Will Shanghai Free Trade Zone be another Hong Kong?

While mainland investors cheer the recent announcement on Shanghai's free-trade zone, there are concerns that it'll steal the limelight from Hong Kong as an international center.

This is the current Asian financial center, an international metropolis.And this is a city trying to become a future financial center.

Hong Kong and Shanghai are always compared, partly due to the interplay between the two cities since the 1940s. But now with the recently announced Shanghai free-trade zone, some believe it will put Hong Kong's future into the spotlight.

"We're not competing with Shanghai,we see Shanghai as our customer."said Chan Ka-Keung, Secretary of Financial Service and Treasury of HK SAR.

Mr. Chan says he is not worried Shanghai' free-trade zone will threaten Hong Kong. On the contrary, Hong Kong's transformed itself from a small manufacturing center, to a service center and now an international financial center, partly because China's opening up and reform.

"When you look at the last 30 years, if it's not because China's opening, there is no today's better HK."said Chan.

Trade and logistics have helped Hong Kong's economy grow by 3-percent through the past quarter.

The sector accounts for nearly 25 percent of Hong Kong's economic output.

It's believed that business in Hong Kong is likely to face fierce competition from Shanghai as the harbor becomes fully active, especially after the setting up of the free-trade zone.

Not only this, as the free-trade zone plan may involve amendments to financial regulations, the liberalisation will also be much greater in scale and broader in scope than other similar initiatives in china. Some say the free-trade zone will be another Hong Kong. So can Hong Kong be copied?

"It all depends whether Shanghai has the business environment like HK... like the efficient system."said Dr.Tao Zhigang, Associate Dean of Faculty of Business&Economics of UNIV of HK.

In the latest World Economic Forum's global competitiveness report, Hong Kong moved up two places to seventh. It ranks top in infrastructure for the fourth consecutive year, and also first in the area of financial market development.

So a more realistic voice here in Hong Kong is that the new free-trade deal for Shanghai would not immediately threaten Hong Kong's leading position as one of the world's most important financial centre cities and also one of the busiest ports. But in the long run, Hong Kong must ask itself what competitive strengths are unique to the city; and whether these can be kept for the next decade or two. Even the success of Shanghai doesn't need to come at the expense of Hong Kong. After all, competition is not a bad thing.