Hong Kong and Beyond: What Awaits the Global Economy?

Sumru Altug

Koç University and CEPR

14/04/2015

We live in extraordinary times. Just last year the World Bank announced that China had surpassed the US as the largest economy in PPP terms - this from a country which, in 1978, had a GDP per capita that was one fortieth of the US and one tenth of Brazil. As China prepares to assume the G-20 presidency in 2016, we can almost hear the reverberations of its approach from afar. At the upcoming IMF-World Bank meetings to be held in Washington, DC next week, one of the key issues under discussion will be the inclusion of the Renminbi in the basket of currencies that make up the Special Drawing Rights, the special reserve asset created by the IMF in 1969 as a supplement to member countries' reserves.

I witnessed the great energy of Asia itself, not only of China, during my stay in Hong Kong as a Visiting Professor at the City University of Hong Kong last fall. As my plane approached the city from the air, I was struck by the beauty of its location but also how organized and well developed the city was.

My first impressions did not disappoint me. As an academic, the existence of so many topnotch universities in so small a space - Hong Kong University, Chinese University of Hong Kong, HKUST, not to mention City U. itself - made me feel like a child in a candy shop. I had a great chance to learn the latest scholarship on China, and to become familiar with the latest policy discussions. One of these was surely the Shanghai-Hong Kong Stock Exchange Connect, which will allow overseas investors to trade in the Mainland A-share market through Hong Kong, and Mainland investors to trade in Hong Kong shares through Shanghai. Mr. Norman Chan, Chief Executive of the Hong Kong Monetary Authority called it "an important milestone in the liberalization of the Mainland's capital account."

But my visit had many other treats in store for me. The students I taught at City U. turned out to be a bit shy but smart, inquisitive, and willing to engage with me on the latest discussions in macro policy and scholarship. I also travelled all over Asia. My first visit was to Seoul, S. Korea, where I visited the Korean Economic Research Institute (KERI), which is a major policy institute under the auspices of Federation of Korean Industries. The people were very friendly in Seoul, and when the hotel assistant learned that I was from Turkey, she remarked that "S. Korea and Turkey are brother countries." My stay was brief but as I was leaving from Incheon Airport, I was regaled with an opera being staged right on its premises!

I also travelled to Taipei and Chiayi in Taiwan, at the invitation of former PhD students that I had taught at the University of Minnesota in the late 1980's and early 1990's. I visited the National University of Taiwan, which is an excellent institution ranked as the top 155 institution of the Times Higher Education university rankings, and got to see the "dragon buildings" at the National Chung Chend University in Chiayi. During my travels, I was truly impressed by the infrastructure all throughout present-day Asia - the modern airports, the fast trains, the world-class think tanks and universities - not to mention the thousands of people travelling between the different cities. Aside from the ubiquitous selfie-stick craze, Asia presents a picture of modern, dynamic, and even harmonious societies that have catapulted themselves into the 21st century with remarkable prowess.

My last trip was to Kyoto, the ancient imperial city, and to the world renowned Kyoto University. Surprisingly, in Japan, I saw many hints of UK influence - driving on the left side of the street, the detailed regulations that govern all aspects of life, even the mix of industrial, retail, and service activities that dominate Japanese and British cities alike. This must go back to Japan's industrialization experience and its island-nation status. All countries, in the end, emulate others as they strive to develop, and I guess Japan had taken the UK as the first example of an industrialized country. But such emulation is prevalent all over Asia! Indeed, it is well known that Deng Hsiao Ping and his colleagues looked to the successful examples of Taiwan, Singapore, and Hong Kong as they contemplated their capitalist reforms, which also opened up the Chinese economy to trade with the rest of world. Today Hong Kong serves as a role model for Mainland regulators and policymakers in their quest to deepen financial reforms in China.

So little space, and so many experiences I gained during my stay. All I can do here is to point to the wonderful, dynamic societies rooted in ancient cultures but striving so successfully for the future. I didn't mention the other cultures and countries of Asia - Vietnam, the Philippines, Thailand, Indonesia, Malaysia, not to mention amazing India. But they are also caught up in the energy of Asia, and their people and economies are rushing towards a new future. Can we aspire to be part of that future, too?


Sumru Altug is a professor at Koç University and a researcher at CEPR.