B.C. Lo, an employee of the Coca-Cola Co. for the past 14 years, sometimes feels a bit like a man adrift on a shrinking piece of pack ice. As corporate-affairs director for Coke's Chinese operations, he has been busy lately helping the company move its local headquarters from Hong Kong to the mainland powerhouse of Shanghai. Now that the move is complete, he and six other staff members are all that are left of a former complement of 140 people. In Shanghai, by contrast, Coke's staff will have jumped to a 1 million-sq.-ft., seven-story building on the Huangpu River in the Pudong area, the commercial investment hub still in the throes of hothouse creation by the government. Says Lo: "If you want to crack the China market, you have to be in Shanghai."
For years the business world in Asia has buzzed about a looming showdown between Hong Kong and Shanghai for the title of economic heavyweight champion of China. The bout is now in its middle rounds, and it's a slam-bang fight. Hong Kong is still ahead on points, but Shanghai is coming on strong and may be headed for a late-round KO. In fact, Shanghai, once the biggest financial center in all Asia, looks intent on regaining that title too. The fear in Hong Kong business clubs is that the former economic hub could become, in most China watchers' words, just another Chinese city.
Comparatively staggering Hong Kong real estate prices are one reason for the migration: rents in the city are running roughly $3 to $11 U.S. per sq. ft. But much more important are the clear signals coming from Beijing that anyone wanting to do serious big business with the communist government had better be prepared to shift to the mainland metropolis. Chinese President Jiang Zemin's national government has been a major exponent of Shanghai's new Pudong economic center, some 135 sq. mi. of former marshland that is the transplanted economic heart of the new Shanghai. Having invested around $185 billion in Shanghai's renaissance, China's rulers clearly want to see the rest of the world acknowledge the primacy of their choice.
This is an ominous sign for Hong Kong, a city of 7 million that was long viewed as the gateway to the communist mainland. But since the takeover of Hong Kong by China in 1997, more and more multinational corporations have seen the calligraphy on the wall. AIA Insurance, an American insurance company, moved its China headquarters to Shanghai last year; Philips Electronics did the same in April; and HSBC Group, the banking complex, followed in May. Dozens of other companies plan to make the jump soon, according to a survey by the American Chamber of Commerce in Hong Kong. The Shanghai chamber says it is signing up more than 50 new members every month. Foreign investors have poured $27.7 billion into the city in the past 10 years, while Shanghai's gross domestic product has grown at an average of 10% a year, compared with 3.7% average growth for Hong Kong. "Hong Kong was never really a gateway to China; it was a window," says Andy Xie, executive director of Morgan Stanley Dean Witter in Hong Kong. "But why would you want to go through the window when the door is wide open?"