Will Hong Kong ever make it as a high-tech center? By building highly wired offices and a new exchange, and by dangling enough invitations, Hong Kong hopes to become the high-tech place to be. Great–if anyone comes. Hong Kong has a long way to go to catch up with Singapore and Taiwan, whose governments have invested heavily in high tech. Its most hyped effort to date has been bumbling–a $1.7 billion Cyberport that’s been criticized as a real-estate project in a high-tech disguise. The new market, modeled after the Nasdaq exchange in New York, is meant to be a fund-raising tool for promising young companies. But it may be stifled by rules. The government has also just announced plans to allow in mainland Chinese experts starting next year, in hopes of bringing in high-tech ideas. The city hopes the best and brightest from China will link their brainpower with the entrepreneurial skills of Hong Kong companies.
The immigrant inflow may be too little, too late. Hong Kong has a severe shortage of scientists. The city is limited by its relatively few and young universities, a brain drain to Silicon Valley and the lure of property and finance, the longtime routes to wealth in Hong Kong. Many Hong Kongers think of Chinese immigrants as bumpkins who will hog social services. But there’s not too much outcry against letting in mainlanders with Ph.D.s and solid work experience. Next year up to 2,000 of them will get one-year work visas for Hong Kong. Hanson Cheah, a tech- focused venture capitalist, says the program should be open to all nationalities, not just mainland Chinese. Cheah, who helps dole out the government’s $96 million tech-research fund, had argued with the immigration officials when he wanted to hire American experts. Hong Kong “needs around 10,000 qualified high-tech professionals–now,” he says.
But China has a budding high-tech sector of its own, with everyone from Shanghai to Shenzhen in the race. “My university is doing a lot of its own research,” says Wang Yongcheng, chairman of Jiaotong University’s computer-science department. He says it has a cooperative agreement with IBM China and plans to set up a software company. “I think Shanghai’s a better place for me.”
The new bourse, theoretically, makes Hong Kong a better place for start-ups that would be lost in a bigger market. GEM is particularly enticing to Chinese entrepreneurs seeking cash, like Joseph Tong, a founder of meetchina.com, which matches Chinese manufacturers with overseas buyers. Tong, who wants to list on GEM next year, worries about recent warnings from Beijing that China’s Internet sector might be closed to foreign investors. GEM’s advantage, he says, is that Beijing “treats Hong Kong like a semi-Chinese market.”
But GEM makes companies wait two years after birth, locking out Kenny, not to mention the students who’ve just hatched a great idea over lunch at McDonald’s. Digital View of Hong Kong, which makes electronic-flat-panel displays, is old enough for GEM but aims for Nasdaq to fund an expansion. GEM–actually, Hong Kong overall–“needs a do-it-today mentality,” says CEO James Henry. One regional analyst says investors are concerned that “any crapola company” might list because companies don’t have to show any prior profit.
There’s still nothing like Nasdaq. Though a Hong Kong, China or Taiwan company can be a bigger fish in a smaller GEM, “no question, Nasdaq is the holy grail,” says Kenny. Companies here are in awe of China.com, which in June became the first China Internet company to list on Nasdaq, and the $89 million it raised. Philip Leung, chief executive officer of ITVentures Ltd., says he’s considering GEM for his Chinese Books Cyberstore, which sells Chinese books online. But “we have Nasdaq aspirations in nine months to a year,” he adds. “Our vision of the company is global, not local.”
To survive, Hong Kong will have to wean itself from the property market. The city will need incentives to attract the best mainland Chinese brains. Despite its gadget-hungry consumers, Hong Kong is oddly suspicious of high tech. Local investors “haven’t perceived my kind of business as a way to make money,” says Digital View’s Henry. On the way to becoming a Silicon island, Hong Kong’s mindset might trip it up.
