globalization loosens a city’s connection with its national and regional economies, Hong Kong is becoming increasingly re-embedded in the broader regional and national, economic environment of China as well as its neighbouring economies. Cross-border economic activity and flows of people have increased exponentially in both directions. Furthermore, Hong Kong is eager to find new opportunities on the mainland as China deepens its economic reform and emerges as an economic powerhouse in the Asian regional and global economy.

Not only is our story longer, it is also broader than what is available in existing accounts. Chapter 3 traces Hong Kong’s pathway to its status as a commercial and financial centre. We underline the effects of geo-politics and institutions on the well-rehearsed story of Hong Kong as a financial centre. Our historical analysis of the emergence of Hong Kong as a regional and then global financial centre in the post-war decades echoes our emphasis on the formation of global city. It is also an attempt to unravel the economic and political dynamics in the shaping of opportunities for development and the institutional responses to such openings.

In Chapter 5, we examine urban governance in detail, with the intention of demonstrating the importance of bringing politics back in to the study of the global city. It is often simply assumed that the rise and fall of a global city hinges upon adaptation to the changing environment. A core-centric approach, which views the dynamics of the global economy from the angle of the core economies, assumes that global cities in the semi-periphery are dependent and reactive. They respond to whatever opportunities are presented by the changing market environment. But how these opportunities are seized at the right time and utilized fully is left unexamined. We argue that the institutional configuration of a global city helps to explain why and whether opportunities are effectively captured or missed.

Our larger story of Hong Kong as a global city, therefore, addresses broader theoretical issues. In particular, we use the experience of Hong Kong to reflect upon the theoretical adequacies of existing global city studies. It is our contention that the case of Hong Kong can help to illuminate the nature of global city formation - that is, the processes whereby cities have come to develop their linkages with the world economy and to assume global city status. Global city formation is not simply an outcome of the changing world economy. Some cities do, and others do not, become global cities. Those that become global cities do so because they have developed the institutional structures that facilitate and strengthen global linkages and better prepare their urban economies to meet new challenges.

Global city studies

Our study of Hong Kong as a Chinese global city is informed by the literature on the world city (Friedmann and Wolff 1982; Friedmann 1986, 1995) and the global city (Sassen 1991, 2000, 2001,2002). Readers whose interests lie in the historical

pathways that Hong Kong has gone through in making itself into a global city may want to go directly to our analysis in Chapter 1 and the following chapters. For those who are interested in finding out more about the theoretical framework upon which this book is based, our discussion here summarizes our critique and an elaboration of a sociological framework for studying global cities. Global city studies, which have proliferated since the 1980s and cover a wide range of cities in different parts of the world (for a summary, see Taylor 2004), promise to cast new light on our understanding of both the city (and inter-city networks) and the changing world economy. The growth of this literature itself reflects the impacts of economic restructuring on the world economy in the past decades, namely the intensification of global flows of economic activity, the deepening of economic penetration through global finance and multinational corporations into different parts of the world, and the consolidation of major cities as nodal points of global business. Cities, and not nation-states, are becoming the key nodes of all these globally connected activities (Abrahamson 2004:2).

The notion of the world city is not new. Gottmann (1989: 62) notes that Goethe, with Rome and Paris in mind, used the term when describing the leading cultural centres. Geddes (see Taylor 2004: 21) introduced the idea of a world league of cities, hinting at a world hierarchy of cities within which some cities assumed major positions and roles. Writing from the perspective of human ecology, McKenzie hinted at the formation of a spider-web-like hierarchy of world cities (see quotation above). Hall (1966), whose interests lie more in urban planning than in analysing inter-city networks, developed Geddes’s idea and identified six leading urban centres in the world. But the systematic study of the world city or the global city really took off in the 1980s following Friedmann’s (Friedmann and Wolff 1982; Friedmann 1986) observation that a ‘new international division of labour’ (Frobel et al. 1980) had facilitated a more global penetration by multinational corporations with the result that major cities had emerged as centres of economic control and coordination. Though cities have always played a significant economic role historically, now they had become even more important in the context of intensified global flows of people and economic activity.

Against this background, a network of global cities arises from the spatial manifestation of capital accumulation in the new global economy. What drives this emergence of global cities is posited to be the dual processes of dispersal of production and centralization of control. As the global mobility of capital and commodities accelerated, production dispersed geographically, especially manufacturing. Firms have aggressively globalized their operations since the 1980s in search of cheaper labour and lucrative markets. It is not only corporations originating from the core countries that have pursued this strategy; some firms from the developing semi-periphery of the world economy have followed a similar strategy.

As spatial dispersion grows, so does the need for more effective mechanisms of coordination and control of a firm’s economic activities. This leads in turn to greater centralization in coordination and control functions. The concentration of ownership in a smaller number of mega-corporations reinforces this trend. But it is the sheer scale and complexity of global transactions that brings about the

expansion of top-level multinational operating headquarters and the concomitant growth of services firms that cater to them: insurance, banking, financial services, real estate, legal services, accounting, consultancy and professional associations. Sassen classifies these firms as producer services that include ‘not only services to production firms narrowly defined but also those to all other types of organizations’ (1991: 91). The distinctive feature of producer services is thus the fact that they are intermediate outputs produced not for final consumers but for other organizations. While the firms providing producer services do not typically depend on proximity to final consumers, they do need to keep abreast of new developments in their field and of what firms are doing. Producer services therefore often exhibit a tendency towards locational concentration. New York and London are global cities essentially for their extraordinary concentration of a variety of service firms. In sum,

Global cities are, however, not only nodal points for the coordination of processes; they are also particular sites of production. They are sites for (1) the production of specialized services needed by complex organizations for running a spatially dispersed network of factories, offices, and service outlets; and (2) the production of financial innovations and the making of markets, both central to the internationalization and expansion of the financial industry. To understand the structure of a global city, we have to understand it as a place where certain kinds of work can get done, which is to say that we have to get beyond the dichotomy between manufacturing and services. The ‘things’ a global city makes are highly specialized services and financial goods.

