Hainan, Shenzhen, and Hong Kong's rivalries will drive trio

As a free trade port, Hong Kong boasts the hard-earned fame of a shopping paradise. But the paradise has been put to the test during the pandemic as the city has been practically sealed off for over a year. It seems that one city's loss is another's gain as the pandemic fueled the rise of Hainan province, a subtropical island with breathtaking sea views, as a new shopping destination.

Hong Kong's "paradise lost", however, does not deprive domestic shoppers' pursuit of luxuries and outlandish duty-free goods. When cross-border shopping appeared to be inaccessible for months, the eager buyers' eye for the new apple within their country turned to Hainan, a Thai-like coastal resort. Compared with the hustle and bustle of Hong Kong, the emerging shopping destination of Hainan has more to offer its wealthy tourists - beaches with stunning views silhouetted by lofty palm trees. In 2020, Hainan racked up a handsome 30 billion yuan ($4.64 billion) in sales of duty-free commodities, double the number for the previous year. The growth shows no sign of abating and sales are expected to double again this year.

The recent Boao Forum, hosted in Hainan, signaled a promising future when the island of sandy beaches was put in the spotlight. The free trade port got off to a good start with the pandemic locking in domestic spending. The emphasis on domestic circulation of the "dual circulation" economic model raises confidence among investors and residents.

Martin Moodie, founder and chairman of the Moodie Davitt Report, told the fifth annual Luxury Symposium, held virtually on April 21 by the French Chamber in Hong Kong, that Hainan is the lighthouse of the global travel retail industry, saying that having "claimed a place at travel retail's top table, there is no chance of it relinquishing that position".

Moodie said that the dazzling success of Hainan in the international travel retail industry is thanks in part to China's dual-cycle approach which "maximizes domestic consumption and repatriates spend by Chinese travelers abroad".

As the island continues to reel in tourists to spend lavishly on duty-free commodities, Hong Kong's quest to retain its reputation as a shopping paradise is fraught with problems, with firstly the prolonged social unrest, coupled with border controls brought about by the pandemic.

Along with the rise of Hainan into a free trade island, one theory has emerged of Hong Kong being surpassed by the island, as part of an attempt to hype up the threat of Hainan to Hong Kong. This sentiment suggests that the success of one comes at a cost to another. The theory has assumed shades of a similar rivalry narrative between Hong Kong and its neighboring city Shenzhen, which transformed itself from a fishing village into a high-tech powerhouse during the nation's reform and opening-up.

Hong Kong's relationship with Shenzhen is an interesting case study for the co-development of mentoring. When the Shenzhen Special Economic Zone took shape in 1980, it had a mentor next door for navigating across the river to the market economy. For four decades, it picked up quickly on the market economy, talent, trade, aviation, and many other areas of Hong Kong, the nation's gateway to the West, and mastered the skills needed for its grand transformation.

Shenzhen, the apprentice, is modest yet bold, and has finally ascended to the same level as its mentor. Undeniably, heroes are not born, they're hammered out through trial and error with gut and wisdom in a perfect sense of timing and mastery in making the most of circumstances. In this respect, Hong Kong was a hero of the past, Shenzhen is one of the present, and Hainan will be one of the future.

Chinese have a saying that "one hill is not spacious enough to accommodate two tigers". Is China's southern coast too narrow to harbor three cosmopolitans pillared on the same trades? Will the three-pronged rivalry in the finance, service and retailing industries hurt everyone?

The answer is no. Shaping Hainan into a free trade port creates an unprecedented opportunity for Hong Kong, as well as Shenzhen, to sharpen the sword: Hong Kong's comparative advantages, such as professional services, aviation, and healthcare, will become more attractive and lucrative as the Guangdong-Hong Kong-Macao Greater Bay Area prospers. Besides, the city is already fine-tuned to be a hub for arts and cultural exchanges - another niche for it to distinguish as a conduit between China and the world.

Eventually, the pandemic will end, and the trio's success story will keep going. If the rise of Shenzhen and Hainan could be any hint to Hong Kong, it should be that they have seized the opportunity by banking on their unique positioning.

One thing for sure is that the trio model the economic miracles China has been creating for decades. Instead of brushing aside the theoretical threat or indulging in self-pity, Hong Kong should soldier on with its lion-rock spirit and continue to forge its skillset in the new roles it has to play in the nation's development.