Hong Kong’s innovation and technology role in Mainland China’s 12th Five Year Plan

 In Economic Development & Economy

Executive Summary


Milton Friedman described Hong Kong as a laissez-faire economy and he credited that policy for Hong Kong’s prosperity since the end of the Second World War. Yet some local Hong Kong activists mock the “Freest Economy of the World” rating as business-government collusion that ignores a widening wealth gap, a more sustainable economic growth strategy and social justice.


Since 1997, the HKSAR Government has been learning to deal with increasingly demanding and diversified groups of stakeholders in the community. At the same time, Hong Kong is increasing its integration with Mainland China. Hong Kong has distinct advantages including: rule of law, integrity, free press, open information environment and Hong Kong’s free and independent thinking capacity. As a Special Administrative Region of China, Hong Kong is treated as a separate custom territory under the “United States-Hong Kong Policy Act of 1992”and can import many U.S. technologies that have embargo on Mainland China. But how do we turn those advantages into economic opportunities? What can Hong Kong do for Mainland China in the context of the 12th Five Year Plan? How do we attract the world to use Hong Kong as gateway for further economic cooperation with China?


Objectives of China’s 12th Five Year Plan
The National 12th Five Year Plan (12-5 Plan) was released as a draft document and passed on 18th October 2010 at the 5th Plenary Session of the 17th Party Congress by the Central Committee of the Chinese Communist Party. Many of the goals stated in the proposal are closely related to Innovation & Technology and Knowledge Economy. Hong Kong is still very new to this planning process and many of the discussions centered on and around Hong Kong’s role as a financial centre and other commercial interests. Hong Kong also seems confused on whether the 12th Five-year Plan is directives “from above” and or if it is a national development plan seeking proposals “from below”.


The 12-5 Plan stated China’s economic ambition to become a truly “moderately wealthy” nation during the period of 2011-2015. To achieve this, China will continue with “Reform and Opening” and rely less on an export-oriented model for growth. More emphasis will be put on domestic consumption and sustainable development. The intention is real improvement in standard of living and real wage increases for the vast majority of the population. To achieve quality growth, planners at the Central Government level fall back on the tradition Confucian values of “knowledge” and “education” – which translates into“Innovation and Technology” (as understood by national leaders) and the “Knowledge-based Economy” (as it is practices in the United States and Europe).


Developing the Knowledge Economy as a reciprocal win-win strategy
Hong Kong, however, is somewhat uncomfortable with becoming part of a planned economy. Hong Kong was essentially built on a foundation of “… good laws, well administered” since it came under British Rule on 29 August 1842 after the Treaty of Nanking. Hong Kong has remained a Special Administrative Region (SAR) under Chinese rule after 1997. A legal and administrative system that is separate from mainland China has remained in place. Hong Kong is a territory of China that has done most of the important things right and a territory mainland China could continue to look at when faced with confusion regarding policy choices. Hong Kong also has all essential “first-level business conditions” which enables Hong Kong to turn into a world-class innovation and technology centre and incubation and commercialization hub to service R&D outputs from Hong Kong, mainland China and from the world.


Hong Kong, however, needs a footing – a positioning and a more active role in the 12-5 Plan. Such a cooperation process of asserting Hong Kong’s “Soft Power” to facilitate trade relations between China and the West should be based on Hong Kong’s most distinct competitive advantages. It can have many names: “Innovation & Technology”, “Commercialization”, “Knowledge-based Economy” or offering Hong Kong’s “Soft Technology” to mainland China.


The Knowledge Economy idea is not new to Hong Kong. In the early 18th Century, Europeans in Hong Kong used “advanced technology” — the China Clippers, the fastest sailing ships in the early 18th Century — to ply trade route between China and Europe. Therefore, some argue that Hong Kong is already a Knowledge-based Economy and nothing more needs to be done. Yet, Hong Kong does not have a meaningful critical mass that would allow it to become a technology hub or to develop commercialization knowhow. University-based researchers keep using government money to invent and develop technologies and end up selling the results cheaply to mainland and international companies.


The lack of solid initiatives and ideas in Hong Kong has prompted some academics to quote John F. Kennedy’s 1961 inaugural speech and remind that Hong Kong should: “… ask not what the country can do for you; ask what you can do for your country”. Hong Kong must be proactive – identify and design an appropriate strategy and the supporting implementation policy and measures to make things happen. Hong Kong must also focus on its core strengths – the essential attributes and competitive differences that mainland China and the rest of the world cannot duplicate easily.