(Sassen 2001: 5)

The three theses of global cities research

The essence of the theses about the world city and the global city put forward by Friedmann (1986,1995; also Friedmann and Wolff 1982) and Sassen (1991,2000, 2001) lies in their attempt to capture the impacts of the structural transformation of the world economy towards accelerated globalization and increasing interconnectedness on urban development. Though their arguments and their implications differ in some respects (see Sassen 2001: xix), they can be summarized in three basic theses. The first thesis, the global urban network and hierarchy thesis, suggests that a network of global cities arises as the spatial manifestation of capital accumulation in the world economy. The second thesis, the global city function thesis, posits that the location of each individual global city in the global urban network is determined by the ‘functions assigned to the city’ (Friedmann 1986: 70). Alternatively, as Sassen (2000:4) puts it, by its contribution to the operation of the global economy as command points in the organization of the world economy, that is, as key locations and marketplaces for the leading industries of the current period - finance and specialized services for firms, and major sites of production and innovation for these industries.

These two theses highlight the existence of a dual process of dispersal of production and centralization of control in the structuring of the emergent global cities.

The linkages among the global cities that result from the changing division of labour in the global economy constitute a ‘complex spatial hierarchy’ (Friedmann 1986: 71). Implicit in the global city function thesis is the idea that cities’ contribution to the coordination and control of global economic activity and the production of specialized services would be reflected in their positioning in the different tiers constituting the hierarchy of global cities. Those belonging to the first tier are expected to be key global players, while those in the second tier assume a more important role at the sub-national or regional level.

The third thesis, the dual city thesis, is that the functions performed by each global city would shape in turn the nature of its socio-economic structure. More specifically, the socio-economic structure of the global city will come to be characterized by rising social inequalities and social polarization. There are two aspects of growing inequalities in global cities. First, the gap between global and globalizing cities on the one side and those in the peripheries on the other is growing. Second, social inequalities within a global city are also found glaring. The idea of the dual city is primarily an attempt to address the latter question, examining the changing social structure and its social consequences within a global city.

The growing literature on world cities and global cities (useful surveys include Friedmann 1995; Beaverstock, Taylor and Smith 1999; Short and Kim 1999; Brenner and Keil 2006) can be grouped into three main areas that roughly correspond to the proposition expressed by these three theses: the mapping of the global city network and hierarchy (Taylor 2004); case studies illustrating the changing urban functions and cityscape (Abu-Lughod 1999; Sassen 2001); and issues concerning the socio-economic consequences (rising income inequalities and social polarization) of becoming a global city (Mollenkopf and Castells 1991; Sassen 2001). A number of questions have been raised as a result of this research, about the theoretical and empirical validity of the original theses put forward by Friedmann and Sassen. Rather than going into specific details of criticism by individual commentators targeted at either theoretical problems or the empirical basis of the claims made in the literature, we concentrate instead only on those criticisms that question the basics of the global city theses.

Methodological issues

The global city thesis has been criticized first for its methodological inadequacy on the grounds that ‘Ideas are asserted more than demonstrated’ (Short and Kim 1999: 8). Taylor (2004) goes further in confronting directly the key texts on global city analysis by arguing that the claims about inter-city networks and the existence of an urban hierarchy, which together form the major contentions of this line of research, are not supported by the evidence. Drawing upon Jacobs’ (1986) analysis of the city economy, Taylor argues for a city-centred approach, and therefore rejects the notion of a national urban hierarchy, implicit in global city analysis, for the study of the development of inter-city connections.

Taylor’s attempt to provide a rigorous empirical mapping and a theoretical foundation for studying, inter-city relations and connectivity is a valuable contribution

to global city research. His work provides us with both a city-centred perspective (thus giving us a framework that is closer to the original idea of the world city or the global city) for analysing the development of inter-city networks and a data-driven structural mapping for understanding the position of the individual city in the macro context. He has made an important contribution in going beyond the mapping of the hierarchy of world cities originally formulated by Friedmann (1986), by giving it the necessary analytical and empirical substance. Yet, because of his focus on structural mapping and related analytical issues, Taylor has paid little attention to questions concerning global city formation, particularly the processes by which it occurs and the role of governance (Olds and Yeung 2004).

Second, the literature on global cities has been criticized for being ahistorical in viewing contemporary developments as a sharp break from the past, for neglecting the diverse ways that cities respond to global forces, and for rarely taking space seriously (King 1991; Ward 1995; Abu-Lughod 1999: 2; Smith 2001). Again, Taylor’s global urban analysis is relatively sensitive to these problems. Not only has he emphasized the need to restore historical understanding of global city development in different phases of the development of the world economy (see Taylor 2004: Chapter 1), he also includes in his analysis a disaggregation and a geography of different types of services. Yet his treatment of history and the networking process at the structural level has its limitations. Structural analysis is good at mapping linkages and spelling out the broader framework of inter-city competition, but has little to offer on the question of how global cities come into being (Robinson 2002; Olds and Yeung 2004; Wang 2004). How mobility in the global urban hierarchy is materialized cannot be explained solely by an analysis of opportunities and possibilities at the macro level. Although the structural mapping can explain the broader context and the availability of opportunities for development, it tells us very little about how individual cities are able to capitalize on the opportunities opened to them by the process of macro restructuring in the world economy. In addition to a structural analysis of networking, we also need to look into the processes of global city formation. For a more complete understanding of the making of global cities, meso-level institutional analysis and an examination of the role of agency are required.

The above criticisms point to an inherent problem in global city analysis. In the first instance, the foci on structural mapping of global urban hierarchy and intercity relations and linkages at the global level have led to a de-emphasis or downright neglect of agents and/or actors in the making of global city. Furthermore, the emphasis on the global economic context and the focus on mobile global capital have prematurely written off the active role of the state (Wang 2004) and other critical players (e.g. the formation of a pro-growth coalition within a city for the promotion of policy conducive to becoming a global city) in global city formation. The discussion has often taken the form of crude economism: the broader global economic structure, or more directly the functions to be performed by global cities, determines the structure of the global urban hierarchy and the fate of individual cities in this stratified urban system. This economism also takes the form of core- centric functionalism - that is, economic functions required by the core of global capitalism largely determine the role to be played by different layers of global cities. Yet, as Brenner and Keil (2006:12) emphasize, ‘local agents act and react to pressures of global restructuring, but they are also active producers of globalization processes. They are the builders of the global city’.

