Hong Kong can retain its special status with the US if it cultivates its differences from mainland China

Technological competition is at the heart of the current US-China trade conflict. What is at stake is which country can best turn technological innovation into a new engine of growth. At a time when Hong Kong officials say that the city has to “prepare for the worst”, it would do well to examine where it can add real value. What are Hong Kong’s unique characteristics in competing in the new digital economy? Is it condemned to be “just another Chinese city”, as pessimists have predicted, or should it aspire to distinguish itself?

The just-released US-China Economic and Security Review Commission report brings into focus the dilemma that Hong Kong finds itself in. The question raised over whether Hong Kong should continue to be treated as a separate customs area for dual-use technology with civilian and military aims suggests how a worst-case scenario might play out, one in which the US’ hardline approach on trade with China threatens Hong Kong’s unique trade status. The report also noted Hong Kong’s self-positioning as a “key node” of the Greater Bay Area, which the US sees as a competitor in technology.

When China was hit with an embargo as a result of the Korean war, Hong Kong was cut off from many US shipments as American companies didn’t want to take the chance that their goods would be smuggled into the People’s Republic. Today, curbing the transfer of US technology seen as sensitive could disrupt key sectors including medical and telecommunication technologies, as well as technologies crucial to the realisation of Hong Kong’s “smart city” ambitions.