As two of the Four Asian Tigers, Singapore and Hong Kong have been discussed in the economic circles in one breath. While the South Korean and Taiwanese economies built up their manufacturing capabilities, Singapore and Hong Kong became prominent global financial hubs. Both Singapore and Hong Kong served as important gateways; Singapore opening the wider Asian market to Western businesses while Hong Kong being the first port of call for businesses entering the Chinese market.

Asia is now emerging as the most strategically dynamic region in the world. In a study by Blackbox Research and ADNA, both Singaporeans and Hongkongers believe that their two cities are the most important in the region as well as being critical to the global economy.

However, the perception of its citizens notwithstanding, Hong Kong’s long-standing reign as Asia’s top financial hub recently came to an end. Singapore moved up three places to third place in the latest Global Financial Centres Index (GFCI) of the world’s leading international financial centres, behind New York and London, while Hong Kong slipped to fourth place.

Singaporeans saw it coming

In a mid-year survey by Blackbox Research, 76% of respondents felt that Singapore would inevitably take over from Hong Kong as Asia’s major global financial hub. This came at a time of growing criticism of China’s management of Hong Kong, both in governance and the management of COVID-19.

Why are people leaving Hong Kong?

The Chinese government, in a series of policies, had exerted greater control over Hong Kong’s more liberal aspects of governance. From arresting dissidents to rewriting school curriculum, some of these policies have spooked businesses, especially from the West, to relocate elsewhere, including to Singapore. The ongoing tensions between China and the United States have also not helped the situation.

In an October 2022 Blackbox-ADNA survey, 99% of polled Singaporeans felt that Hong Kong’s integration into China posed major disadvantages to the city at present. On the other hand, 51% of polled Hongkongers saw minor disadvantages at the very least while 36% felt that the integration poses major disadvantages. This is unfortunate as Hong Kong remains one of the easiest places to do business, especially for companies looking to eventually enter the mainland Chinese market.

The inconsistency in managing the COVID-19 pandemic in Hong Kong has also dampened enthusiasm for the city. Hong Kong, like mainland China, had adopted a Zero-COVID policy, a mix of stringent quarantines, mass testing, and vaccination programmes. However, as other countries moved towards a normalised, post-COVID strategy, Hong Kong had stuck to the Zero-COVID policy for too long according to some critics.

In the Blackbox-ADNA survey, only 6% of polled Singaporeans felt that Hong Kong had a better COVID management strategy. In contrast, 51% of Hongkongers felt Singapore had the better strategy.

The mismanagement of Hong Kong has inevitably tarnished its international standing and raised serious questions about the future of the city. Hong Kong has announced property tax cuts and  easier visa requirements for 13 priority professions to woo back foreign talents though expatriates are unsure of their future within Hong Kong.

The departure of expatriates from Hong Kong will eventually lead to a brain drain. Economic brain drain refers to the emigration of highly trained or qualified people from a particular country. This is especially problematic for Hong Kong’s financial industry which is dependent on talented professionals.  

Singapore has become one of the major destinations many ex-Hong Kong expatriates are flocking to, though views by Singaporeans are mixed on the matter. Only 41% of Singaporeans in the mid-year survey by Blackbox viewed the move of people from Hong Kong to Singapore positively while 38% expressed negative sentiments. Much of the negativity stems from domestic concerns about rising property prices, housing rental, and daily costs of living being potentially impacted by the arrival of many expatriates into Singapore.

Singapore and Hong Kong to continue being Asia’s leading financial hubs

Eventually, Asia will recover from the economic slowdown caused by COVID-19 and the current inflationary crisis. Singapore and Hong Kong will continue to be major financial hubs for the Asian region. According to the Blackbox-ADNA survey, 55% of Singaporeans and 26% of Hongkongers firmly believe that Singapore will continue to outpace Hong Kong as Asia’s leading financial hub. Meanwhile 27% of Singaporeans and 30% of Hongkongers believe that Hong Kong will bounce back and reclaim its numero uno status.

One of the potential reasons behind Hong Kong’s optimism is its comparative strength in its financial markets. The Hong Kong stock exchange’s (HKEX) daily turnover of US$16.5 billion far outstrips Singapore’s US$890 million as of January 2022. Hong Kong is also likely to have an easier time attracting wealth from Mainland China. For businesses looking for a public listing on an Asian exchange, Hong Kong simply has a more vibrant securities market than Singapore.

Beyond the financial considerations, many Hongkongers, as found in the Blackbox-ADNA study, still believe their city has many qualities which offer an advantage over Singapore – from better food to vibrant local culture, to being more cosmopolitan. Hongkongers also believe their city is a good place to work and make money compared to Singapore.

Singaporeans are more optimistic about their city’s future

From a future perspective, both Singaporeans and Hongkongers firmly believe that Singapore is much better placed to move more confidently into the future. Singapore is certainly not bereft of domestic and international issues—namely, cost of living, housing, and job security—but Hong Kong does have more overt concerns. Political uncertainties, muted confidence in the Hong Kong government, the exodus of talented foreigners, brain drain affecting Hong Kong’s key industries, and the continuing effects of COVID-19 can all dampen expectations for Hong Kong. 

The confidence in Singapore’s future may also stem from the city-state's measures to promote technological innovation. 1 in 2 (50%) polled Singaporeans believe that Singapore is well-placed to become a leading global technology hub in the future. However, only 3 in 10 (31%) polled Hongkongers felt their city would achieve the same. Interestingly, more than 1 in 3 (37%) Hongkongers felt that both Singapore and Hong Kong would become leading global technology hubs in the future.

Singapore’s Smart Nation programme paves the way for meaningful integration of technology into the lives of everyday Singaporeans, be it through digital governance or the digital economy. Other initiatives such as Research Innovation and Enterprise (RIE 2020) have provided a business-friendly environment for tech companies in Singapore. The city-state already plays host to some of the biggest tech-oriented companies such as IBM, Revolut and Cognosphere.

Meanwhile, Hong Kong’s proximity to Shenzhen, China’s tech hub city, also presents opportunities for businesses to provide important financial and auxiliary services to Shenzhen’s tech companies. Hong Kong is also looking to initiate the development of smart ports given the high value-added logistics and maritime business the city sees.

In 2022’s Dialogue with the Council on Foreign Relations (CFR), Singapore’s Prime Minister Lee Hsien Loong spoke of the importance of Hong Kong to Singapore, “From a broader point of view, it is not to our advantage to have Hong Kong languish. We are far better for us (sic) to have a robust competitor. They thrive, we thrive. We will make a living, and so will they.” Even as Singapore takes the top spot as Asia’s financial hub, it is in Singapore’s interest for Hong Kong’s troubles to be temporary. Singapore and Hong Kong are strategic competitors, not rivals for the sake of it.

Singapore and Hong Kong will continue to be the major economic hubs in Asia. Get in touch with us at connect@blackbox.com.sg to understand more about these dynamic economies and what they mean for businesses, investors, and governments worldwide.