Furthermore, underlying this emphasis on the global economy and its power to shape the fortune of global cities, lies a Euro-American-centric perspective (Ward 1995; Robinson 2002; Gugler 2003). This is most evident in the difference in research focus between the studies of global cities in the USA and Europe on the one side, and Asia (perhaps with the exception of Tokyo) on the other. In the study of existing global cities, especially those well-documented global cities like New York, London and Tokyo, ‘All too often structures of city governance are either taken as a “given”, or are ignored altogether’ (Ward 1995: 298). This Euro-American-centric perspective is, as noted above, closely connected with core-centric functionalism and structural hierarchy and ranking built into the literature on global city research. The fact that these cities almost command unchallenged status in the literature leads to an under-emphasis on local politics and the institutional basis of governance (Ward 1995). By contrast, studies of potential and aspiring global cities in developing countries, whether in East Asia (Wang 2004) or South America (Ward 1995), are keen to ‘put politics and government back into the world cities agenda’ (Ward 1995: 298). Research on global cities outside the core, largely driven by the concern about how to push major cities in developing countries further up the global urban hierarchy, is far more attentive to the importance of institutional and political analysis and the role of actors/agencies. In other words, it pursues a research agenda concerning the processes that facilitate some cities to become (or fail to become) global cities. This leads in turn to a focus on the question of urban governance, which has been unduly neglected, as an important component of the research on global city formation.

The significance of place

Critiques of global cities research for its weak empirical basis and over-reliance on structural analysis also point out that global cities research tends to see such leading cities too broadly in terms of their functions in the global economy. Equally pertinent is the temptation, dangerous indeed, of viewing the city as a globalizing and autonomous economic unit, and thus the global economy as no more than networks and flows linking up cities through nodes in the global urban hierarchy. While the value of these criticisms is noted, it should be pointed out that world cities researchers have long recognized the significance of place in understanding the development of global cities (see Sassen’s reinstatement of her arguments, 2001: 349-50):

The place-ness of the global city is a crucial theoretical and methodological issue in my work. Theoretically it captures Harvey’s notion of capital fixity as necessary for hypermobility. A key issue for me has been to introduce into our notions of globalization the fact that capital even if dematerialized is not simply hypermobile or that trade and investment and information flows are not only about flows. Further, place-ness also signals an embeddedness in what has been constructed as the ‘national,’ as in national economy and national territory. This brings with it a consideration of political issues and theorizations about the role of the state in the global economy which are excluded in more conventional accounts about the global economy.

Short et al. (2000: 318) also put forward the thesis of the gateway city with the intention of shifting the attention ‘away from which cities dominate to how cities are affected by globalization’. By focusing on ‘the transmission of economic, political and cultural globalization’, the gateway city thesis highlights the interconnectedness of the global city and its surrounding region. Indeed, it points to the interactions between the local and the regional.

This emphasis on the significance of place makes it easier to connect global cities research with the new concept of the global city-region (Scott 2001). This regional dimension of global city underlines the fact that the development of global city, despite its articulation with the global economy and thus a strong connection with distant economic locations and activity, is always embedded in a wider and yet proximate social, political and spatial context. The key implication of this emphasis on embeddedness of global cities is that instead of seeing global cities as globalizing economic units that are disembedded from their immediate environment, we need to tease out how they are contextualized in different layers of the broader socio-economic and political structures.

One of the key features of our analysis of Hong Kong becoming a global city underlines the embeddedness of the global city and the significance of national and regional factors in shaping global city development. Instead of seeing global cities as globalizing economic units that are disembedded from their immediate environment, we try to analyse how different layers of the broader socio-economic and political structures impact on the making of a global city. A focus on the significance of place in understanding the global city requires taking seriously the interplay of the global and the local, the interactions of national, regional and local levels, and the issue of urban governance.

Governance: without and within

There are different layers of political embeddedness. What is especially relevant to our present discussion is that the national is more than just the backdrop for the rise and fall of global cities (Massey 2007: 17-21). Despite the fact that globalization brings with it new challenges to the capacity of the nation-state to deal with new issues relating to the management of the national economy, the power and effects of the national remain real enough in shaping the parameters that structure the development of global cities (on the myth of the powerlessness of the state under globalization, see Weiss 1998). State policy at the national level defines and redefines how global cities are connected with their neighbouring regions, and thus draws and redraws the boundary with their hinterland. The state can also develop new rules and regulations that either expand or restrict global cities’ interconnectedness with the regional and the world economy. This is not to deny or to underestimate the significance of the sub-national and the impacts of new regionalism (i.e. local regions taking the initiative in carrying out economic, political and social mobilization to deal with economic restructuring in the face of globalization) in the shaping of economic development. Our point rather is to highlight the fact that whether and how the national is relevant or otherwise is an empirical question. Globalization per se does not make the role of the nation-state irrelevant. The state continues to exert its influence, albeit in different ways, on regional social formation (and thus the configuration of the global cities’ hinterland).¹ The re-scaling of a global city is always closely connected to the state’s re-scaling project. As Brenner (1998) puts it, ‘Global city formation cannot be adequately understood without an examination of the matrices of state territorial organization within and through which it occurs.’ In other words, the question of development for global cities is always a project embedded in a broader regional and national context. Indeed, the question of governance for a global city is, by default, a city-region or city-nation issue. The global city’s management of its growth and development always requires coordination and collaboration that go beyond its city boundary. How inter-city as well as city-region ‘development coalitions’ (Keating 2001) are created to foster the growth and development of global cities is a crucial issue in urban governance that lies beyond the boundary and scope of the global city itself

Equally important is the question of governance within the global city (also see Brenner and Keil 2006: 130-1). Ward (1995:299-300) criticizes existing research for giving insufficient attention to ‘the political-administrative structures through which such cities are governed and managed’. The political and institutional basis for the success of leading global cities in attaining their current positions has been largely taken for granted. As noted above, this neglect of the political question is partly an outcome of the use of structuralist (the focus on positioning within the world economy and the global urban hierarchy) and functionalist (the focus on contributions to global financial and producer services) explanations in global city research. It is partly a consequence also of an under-emphasis on the processes of global city formation (i.e. of ignoring how a place is governed and managed in order to capitalize on the opportunities opened by economic restructuring in the world economy). In brief, global city research can benefit from incorporating a political economy of place.