Relying solely on the “Four Pillar Industries” and “Six New Industries” need not be the only strategies for Hong Kong. A vertical sector-based industry support strategy is something Hong Kong should try to avoid. A more logical support strategy Hong Kong should adopt is the horizontal support strategy – an approach favored by the OECD and by the European Union as it does not name the “winning sectors” and exclude the “emerging” or “unforeseen” sectors which often become real winners because of market driven forces.


Discovering Hong Kong’s market niche
A diplomat who is also a very well-learnt scholar of contemporary Russian and Chinese history said if Gorbachev had a little piece of Hong Kong when he was trying to reform USSR through “Perestroika” and “Glasnost” in the 1980s, it would have been easier for him and he could have done a much better job. Hong Kong should not overlook the historical perspectives — Hong Kong has made much contribution in the early 80s by providing capital and production skills to the Pearl River Delta. Now that China is rich, Hong Kong’s “soft power” has become more valuable than the money Hong Kong businessmen provided in the past. And these are the ingredients China is looking for to achieve the objective of quality growth.


Hong Kong’s role in China’s 12th Five Year Plan (12-5) must include China’s “Self-initiated Innovation”objectives. To find a market niche for itself, Hong Kong also need to understand and face up to its own inadequacies. Moving Hong Kong towards knowledge-based production is not a sharp break from the past — nor is it a “sector-based” support strategy as misunderstood by some opponents. Coming up with a coordinated economic development policy and providing business facilitation to turn part of Hong Kong economy into a commercialization hub (along the lines of Silicon Valley, Boston and the Research Triangle of North Carolina) is not a big step for Hong Kong to take. Samson Tam, Hong Kong legislator for the IT Sector, suggested publicly that Hong Kong needs an “Innovation and Technology Bureau”. He suggested that the proposed Bureau “… will have the responsibility to build up links to initiatives in mainland China and the rest of the world under the “Open Innovation” theme”. Hong Kong has been successful as a trading hub of goods, but Samson believes that Hong Kong also has potential to evolve into a trader of knowledge, linking R&D in universities and serving as a technology transfer and commercialization centre that serves mainland China and the world.


Opponents of “Innovation & Technology” and “Knowledge Economy” should take note that the subject is not about supporting narrowly defined “technology” or supporting narrowly defined business sectors. The concept, as it is practiced by the Danish Mindlab and many future centres in Europe, embraces“social innovation”, “public sector innovation”, very broad perspectives on social and economic development, R&D and job creation and business and economic value creation across all business sectors. NESTA[1] (National Endowment for Science, Technology and the Arts) of the UK which is the closest equivalent of the Innovation and Technology Commission (ITC) in Hong Kong, takes risk on behalf of the UK Government by investing in medium to long-term projects, informing the UK Government on innovation policy and encouraging a culture that helps innovation to flourish. The result is a UK innovation policy that embraces all innovative activities.


It was suggested that HKSAR Government could play the role of a creator of “virtuous ecology” to facilitate economic growth. Indeed, the idea of “Virtuous Ecology” has a Buddhist origin —  an “Indra’s Net”, often pictured as a light-weight “spider web” with jewels of water droplets attached: “… formless with qualities that depend on the wisdom of the observer.” Such a metaphor is particularly relevant to Hong Kong’s role in the National 12-5 Plan. Asserting Hong Kong’s “Soft Power” and a light-weight facilitation role have no conflict with the market-driven philosophy of Hong Kong or the national development strategy (see point 6.6 for a list of proposed facilitation measures).


The National 12th Five Year Plan is not an order from above. It is not a static thing, but a constantly evolving set of national development objectives Hong Kong could contribute to. Hong Kong needs to take this opportunity to upgrade its own economic infrastructure – or risk becoming irrelevant to the mainland economy and other economies of the world.



Alan Lung Ka Lun (龍家麟)
Director & General Manager of Asia Pacific Intellectual Capital Centre (亞太知識資本中心董事總經理)
16 March 2011




[1] NESTA’s (National Endowment for Science, Technology and the Arts) stated aim is to transform UK’s capacity for innovation.


(Download the full English version of this paper as a pdf file from apicc.asia or from hkdf.org or the full Chinese pdf file from here.)


Reproduction of this article is permitted with proper attribution to the author.





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