Will Hong Kong's financial talent come to Tokyo?
Good day. I'm Mike, a lawyer living in Hong Kong.
Last time I wrote about the basic premise, this time I'll talk about the minor premise.
"Tokyo is one of the financial capitals of Asia."
This is a fact. In fact, it was only 10 months ago that Tokyo, which had long been behind Hong Kong and Singapore (and more recently Shanghai) in the biannual Global Financial Centres Index (GFCI), was boasting that it was finally in third place, behind New York and London. Unfortunately, it has always been in the top 6 group, although most recently it was 4th. But a closer look at the scores shows that New York and London are battling for the top spot, Hong Kong and Singapore are a little further back in third place, Shanghai and Tokyo are battling for fifth place, and now Shanghai and Tokyo are catching up, making it a four-city race for third place, with Hong Kong, Singapore, Shanghai and Tokyo all battling for the top spot in Asia. In other words, Hong Kong, Singapore, Shanghai and Tokyo are fighting for the top spot in Asia.
Leaving Shanghai aside for a moment (given China's recent economic growth, it may not be long before Shanghai is in first place), I think it is quite different to say that Tokyo is a world financial centre like Hong Kong and Singapore. When a government official asked me the other day what I thought about bringing Hong Kong's financial talent to Tokyo, I said, "It's like asking a player playing at Wimbledon to wrestle at the Kokugikan. I made an analogy. Do you understand me?
Originally a small fishing port, Hong Kong was ceded to the British in 1842 as a result of the Opium War and developed into a transit trading centre for the British in Asia. Hong Kong's land is too small for manufacturing or agriculture, so the best way to develop the economy is through the service industry (financial services), which relies on human capital. The Hong Kong government is well aware of this, and is actively creating an environment and system that makes it easy for fund managers and others to work in Hong Kong, taking advantage of the well-developed legal system under British rule, preferential taxation, high standards of education and English language training. Singapore is much the same.
JAPAN, ON THE OTHER HAND, FROM THE PROTECTIONIST POLICIES OF THE HIGH-GROWTH YEARS OF THE 1960S TO THE CHAOS OF THE 1990S AFTER THE BURSTING OF THE BUBBLE ECONOMY, THE FORMER MINISTRY OF FINANCE'S CONVOY PROTECTIONISM OF DOMESTIC INDUSTRY, AND ESPECIALLY DOMESTIC FINANCIAL INSTITUTIONS, HAS PLACED VARIOUS RESTRICTIONS ON FOREIGN TALENT, AND EVEN ON FOREIGN COMPANIES ENTERING JAPAN. IN THE 1980S, WHEN JAPAN WAS REVERED AS "JAPAN'S NUMBER ONE", IT WAS SAID THAT YOU COULD BUY THE WHOLE OF THE US FOR THE PRICE OF A PLOT OF LAND IN TOKYO, AND JUST AFTER THE BUBBLE BURST, SEVEN OF THE TOP TEN GLOBAL COMPANIES IN TERMS OF MARKET VALUE WERE JAPANESE, WITH NTT AND TEPCO THE ONLY OTHER FIVE BEING BANKS. THE OTHER FIVE WERE BANKS. UNFORTUNATELY, 30 YEARS LATER, TOYOTA IS ONLY IN THE 40S.
The convoy system is gone now, but the residue of protectionism is still visible everywhere. The people at the heart of Japan's political and economic life are all old people who experienced this Japan-as-Number-One system when they were young (like me), and they think that the financial city is about managing domestic financial assets (and the personal assets of even older people) to become a world leader.
After all, Hong Kong (and Singapore) have created a platform for the management of funds from all over the world, whereas Japan, which has focused on managing domestic assets domestically and has excluded foreign funds and managers, has a completely different character even though it is a "financial city". In this sense, Japan may be a financial city, but it will never be a financial hub.
To be continued next time.
