There will be some similarity in functions, but there will also be scope for each city to develop its own characteristics as a financial centre. The logical trend in financial services, given the continuation of exchange controls on the mainland, in contrast to the free flow of capital in and out of Hong Kong, as enshrined in the Basic Law, seems to be for Shanghai to develop as China’s domestic financial centre and for Hong Kong to develop as its international financial centre. But there is no reason why they should be deliberately constrained to these roles. China has room for at least two global cities. Nor is there any reason why, in the event the mainland attains the financial and other freedoms enjoyed in Hong Kong, Shanghai should not have a go at the business of international finance, or why Hong Kong, with its highly sophisticated financial infrastructure, to facilitate efficient international as well as domestic financial intermediation, should not have a go at the RMB business. A little competition is no bad thing, as long as it is fair competition, and Hong Kong’s free enterprise is very good at it. The only residual worry is that the playing field might be a tilted one, involving subsidies and other forms of support or protection from the authorities. But WTO entry is thankfully conditional upon the removal of many of these obstacles to free and fair competition, to the advantage of those that are good at this game and are prepared to embrace it.
This doubling in China’s share in the world’s external trade will be complemented by an opening to the world of large sectors of the economy that have hitherto been closed to external investors: the telecommunications, financial services and distribution industries, for example, and a variety of technical and professional services. These are all areas with enormous potential in China. They have already, over the past decade, seen dramatic change and expansion through the - still raging revolution in information technology. WTO entry will give them a further boost by breaking down restrictive barriers and opening the channels for direct investment and technology transfer from outside. Increased foreign competition in these areas will force Chinese enterprises to speed up their reforms to meet the challenges. From a larger and longer perspective, further economic liberalisation and integration into the global economy will undoubtedly be a stimulus to regulatory, institutional and cultural change within China: I note that this is an important theme in today’s conference, although it seems to be a matter of some considerable debate what path, or paths, that change will follow. The general view, nevertheless, is that WTO entry will mean growth, integration and globalisation for the mainland’s economy. 1  BIS Review 68/2000  The implications for Hong Kong The view on the implications for Hong Kong are, on the other hand, somewhat divided.