The character of producer service demand in mainland China : its repercussion on Hong Kong's service industries

Abstract

Abstract of thesis entitled

THE CHARACTER OF PRODUCER SERVICE DEMAND IN MAINLAND CHINA ----- ITS REPERCUSSION ON HONG KONG’S SERVICE INDUSTRIES

Submitted by

Chan Tsze-wah, Gabriel

For the degree of Doctor of Philosophy At the University of Hong Kong In February 2016

A common conviction is that Hong Kong’s economic future hinges on its successful integration with Mainland China, but despite Mainland China’s vast increase in national income since the beginning of the millennium, Hong Kong‘s yearly GDP growth rate has been showing a downward trend. This thesis seeks to uncover the causes for the feebleness of the growth momentum in Hong Kong’s service economy through studying contextually the interactions between Hong Kong’s producer service industries and the demand from the mainland from the beginning of the new century to date. To deepen the understanding of the economic integration process between Hong Kong and Mainland China, in the study, the characteristics of producer service demand and the structural restraints on the demand for knowledge-intensive producer services in the Mainland market are introduced as a critical factor, and focus is also placed on the capabilities of Hong Kong’s producer service providers and whether the city can provide the producer service needs of Mainland China competitively.

The thesis finds that the low income elasticities of trade and transport services provided by Hong Kong to the mainland as well as intensive competition from mainland providers in respect of those services, the under-development of demand for knowledge-intensive producer services on the mainland, the city’s weakness in scientific and technological services, the decline in the demand for financial and professional services due to reduction in overseas fund-raising activities by Mainland enterprises, and the general obstructiveness of the Mainland market to Hong Kong service providers have largely constituted the present economic woes of the service economy of Hong Kong. In the long-term, due to the expected progressive enhancement of Mainland China’s competitiveness relative to Hong Kong and the likelihood of the continuation of the present unfriendliness in the Mainland market, there is doubt whether Hong Kong can just rely on the Mainland market to anchor its long-term economic development.

The thesis also finds that in Mainland China, there are deep-rooted structural restraints on the development of knowledge-intensive producer services, an effective conduit for the dissemination of knowledge, and the country needs to overcome such restraints in order to enhance the employment of knowledge-intensive producer services so as to increase the knowledge intensity of its production systems and achieve success in its present economic transformation.