Hong Kong's Role as a Trading Post Under Threat as China Joins the World Trade Organization

As a former British colony and now a semiautonomous region of China, Hong Kong has long played a crucial role in the global economy as a trading post between China and the outside world. However, with China's imminent membership in the World Trade Organization (WTO), Hong Kong's position is facing unprecedented challenges. The city's historic role as a trading hub may be eroded as companies begin to do business directly with China, according to experts.

Key Takeaways:

• Hong Kong's stock market fell slightly on the news, while shares in mainland Chinese cities of Shanghai and Shenzhen surged ahead.
• More than $52 billion worth of goods passed through Hong Kong's port bound for mainland destinations in 1998, but a third of that traffic is expected to disappear as companies start shipping directly to mainland ports.
• Hong Kong could lose its role as a gateway to China in air travel, with the possibility of direct flights between American cities and mainland Chinese cities, potentially hurting Dragonair, a Hong Kong carrier.
• Taiwan's potential entry into the WTO could further threaten Hong Kong's position, as it may negotiate direct trade links with China, bypassing Hong Kong.
• Only a small number of Hong Kong officials pushed for the US House of Representatives to pass the bill, primarily due to political reasons, with some arguing it would lead to China's change in culture towards observing the rule of law.
• Hong Kong's middleman role is likely to be replaced by a provider of services to foreign companies entering China, but some traditional industries will have to redefine themselves.
• Hong Kong's thriving gray market in goods like oil, cigarettes, and agricultural products is expected to be deprived as a result of China's entry into the WTO.

Statistics:

• In 1998, more than $52 billion worth of goods passed through Hong Kong's port bound for mainland destinations.
• A third of that traffic ($17.33 billion) is expected to disappear as companies start shipping directly to mainland ports.
• By 2005, the United States plans to lift import quotas on Chinese textiles and textile products.
• In 1998, Hong Kong's container port handled nearly $10 billion worth of Taiwanese exports bound for China.
• Hong Kong's cumulative investment in China is $156 billion.
• China's entry into the WTO is expected to add more than 5% to Hong Kong's GDP over the next decade.

Sources:

• Robert C. Broadfoot, managing director of the Political and Economic Risk Consultancy.
• Eden Woon, director of the Hong Kong General Chamber of Commerce.
• Martin Lee, Hong Kong's most prominent pro-democracy leader.
• Victor K. Fung, chairman of the Hong Kong Trade Development Council and owner of a trading firm.
• Stephen Lam, Hong Kong government's chief spokesman.