Research on the urban growth machine (Molotch 1976; Logan and Molotch 1987; Jonas and Wilson 1999) and urban regime (Lauria 1997) does not address the question of governance of the global city directly but is still relevant to our discussion here. Despite their differences (Harding 1995; Stoker 1995), research on the urban growth machine and urban regime has pointed to some crucial aspects of urban politics, namely the need to go beyond a focus on the local state, the interplay of public and private agencies in shaping urban development, the internal politics of coalition building, the building of capacity for action, and a choice of policy or path of development. For a deeper understanding of the growth and development of global cities in developing countries, how a global city project (often expressed in

the forms of heavy investments in infrastructure construction, the building of spectacular architectural landmarks, hosting of mega-events, etc.) is made viable in terms of capacity building, mobilization of resources and the construction of a hegemonic alliance to support such a venture is always an open question. Through examining the nature of urban governance, we probe the institutional configuration and the role of actors/agencies in the making of global cities. As noted above, opportunities come and go. It is important to know how a city is capable of capturing the new openings or otherwise in changing its position and fortune in the global urban hierarchy. Governance is one of the key variables in determining a city’s capacity for action in becoming a global city.

Dual social structure

So far we have discussed the processes of global city formation. As noted earlier, equally important in studies of global cities is the issue of the outcomes of becoming a global city (i.e. the dual city thesis). One view is that global city formation has a similar impact everywhere on urban social structure. By contrast, our emphasis on the significance of place and the institutional as well as political configuration of global city formation points to the possibility that globalization can have diverse outcomes for urban social structure. While the hypothesis put forward by Friedmann and Sassen on dualism in the social structure of the global city should be taken seriously, how and why social polarization and rising inequalities come about is an analytical and empirical question deserving our attention.

The relationship between global city development and social polarization has generated a rich body of literature debating and testing the validity of the thesis. Most of the relevant studies have focused on global cities in the USA and Europe. Baum’s contributions (1997, 1999) are among the few exceptions that go beyond such geographical limits. In this book we intend to contribute to this ongoing discussion by examining the case of Hong Kong, another global city outside of the primary axes of London, New York and Tokyo. Hong Kong is an ideal site for testing the dual city thesis because it has undergone the critical transformation postulated in the global city literature in the most striking manner in that the decline of secondary production and expansion of services, and especially producer services, has been rapid and extensive. Hong Kong can thus serve as a critical case for assessing whether social polarization is in fact an inevitable outcome associated with the development of global cities. Moreover, by using the Hong Kong population census micro-data rather than published aggregate data, we can conduct a more direct test of the polarization thesis by examining the relationship between structural and occupational changes.

One of the most interesting and controversial aspects of the global city thesis concerns the impact of the emergence of global cities as post-industrial production sites, and the ascendance of finance and producer services on the broader social and economic structure of major cities - the so-called polarization thesis. Friedmann and Wolff (1982: 320) noted that, ‘The dynamism of the world city economy results chiefly from the growth of a primary cluster of high level business services which employs a large number of professionals - the transnational elite - and ancillary staffs of clerical personnel.’ Allied to this primary cluster are other poles of employment growth. One is the personal services and other amenities catering for the new elite: restaurants, hotels, luxury boutiques, entertainment, real estate, domestic services and security. The other growing sectors are international tourism and government services. All these sectoral and occupational trends are argued to have negative consequences for social equity in the form of rising social inequality and a more skewed income distribution. Sassen (1998: 137) drew our attention to growing differences in the earning capacities of different kinds of employees working in different economic sectors, the casualization of the employment relation and the rise of urban marginality. In global cities, ‘class polarization has three principal facets: huge income gaps between transnational elites and low-skilled workers, large-scale immigration from rural areas or from abroad, and structural trends in evolution of jobs’ (Friedmann 1995: 324). Employment expansion tends to cluster at the top and bottom ends of the occupational/income distribution at the expense of the middle. The processes of deindustrialization and expanding service industries have both contributed to this phenomenon. Manufacturing jobs that once provided middle-level income have been replaced by a duality of jobs in services that tend to be either relatively well paid or poorly paid. Sassen (1998) underlines the casualization of the employment relation in the form of rising job insecurity and part-time jobs at the lower end of the labour market and in the labour-intensive service industries. As a result of the dualization in the organization of service industries, jobs at the bottom are often filled by marginal workers, primarily documented or undocumented migrants from countries with a lower level of development. The image of an ‘hourglass’ has also been invoked to describe the social structure of the global city (Marcuse 1989: 699).

The polarization thesis has been subjected to considerable critical review (see especially Hamnett 1994,1996). First, the concept as presented by Sassen is found to be ambiguous and ill-defined. To test whether there is polarization, we need to distinguish between relative and absolute polarization - that is, whether it means a widening of the gap between the top and the bottom in the occupational hierarchy, or whether it means that globalization will create a larger number of low-skilled and/or low-paid jobs in addition to the increase in professional and managerial jobs. Furthermore, it is also necessary to assess whether polarization occurs in the occupational structure or is largely manifested in income distribution.

Second, the polarization thesis is also said to contradict findings from the wider literature on the changing occupational structure in advanced capitalist societies, especially the evidence for the growth of professionalization and the new middle class. Third, it is also questionable whether the hypothesis can be generalized to other advanced countries because it could be contingent on the experiences of New Y ork and Los Angeles, where high levels of immigration accentuated the processes of dualization and casualization in the service sector. A more general issue therefore is to what extent polarization, if it occurs, is a result of the economic restructuring forced by globalization and how much it is shaped by local institutional contexts such as policies on immigration. Finally, there is the issue of gender: to

what extent are the growing inequalities in the global city gender-specific? These are the key questions that need to be addressed in discussing the social consequences of becoming a global city.

