Leveraging Competitive Advantages

Seminars introducing the spirit underpinning the third plenary session of the 20th Central Committee of the Communist Party of China were held in Macau on Wednesday 28th and Thursday 29th August attended by Macau officials and representatives of the Executive Council and the Legislative Assembly and representatives of various sectors of the community. Similar sessions were held in Hong Kong at the Central Government Offices earlier in the week. This was the first time such sessions had been held and publicly broadcast; an initiative that will surely build a shared vision, set expectations and guide populations, industries and businesses to travel together along the planned pathway.

According to Hong Kong government press releases, the sessions started by Shen Chunyao (Vice-chairperson of the Constitution and Law Committee of the National People’s Congress and the Chairman of the Legislative Affairs Commission of the Standing Committee of the National People’s Congress) and Wang Wentao (Secretary of the CPC Leadership Group of the Ministry of Commerce and the Minister of Commerce) introduced the Resolution of the Plenary Session which focuses on deepening institutional reform and promoting Chinese modernisation. This national strategy is established to improve economic and social outcomes and enhance standards of living.

Delegates representing different sectors presented their perspectives on how the Resolution could foreseeably be implemented in their fields of economic, industrial and social activity, showcasing the unique strengths and advantages of each of the SARs.

The message being made clear both at the sessions and through broad media dissemination is that economic and social players in the respective SARs have critical roles to play in this national reform. They are expected to take responsibility for the integration into the GBA and the national economy through an understanding of their roles and the national goals, and to embrace change as required.

Although these directives are top-down and the weight of their import impressed upon the communities, the method of the sharing of the vision subsequent to the Resolution and an enumeration of the opportunities available and benefits to accrue to those who take up the call bode well for a gentler motivational style. We have an appeal to the heart and purse-strings, as well as patriotic loyalty. Such a resourced and multipronged approach to incentivising appropriate buy-in – the participative nature, the quasi-consultative process, the clarification of expectations – feels new in spirit and nature. One can sense an urgency to get this right.

Macau and Hong Kong have unique attributes to bring to this reform and modernisation of China’s economy. At the Macau session, its external-facing role as a connector between Portuguese-speaking countries and ASEAN was raised, as was multi-lingual proficiency. More insular concerns about local public administrative restructuring, although seemingly at odds with the larger mission, hint at the role a small and confined administration can play as a “testing ground for innovative administrative reform policies,” according to Wang Wentao. There were further opportunities for highlighting the unique competitive advantages of Macau. Some of these novel attributes are less valued but none-the-less worth acknowledging due to the opportunities for leverage, rather than hiding them under the carpet.

As Shun Tak’s recent half-yearly report has raised, integration into a larger economy brings with it difficulties for both large and small businesses as structural changes in human, goods and capital movement shift the status quo. A dispassionate assessment of the areas where Hong Kong and Macau will no longer be able to compete needs to be made – such as in day-to-day retail and services which are better and more cheaply provisioned through increasing ease of cross-border access to both SARs populations (note the most recent permission for non-Chinese permanent residents for north-bound car access and the significant rise of cross-border traffic which have impacted local retail, restaurants, family leisure activities and real estate).

A searing focus on assessing the SARs’ unique attributes, devoid of value judgements may uncover further opportunities to play a role in the larger economy whilst supporting local amenity and livelihoods. Macau, for example, has competitive advantage in gaming due to regulatory provisions giving the SAR monopoly status, Portuguese language due to historical and current cultural institutions, quality western-tradition educational establishments, a modern village-lifestyle close to family and friends, a population generally tolerant of difference, receptivity to a range of management styles, and management and operational expertise in large, complex integrated resorts, amongst others.

Much of what Macau has to offer leverages off its historic openness to the outside world and its residents’, institutions’ and government’s willingness to engage. It is a spirit and a mindset, a set of attributes that has kept Macau as a cohesive yet agile entity that adapts to the circumstances it finds itself in, out of necessity due to its lack of local material resources.

Macau’s true resources are intangible. Each of the current economic competitive advantages are built upon these. The concern is that the integration of and openness to outside influence upon which Macau is built can alternatively be the source of its demise or recognised as an intangible treasure chest. This will depend upon the value placed on Macau’s Macau-ness.

Much has been written about President Xi Jinping’s rare letter to Hong Kong business leaders related to the Ningbo-born entrepreneurs. It has been seen as support for development and a reinvigoration of private business, gratitude for this group’s ongoing support of Ningbo in business, education and philanthropy, recognition of patriotism and a call for continued efforts towards integration, China’s modernisation and opening up. It is also seen as a signal of reassurance for foreign investment through Hong Kong and into mainland China.

It is difficult, however, to obtain clarity as to what level of openness opening up entails. The South China Morning Post reported Wang Wentao as saying President Xi Jinping has stressed that “only an open China would become a modern China.” However, according to Wang Xiangwei, former editor-in-chief of the South China Morning Post, there is still much commentary in public discourse that is hell-bent upon protecting against perceived foreign influence and the unassailability of patriotism. The latter voice has been the loudest until recent times.

The juxtaposition of Xi Jinping’s letter with the sessions in Hong Kong and Macau last week on the Resolution and the SAR’s roles in China’s economic reforms, together with the likes of surveys of Hong Kong residents on the advantages of Hong Kong’s opening-up, and promises in Macau to spread the word of China’s progress towards reform globally suggests these economies are seen as critical to the national agenda. Perversely, the SARs’ advantage to the GBA and national economic integration is precisely their ability to be perceived as unique and separate from China. Think of it as a marketing exercise: one country, three brands – to attract different segments of investors, human and capital resources.

Economist Daniel Susskind offers us an even greater rationale for a belief in the pivotal role that knowledge-based economies and intangible resources such as Hong Kong and Macau have to offer. Growth is generally believed to be limited and that there are natural declines as economies mature. Much of this is predicated on the idea that material resources are finite and even with improvements in productivity and technology there will inevitably be a slowing down of the growth curve (not to mention the resistance caused by the environmental, equity, health and social failures that come with material prosperity). But Susskind says the “tangible world is not where the origins of sustained growth are to be found.” Ideas have properties that material resources do not: they can be used again and again, and one idea builds upon another. The non-rival and cumulative properties of ideas embedded into the DNA of the economies and communities of Macau and Hong Kong offer much promise to the national vision. By Leanda Lee, MDT