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.
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.
List of figures xii
List of tables xiii
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
|
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
|
|
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
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 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.
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.
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.
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)
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.
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
N
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.
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-
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Table 1.1 The Hongkong and Shanghai Banking Corporation
branches and agencies, 1918
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Source: Based on King (1988: 92)
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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.