Summary

In the following chapters we shall take up the questions raised above in our analysis of Hong Kong as a Chinese global city. We contextualize Hong Kong’s emergence as a global city in the structuring and restructuring of the world economy as well as in its national and regional economic and political environment. In emphasizing the broader regional and national context of global city, our discussion aims to be sensitive to geo-politics, and the changing parameters and effects of both the national and the regional levels. Global city formation, in other words, is not simply an outcome of exogenous factors in the world economy. How specific cities are able to capitalize on opportunities in the changing world economy is crucial to our understanding of the processes through which some cities are able to reach global city status and others are not. The formation process itself needs to be addressed. Our case study of Hong Kong is intended to unpack this formation process.

We shall also examine the socio-economic consequences of becoming a global city, particularly in terms of rising social inequalities and social polarization. We not only look at the socio-economic outcomes empirically, we also underline through our analysis the pertinence of the institutional configuration of the global city in shaping the social fabric and contours of the city itself. By analysing both the institutional settings and the social consequences of global city development, we gain a better understanding of the complexities of global cities. There are different types of global city. Local institutional settings have their impacts on shaping the social fabric of the global city. An awareness of how local specificities matter is important to future comparative global city research.

1 Global connections

Centre of Chinese capitalism

Hong Kong, as a place, was and continues to be at the organizing center of Chinese- led capitalism. Hong Kong assumed this role shortly after its founding in the nineteenth century and continued it until World War II. Then after the war and the Chinese revolution, Hong Kong was the first location where Chinese capitalism reemerged, although in a somewhat changed form.

(Hamilton 1999: 15)

Introduction

Exposure to globalization is hardly new to Hong Kong. Right from its beginnings as a British colony in the nineteenth century, Hong Kong was declared a free port (by Elliot in June 1841) with no restrictions on foreign trade and investment. It subsequently became an important trading port as well as a commercial city not only for advancing the economic and political interests of the British Empire but also for facilitating regional trade and finance between China and other Asian economies. Indeed, Hong Kong’s strength as a commercial city and trading port lies in her interconnectedness with not one but a variety of economic networks. This chapter provides a historical backdrop to our discussion of the emergence of Hong Kong as a centre of Chinese capitalism for the past 160 years.

The beginning

Archaeological findings suggest that human settlements in Hong Kong date back to 6000 BC. The discovery of an Eastern Han (AD 25-220) tomb in Kowloon is another piece of archaeological evidence of a long historical connection with the southern region of the mainland. But regular Chinese settlement in the New Territories began only during the Song dynasty (Hayes 1977:25). During the Tang dynasty, garrisons were established in Tuen Mun, where the Portuguese landed in 1514. According to the official gazetteer records that first appeared in the late sixteenth century, what was later to become Hong Kong, Kowloon and the New Territories were included in San On County. In brief, the history of Hong Kong does not begin with the arrival of the British. But, once it became a colony, Hong Kong was channelled towards a different path of development.

Hong Kong was first occupied by British troops in 1841 and then formally ceded to Britain under the Nanjing Treaty in 1842. Hong Kong island was, by British accounts, sparsely populated at that time. A statement on the conditions of the Island of Hong Kong prepared in 1844 reported that:

On taking possession of Hong Kong, it was found to contain about 7,500 inhabitants, scattered over 20 fishing hamlets and villages. The requirements of the fleet and troops, the demands for labourers to make roads and houses, and the servants of Europeans, increased the number of inhabitants, and in March 1842, they were numbered at 12,361. In April, 1844, the number of Chinese on the island is computed at 19,000, of whom not more than 1,000 are women and children. In the census are included 97 women slaves, and the females attendant on 31 brothels, eight gambling-houses, and 20 opium shops, &c. ... There is no trade of any noticeable extent in Hong Kong.

(Jarman 1996: 9, 11)

R. Montgomery Martin, the Colonial Treasurer who prepared this statement on Hong Kong, objected to the choice of the island for British occupation, arguing that, ‘On a review of the whole case, there are no assignable grounds for the political or military occupancy of Hong Kong, even if there were no expense attending that occupancy’ (Jarman 1996: 16). This echoed the comment by Lord Palmerston, the British Foreign Secretary, to Elliot concerning his occupation of Hong Kong that it was, in his eyes, ‘a barren island with hardly a house upon it’ (quoted from Welsh 1997: 108). Palmerston further remarked that ‘it seems obvious that Hong Kong will not be a Mart of Trade’ (Welsh 1997: 108). The acquisition of Hong Kong was not without controversy among the British (Carroll 2005: 38—^4-6) and this controversy continued for years afterwards (Zhang 2001: 21-2). Chusan, which was strategically located for future interests in Guangzhou, was repeatedly cited as a better choice for the advancement of British interests. In fact, as shown in Martin’s exchanges with the British government, even after the exchange of the ratifications of the Treaty of Nanjing, arguments about the desirability of the acquisition of Hong Kong continued. Our point here is that while British descriptions about the barrenness of Hong Kong might have been overstated, they did point to an important fact about the motivation for the colonization of Hong Kong: the British had their eyes on expanding business opportunities with China, and Hong Kong was not an obvious choice of acquisition for that purpose.

The British had in fact seriously entertained the idea of surrendering Hong Kong in exchange for other, more economically promising concessions from China. But Pottinger, who was initially hugely disappointed by the Chuenpi agreement, was later convinced of ‘the necessity and desirability of our possessing such a settlement as an emporium for our trade and a place from which Her Majesty’s subjects in China may be alike protected and controlled’ (quoted in Endacott 1973: 22). To conduct business with China, the British needed a sheltered harbour and a land base for related logistics. These, and not Hong Kong’s natural resources nor a population constituting an attractive market, were the primary advantages of Hong Kong

New Territories

Kowloon

Hong Kong Island

Figure 1.1 Map of Hong Kong

for the British. Because of these considerations, the British did not develop their base in existing major settlements in the Eastern and southern parts of the island but set up their military and administrative operations on the northern shore instead (Ho 2004: 17). This area was developed into the City of Victoria. Later, with the cessation of Kowloon in 1860 and the lease of the New Territories in 1898, the territorial boundaries of colonial Hong Kong were finalized (see Figure 1.1). Despite her long historical linkages with China, Hong Kong’s subsequent development into a trading port and commercial city, boosted by an influx of Chinese, was largely an outcome of the rise of the City of Victoria.

