Hong Kong's specific inclusion in the national 11th Five-Year Plan (2006-10) is generally well received here in the Special Administrative Region (SAR). There is a common consensus that since Hong Kong is part of China, which is the growth engine for the region, if not for the global economy, we should reserve a good seat on the "China economic express." Rafael Hui Si-yan, chief secretary for Administration of the Hong Kong Special Administrative Region, recently articulated his concern that Hong Kong might risk being "marginalized." This sparked a heated debate in Hong Kong, which served to consolidate the determination that Hong Kong must shape up to face the challenge of integration into the national economy.

Subjective determination apart, a meaningful economic integration entails quite a few problems, both on the part of every level of government on the mainland as well as that of Hong Kong. Hong Kong is commonly recognized as the world's most free economy in which the government deliberately refrains from meddling with the market. It does not even possess the usual macro-management tools common to other market economies such as fiscal policy, monetary policy, industrial policy, and exchange rate policy.

For several decades, Hong Kong has thrived like a single-cell amoeba, freely moving around, exchanging resources with the environment. Now it has had to adapt itself as part of a composite life form, such as an arm to the whole body, serving certain specific functions, synchronizing with the whole entity.

In economic terms, Hong Kong now has to position itself in the national economy, working out an elaborate scheme of division of labour and co-operation with various levels of government on the mainland. This is heresy to the long-held positive non-interventionist dogma, and has left most decision-makers in Hong Kong though they can somehow appreciate the necessity unsure how to proceed. To some die-hards, this may amount to losing a large degree of economic integrity and even economic autonomy.

In a recent seminar for Hong Kong civil servants, Xu Lin, deputy director-general of the Department of Development Planning of the National Development and Reform Commission, stressed that under the Basic Law and the "one country, two systems" principle, the planning and arrangement of socio-economic development in Hong Kong should be formulated by the Hong Kong SAR government.

It may take a while for the Hong Kong SAR government to gradually work out the strategy and sell it to its citizens. In a pluralistic society with elected legislature, this is not a very easy task. Even today, many people still insist that Hong Kong should strive to revive a strong industrial base to maintain its economic integrity, not to mention giving up a long-held economic dogma.

Without directly confronting and assailing the positive non-interventionist dogma, the Hong Kong SAR government can still be more proactive within its existing parameters. Breaking down barriers to trade, investment and information exchange, for instance, is completely in line with free trade principles, and there are a lot of things to be done in these areas.

To cite a few concrete examples, we may question whether Hong Kong should cling to its communications system with its expensive roaming charges on telephone conversations during frequent travel on the mainland. Another recent debate centres on whether Hong Kong's power supply should be open to the South China Grid. Further, low priority was previously given to linking the regional express in Shenzhen to Guangzhou, and then to the whole country. Realizing the significance of integration, the priority can now be lifted to build a dedicated high-speed railway for this purpose.

Attracting external investment has long been accepted as one of the basic roles of the Hong Kong SAR government. The Hong Kong Trade Development Council, a government-funded body with an extensive network of overseas offices, was given this function as early as 1968 when it was first set up. On top of that, the Hong Kong SAR government has a separate network of economic and trade offices and an Invest Hong Kong Department. Over the years, Hong Kong has always adopted a take it or leave it attitude, confident that its superior investment climate and advanced infrastructure would be sufficient to attract overseas investors. All it has to do is to provide information and facilitate the investment process.

Despite this passive official attitude, Hong Kong is today unquestionably the No 1 centre for the regional headquarters of multinational corporations in the Asia-Pacific region, and is by far the No 1 choice in China, with Shanghai as No 2 at quite a distance behind. It is estimated that there are about 7,000 multinational regional headquarters, regional offices and local offices in the SAR. As an indication of its degree of globalization, Hong Kong hosts 107 consulates and consulates-general offices, more than any other city in the world; more than even New York, with only 93 consulates.

Hong Kong is the world's 11th largest banking centre. Our service sector constitutes a remarkable 88 per cent of the GDP, with a highly sophisticated banking sector and good communications links, making Hong Kong the best location for regional and national headquarters anywhere in the world.

With more aggressive efforts to promote Hong Kong as the most convenient gateway to China, we can attract many more overseas companies to set up their regional operations here, enhancing Hong Kong's position as a financial centre, logistics centre, and commercial service centre, as envisaged in the national 11th Five-Year Plan, revitalizing the economy, and creating more high-value jobs. On top of that, commercial tourism, also high-value, will get a big boost.

Also in the plan, mainland enterprises are encouraged to invest and diversify their operations overseas. What other cities can surpass Hong Kong as a springboard and an international operations centre? Many mainland enterprises urgently want to be listed here, and to use Hong Kong's superb trade and commercial service infrastructure to house their headquarters for central management, finance and research and development, and to leapfrog into overseas markets. A convergence of major mainland enterprises and multinationals in Hong Kong will be the catalyst for plenty of business opportunities both for Hong Kong and for the whole country.

On the mainland, this model is commonly called the "headquarters economy." Developing Hong Kong along these lines does not require any unnecessary government intervention as all the elements are already there, but it is definitely supportive of the 11th Five-Year Plan in the most unique Hong Kong way, and will create a win-win situation for all parties concerned.

The author is a member of the Chinese People's Political Consultative Conference from Hong Kong.

(China Daily 04/12/2006 page4)