Hong Kong as an developed economy and society has a well-known structural vulnerability: over reliance on financials (including banks and real estate) for a population of seven million who are used to high living standards. Such vulnerability is economic as well as social: over-reliance on financials means the economy is inherently highly leverage and susceptible to credit shocks, which the financial-related industry is full of winners-take-all phenomenons that lead to income and wealth inequality that contributes to social instability.
What is a comparable economy/society to Hong Kong that the city should learn from? Luxembourg? Well, it is indeed a finance-based economy like Hong Kong, but Luxembourg only has half a million population to feed on. Never mention those tax-haven islands that inhibit much fewer populations. If one looks at developed economies with similar population to Hong Kong, he may end up finding these countries: Switzerland, Austria, Belgium, and to some extent, Singapore. Interesting – all of them (including Hong Kong) are small and open economies. But Hong Kong should have the highest inequality among the five.
What is the common character that those four economies enjoy which Hong Kong lacks? I can certainly think of one: having a strong high-end manufacturing sector. For instance, while Switzerland has a big finance sector, its manufacturing sector is even bigger – precision appliances, medical equipment, etc. Singapore, as another Asian financial center, has a huge manufacturing base around petrochemicals.
Has Hong Kong ever considered building a high-end manufacturing base? I don’t know. But it certainly involves long-term planning and ambition to make this happen.