The rise of a city of trade, commerce and finance

As one might have guessed from the above discussion about the controversy among the British over the acquisition of Hong Kong, there were few signs during the early years of colonization foretelling Hong Kong’s subsequent economic success. Contrary to Pottinger’s prediction in 1842 that ‘Within six months of Hong Kong being declared to have become a permanent Colony, it will be a vast emporium of commerce and wealth’ (quoted in Endacott 1973: 72), the City of Victoria soon found itself in a difficult situation. The opening of five treaty ports to the British, as stipulated in the Treaty of Nanjing, actually undermined Hong Kong’s role as a centre of transhipment. Indeed, in the 1840s, ‘Hong Kong survived ..., not primarily through the development of a free trade between Britain and China (which took

place slowly at the mainland ports), but as a depot for two semi-monopolistic and still technically illegal enterprises: the importation of opium into China and the traffic in labourers out of China’ (Munn 2001:23). Hong Kong thus did not develop into an important port for entrepot trade immediately after the arrival of the British.

It did not take long, however, before the City of Victoria was turned from a British frontier colony into a vibrant trading and commercial city. Following closely behind the military troops, major British traders almost immediately moved their head offices for their business operations in the region to Hong Kong (Endacott 1973: 76; Tsang 2004: 56-7). In this connection, Hong Kong was also gradually developed into a centre for services, more precisely shipping and repair services, for the businesses concerned.

It was during the 1850s, however, that Hong Kong’s prospects ‘were becoming brighter’ (Fairbank 1969: 239) as the island experienced a rapid growth of economic activity. The Chinese population in Hong Kong increased sharply during this period, rising from 28,297 in 1849 to 85,280 in 1859 (Tsai 1993:22,299). Two external factors facilitated this turnaround in Hong Kong’s business fortunes. First, the discovery of gold and the resultant gold rush in California in 1848 and then a couple of years later in New South Wales, Australia, created a strong demand for labourers. Hong Kong became, as a result of increasing activity related to the dispatch of Chinese coolie emigrants abroad, ‘the key staging post for Chinese emigration’ (Tsang 2004: 58). Second, political and social disorder on the mainland drove people from the southern part of China, both merchants and labourers, to seek refuge in Hong Kong (Fan 1974: 1). This experience was to be repeated a number of times in the course of Hong Kong’s history: ‘trouble in China was a “god-send” for Hong Kong’ (Munn 2001: 49; also see Eitel 1983: 259). As Carroll (2005: 50) notes, ‘The combination of the Taiping Rebellion and the growth of Chinese communities overseas did more than save Hong Kong from an economic depression; it changed the island’s basic reason for being. Hong Kong was transformed from a colonial outpost into the center of a transnational trade network stretching from the China coast to Southeast Asia and then to Australia and North America. ’ And Hong Kong was quick to capitalize on these new opportunities, changing itself in the process into a seaport with growing business activity.

The business of exporting Chinese labourers began in Xiamen in 1845 (Peng 1981: 181). The huge demand for Chinese labourers sprang from the gold rush in the United States of America and Australia, and the intensification of colonization and capitalist penetration into Asia and Latin America. Chinese labourers, who were cheap and productive, were much in demand and were exported not only to the USA and British colonies, but also to more remote places such as Cuba and Peru (Peng 1981: 191). The emigration business enabled the shipping companies, brokers and labour recruiters to make huge profits from the coolie trade. But the impacts of the emigration business extended far beyond benefiting those directly involved in the organization of coolie labour. Closely related to the emigration business were rope manufacturing, shipbuilding, repairing and refitting, and provisioning for ships. As a result of the growth of coastal and international shipping services, the demand for professional services increased so that medical facilities, legal advice, money exchange and insurance services became available. The growth of overseas Chinese communities (and their demands for supplies from their native places) stimulated an increase in international commercial and trading activities. Indeed, ‘both European and Chinese mercantile communities in Hong Kong prospered by providing commercial, financial and professional services’ (Tsai 1993: 26). More critically, the demand for financial services, particularly services driven by the emigrant labourers’ remittances to their hometowns (Hamashita 1997a), created the conditions for the growth of banking and financial activities in Hong Kong from the 1860s.

As noted above, the emigration business involved more than simply human trafficking. The rise of Chinese communities abroad created demands for commercial and financial activities. The establishment of the so-called ‘jinshan zhuang’ and ‘nanyang zhuang’ in Hong Kong, firms specialized in shipping supplies to North America and Australia, and Southeast Asia respectively, served as intermediaries between the growing overseas Chinese communities and the emigrants’ hometowns (Zhang 2001: 182-7). In addition to the shipment of supplies to overseas Chinese communities, these ‘jinshan zhuang’ and ‘nanyang zhuang’ also assumed the role of recruitment agents for emigrant labourers and financial intermediaries. They handled in particular the remittances of emigrant labourers. And that business gradually evolved into commercial lending and credit as well.

In brief, Hong Kong’s participation in the transhipment of emigrant labourers and goods had a much bigger impact on its economy and society than merely promoting shipping and related activities. A whole cluster of economic activities, from shipping and related manufacturing activities to commerce and finance, grew concomitantly with the rise of Hong Kong as a seaport. Internal trade within China also reinforced the momentum of economic growth and development in Hong Kong. As Kose (1994) argues, major centres of commerce and finance like Hong Kong and Shanghai benefited enormously from Chinese internal trade. First, they were centres of regional economies. Second, internal trade was controlled primarily by Chinese merchants. Because of a shortage of currency, most of the trading activities and the related financing (e.g. the issuing of certificates of credit) were carried out by a settlement system under the Chinese merchants’ control. This settlement system worked as a clearing house for business transactions among the local merchants. As a result, Hong Kong and Shanghai functioned both as a centre of trade and of settlement. And because of their international connections, Hong Kong and Shanghai had an additional advantage:

The settlement system was profitable for the Chinese import-export merchants and promoted bartering. It made trade expansion possible even when little silver cash was available.... Foreign merchants did not have locally produced Chinese goods which could be exchanged together with their goods. ... This placed foreign merchants at a disadvantage, and in the late nineteenth century foreign merchants withdrew from local ports to trading centres at Shanghai or Hong Kong.

(Kose 1994: 140-1)

There are two points to note here. First, once Hong Kong’s pace of development picked up from the 1850s, the different kinds of economic activity worked to reinforce each other in strengthening Hong Kong’s role as a commercial and financial intermediary in the changing global economy (Endacott 1964a: xiii, xv). Hong Kong became a base of operations for British traders’ head offices, a centre for the transhipment of emigrant labourers, a seaport with growing supporting industries for interregional and international trades, and a financial hub for remittances and the settlement of payment for commercial activities. Not only did each of these activities develop its forward and backward linkages, thus reinforcing the momentum of growth and development, more importantly together they brought Hong Kong into world and regional trading, financial and migration networks. They literally put Hong Kong on the map of the world economy.

Second, Hong Kong’s rise as a centre of trade and finance was not simply an outcome of Western colonialism (also see Carroll 2005). Nor can we explain Hong Kong’s changing path of development in the nineteenth century simply from the perspective of the metropolitan centre of imperialism (cf. Stoler and Cooper 1997: 29). The socio-economic development of Hong Kong was not determined by the metropolitan centre. Pre-existing interregional and transnational networks of economic activity were equally, if not more, important in shaping Hong Kong ’ s path of development:

The growth of Hong Kong after 1842 into an entrepot owed a great deal to the interregional and international trades already developed in the region centuries before the Opium War. In fact, British Hong Kong inherited these trades, which had long been carried on, with Canton and Whampoa as a transhipment port for commodities from various parts of China, Northeast Asia, Southeast Asia, and the Western world.

(Tsai 1993: 17)

And Hong Kong was not alone in finding that the immediate impacts of colonialism were more limited than expected. Singapore, another British colony and an important trading port in Southeast Asia, was also a case that experienced little direct benefit from British imperial connections. In fact, Britain was ‘not a very important trading partner’ (Latham 1994: 158-9) for both Singapore and Hong Kong. Singapore’s rise to the status of important trading port had a lot to do with its intra-Asian trading networks:

[T]he dynamic element in Singapore’s trade was Western purchases of tin and rubber, which drew imports to Singapore which were then re-exported West. The purchasing power which was thus transmitted to Singapore and Asia was not then channelled back to Britain, America and other Western countries, but retained in Asia where it was spent to a considerable extent on rice and other foodstuffs, and the manufacturers of Asia’s emergent industries.

(Latham 1994: 151)

In sum, the significance of Singapore and Hong Kong, both being British colonies, lay not in distributing British exports within the region, but in assuming the role of reallocation and distribution of Asian goods within Asia. ‘They were the twin hubs of intra-Asian trading activity, not merely British trading outposts’ (Latham 1994: 145).

The pre-existing intra-Asian trading networks played a crucial role in facilitating Hong Kong’s economic development after 1841. The formation of these trading networks can be traced back to the tributary system in Asia, which ‘consisted of a network of bilateral relationships between China and each tribute-paying country, with tribute and imperial “gift” as the mediums of exchange and the Chinese Capital as the center’ (Hamashita 1997b: 120; also see Hamashita 2003). More importantly, the tributary system grew in parallel with or ‘was in symbiosis with a network of commercial trade relations’ within the region (Hamashita 1997b: 120). Hong Kong’s success in locking in to these pre-existing commercial networks, and not its trade and finance with the metropolitan centre of the imperial power, marked the first major turning point in its economic development. Hong Kong captured such opportunities through inheriting the historical trading centre of Canton, and developing into a centre of trade and finance for the intra-Asian economic networks and the international market. It transformed itself in the process from a colonial outpost that served other economic purposes into a city of trade, commerce and finance.

Consolidation of a regional and international business centre

In an article entitled ‘A glance at Hongkong in 1850’, Dr J. Bemcastle, a physician passing through the colony on his way to England from Canton, described Hong Kong as ‘a dull place for a stranger to remain in more than a few days’ (quoted in Bard 1993: 42-3). In Bemcastle’s description, the main street, Queen’s Road, ‘extends the whole length of the town. In it are the principal offices of the merchants, banks, and shops ... filled with all sorts of European goods’ (Bard 1993: 41). And piracy was a problem. ‘There is seldom a week without some attack taking place upon fishing boats or passage-boats, in these waters’ (Bard 1993:41). The description by the famous Russian playwright Anton Chekhov, who visited the colony in October 1890, was very different: ‘[Hong Kong] has a glorious bay, the movement of ships on the ocean is beyond anything I have seen even in pictures, excellent roads, trolleys, a railway to the mountains, museums, botanical gardens; wherever you turn you will note evidences of the most tender solicitude on the part ofthe English for men in their service; there is evenasailors’ club’ (Bard 1993: 50).

Between 1850 and 1890, Hong Kong consolidated its position as an entrepot within the region. Indeed, once Hong Kong entered into the regional and international networks of trade, commerce and finance, it was able to capitalize quickly on the opening of new opportunities. Despite growing competition from other treaty ports in the region, Hong Kong remained the location for the head offices of the leading British companies (see, for example, Bard 1993: 51-79; Meyer 2000: 103-5): ‘The main British firms were centred at Hong Kong, and other ports were

regarded as out-ports, and this remained broadly true, even when Shanghai outstripped Hong Kong in commercial importance’ (Endacott 1964a: xv). The availability of commercial, financial and professional services constituted an essential component of Hong Kong’s competitive advantage.

Equally significant for the socio-economic development of Hong Kong society in the second half of the nineteenth century was the rise of a Chinese business elite. As early as 1854, Governor Bowring noted that economic development in Hong Kong had ‘created a class of Chinamen daily becoming more influential and more opulent to whom we may look for future cooperation’ (quoted in Carroll 2005:52). In his correspondence in 1863 to the Colonial Office, Governor Robinson recognized that the Chinese merchants had played an important role in Hong Kong’s economic growth when he noted that ‘ it is the Chinese who have made Hong Kong what it is and not its connection with the foreign trade’ (Carroll 2005: 53). The rise of the Chinese merchants was reflected in their contribution to the government’s revenue. In 1876, only eight names on the official list of the 20 highest rate payers in Hong Kong were Chinese individuals or firms. In 1881, there were 17 Chinese names; only three European companies were listed (Chan 1991:107). Robinson’s observation about the emergence of the Chinese merchants was confirmed by Governor Hennessy’s report on the census findings (seemingly in an attempt to explain whether the huge amount of money expended by the Chinese merchants on the acquisition of land property was speculation or otherwise) in his speech to the Legislative Council in 1881:

Total value of [land] properties bought by Chinese from foreigners, $ 1,710,0366 [sic]... Now, this large item of $ 1,710,000 on the transfer of property, almost entirely for commercial purposes, to the Chinese community since January last year, is undoubtedly an event of great importance.... The Chinese Trading hongs, - that is, the Nam-pak hongs and other wealthy merchants who now send the manufacturers of England into China, - have increased from 215 to 395 [between 1876 and 1881]. Chinese traders have increased from 287 to 2,377; Chinese brokers, from 142 to 455. Taking the Chinese engaged in dealing in money; - the Shroffs have increased from 40 to 208; the Teachers of shroffing have increased from 9 to 14; the Bullion dealers, who do not appear in any former census, are now returned at 34; the Money Changers, 111 in 1876, still remain at 111, but in 1876 there were no Chinese Bankers returned, and now we have in this census 55 Chinese Bankers. ... Looking to the increase I have pointed out in the ordinary machinery for commercial movement in the harbour, to this remarkable increase of the mercantile community, and to the well-known magnitude of the mercantile transactions of our Chinese merchants, it seems clear that this large expenditure, since January 1880, of $1,710,000 by Chinese for commercial property was a necessary expenditure.

(Endacott 1964a: 146—7)

And the scope of Chinese business was by no means confined to trade, commerce and finance. As noted by Governor Hennessy in the same speech, ‘I find many local Chinese manufacturers in this Colony’ (Endacott 1964a: 148).

It is true that many of these rising Chinese merchants were compradors of foreign hongs. But it would be misleading to assume that the Chinese compradors were completely subordinated to foreign interests. The employment of compradors was a reflection of changes in the business environment and operations (particularly the decline of the traditional commission agency business) (Hao 1970: 21). Diversification of economic activities and the increasingly direct involvement in Asian business meant that the Western merchants had to find support from Chinese compradors for developing a bridge between themselves and the local market. And these Chinese compradors were not simply local agents of the Western merchants. They developed their own lines of business, ranging from trade and shipping to banking and insurance. In short, a Chinese capitalist class was forming and these Chinese capitalists played an important role in the facilitation of Hong Kong’s growth and development into a centre of regional as well as international trade, commerce and finance.

Hong Kong’s status as a regional and international centre of trade, commerce and finance is best reflected in the rapid growth of activity of the Hongkong and Shanghai Banking Corporation (HSBC), established in 1864 as ‘a local bank... for Hong Kong and the Treaty Ports of China and Japan’ (King 1988: 4), which con-

Table 1.1 The Hongkong and Shanghai Banking Corporation branches and agencies, 1918

Location	Year of opening	Location	Year of opening
Hong Kong	1865	Calcutta	1867
Foochow	1867	Rangoon	1891
Saigon	1870	Bombay	1869
Amoy	1873	Colombo	1892
Bangkok	1888
Canton	1909	Mania	1875
		Iloilo	1883
Shanghai	1865
Hankow	1868	Batavia	1884
Tientsin	1881	Sourabaya	1896
Peking	1885
Hongkew	1909	Singapore	1877
Tsingtau	1914	Penang	1884
Harbin	1915	Malacca	1909
Vladivostok	1918	Kuala Lumpur	1910
		Ipoh	1910
London	1865	Johore	1910
San Francisco	1875
New York	1880
Lyons	1881
Hamburg	1889
Yokohama	1866
Kobe/Hiogo	1869
Nagasaki	1891
Taipei	1909

Source: Based on King (1988: 92)

firmed its head office status in regional and international networks. More interestingly, the spread of branches and agencies of the Hongkong and Shanghai Banking Corporation, shown in Table 1.1, covering many major ports connected with Chinese emigration and serving commerce and trade via Chinese migrants, also confirms our earlier discussion about the impacts of the long established Chinese networks, particularly in terms of remittances and the flow of the Chinese population (Hamashita 1997a: 111-14), on Hong Kong’s economic development as a business centre for trade and finance.

In brief, by the late nineteenth century, Hong Kong was clearly a key participant in international and regional networks and flows of economic activity. In commenting on the commercial revolution in China in the nineteenth century, Hao (1986:341-2) noted:

New commercial centers, such as Shanghai and Hong Kong, rose to national and international prominence. They were great population centers, which, unlike earlier Chinese cities as centers of political administration, were primarily great emporiums of trade. It was in these economic centers that those who traded could usually count on a quick sale, prompt payment, and a broad choice of opportunities to invest the proceeds. It was here, too, that one found expert knowledge of market conditions the world over, skill in appraisal and classification of merchandise, informed brokerage services, and sophisticated facilities handling credit, exchange, insurance, and distribution.

Hong Kong’s subsequent rise to the status of a global city did not happen overnight, but had long historical roots.

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2010年12月20日星期一

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2010年11月10日星期三

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2010年1月26日星期二

Hong Kong- Introduction

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