(Chinese Version)

TMTpost Editor’ Note:

It’s rather the lack of talents or funding than the economic structure that’s holding back Hong Kong’s startup environment. Big businesses monopolize Hong Kong’s economy, and social elites are all recruited by big firms. In contrast to having a stable and high-paid job, starting a business will be costly and risky, which stops people from even making such attempts. Eventually, Internet entrepreneur groups in HK are just wandering around instead of scaling up.

Chinese Version

On February 2, 2015, Alibaba Group announced that it is poising to establish the Alibaba Hong Kong Young Entrepreneurs Foundation, offering 1 billion HKD to back young entrepreneurs in Hong Kong. “Hong Kong is a great city with the best financial environment, legal system and higher education in today’s highly globalized world. Students in mainland China do not have such benefits and qualities,” Ma Yun stated in his speech, “The only problem is that the young generation in Hong Kong are afraid of starting their own businesses.”

Back in the 90s, Hong Kong had already started providing Internet services, and was one of the earliest regions in Asia to provide Internet access. Ten years ago, the number of Internet users in Hong Kong was 3.3 million (now the population is 7 million), about 51% of the Hong Kong residents were wired. At that time, Hong Kong ranked fourth in the world in terms of Internet coverage, only trailing South Korea, Sweden and the U.S.. It is reported that Internet users in Hong Kong spend 22 hours online each month, overwhelming other regions in the world. Broadband network now covers all business premises and more than 95% of residential buildings in the city. Community centers, libraries and other public facilities also provide Internet access for free.

Even so, Hong Kong has never been home to influential Internet entrepreneurs or enterprises. It doesn’t befit the reputation as an advanced city known for its open culture and free spirit. So, what’s wrong with Hong Kong? Why so few Internet enterpreneurs? The answers lie behind its society, government, and culture.

An incredibly complex social environment

Deeply connected with the West since the British colonial period, modern Hong Kong is used to welcoming western culture with open arms, and Internet is no exception. “We read news on Yahoo, search through Google and also Yahoo. We go to AASTOCKS for new information on finance. We also use Facebook to socialize with friends, watch videos on YouTube, and enjoy Gmail services, ” said Li Yinghao, founder of a financial service company and a local in Hong Kong. “We rate restaurants on OpenRice, discuss issues with people on Discuss and Uwant, and use Whatsapp instead of SMS.”

The mainstream Internet products in Hong Kong are mostly American. By now, thanks to continuous trade and interaction with the mainland, WeChat and Taobao have also won over a portion of users in Hong Kong, though the numbers remain small. Influenced by both Chinese mainland and the West, Internet users in Hong Kong will definitely become targeted customers of products from both worlds.

This explains the dilemma faced by Internet entrepreneurs in Hong Kong: their oriental cultural background does not allow them to fully cater the western user habits and preferences. Also, being in a city where the East meets the West, these entrepreneurs cannot be flattered to know mainland Internet users by heart. For one thing, Hong Kong has a highly developed transportation network and service sector, there isn't much potential for e-commerce to appeal to local residents, which is why Taobao's prosperity on the mainland has always remained a mystery for Internet entrepreneurs in Hong Kong. At the end of the day, these entrepreneurs find themselves in an awkward position where they are stucked in the middle but know little about both cultures. Under such circumstances, Internet products can hardly thrive.

Benefits of demographic dividend: Demographic dividend refers to a "golden" period when labor force takes up a huge proportion of the total population while the number of children and the elderly is small. This cuts spending on dependents and spurs economic growth. It’s unquestionably a great period for economic development.

This also rings true for the Internet sector. Years ago, many companies were lucky enough to enjoy the benefits of demographic dividend and progressed rapidly, when users at the right age of having Internet access were soaring. Now with more than 7 million people, Hong Kong is aging very fast. The shrinking Internet market in Hong Kong is simply too small to incubate great companies and entrepreneurs.

Mainstream value：As a city deeply rooted in Asian culture, when it comes to choosing a career, the young generation in Hong Kong are deeply influenced by their parents. Holding dear to the mainstream social value that prefers elites in the four pillar industries - trading and logistics industry, financial service industry, industry offering professional business support and the tourism industry, as well as real estate industry - parents invariably wish their children to become doctors, lawyers or to work in big firms or banks more than anything. They think this is the best way to have a stable life.

Although Hong Kong has a rather open market economy, most business sectors, ranging from basic sectors like clothing, dinning and housing to trading, are mostly controlled by big monopolies like Li Ka-shing’s. They contribute more than 50% to the city’s GDP. With vested interest, big businesses in Hong Kong gain great profits from the real estate, trading and harbor industries. To maintain these lucrative advantages, they don’t have the incentives to support startups and invest themselves into the technology industry.

Particularly around 2000, when the Internet bubble finally exploded, investors became more careful towards Internet businesses and were more willing to put their investment in traditional businesses that are more stable. Even job hunters that were looking for IT-related occupations preferred in-house technical support jobs in big firms or to work in other departments. Very few of them chose to start their own businesses.

It’s rather the lack of talents or funding than the economic structure that’s holding back Hong Kong’s entrepreneurial environment. Big businesses monopolize Hong Kong’s economy, and social elites are all employed by big firms. In contrast to having a stable and high-paid job, starting a business will be costly and risky, which hinders people from even making such attempts. Eventually, Internet entrepreneur groups in Hong Kong could only wander around instead of scaling up.

Sluggish and bureaucratic management

Hong Kong’s government is famous for being highly efficient, transparent and incorruptible, yet shows little support for innovations in the tech industry. However, it did set up the Hong Kong Science & Technology Parks Corporation to support entrepreneurs in the tech industry, offering research facilities, infrastructures, planning services and innovative development services. Services for companies include providing office space, marketing and startup capital.

The government offers small amount of funds (from 100 thousand HKD to 300 thousand HKD), office resources (free working space), commercial loans at low interest rates, incubator projects (Cocoon and Startuphk have already gained influence) and entrepreneurial competitions. Activities and exchanges are also provided by the government from time to time, but leaping progress hasn't been achieved so far.

This might seem much, but when compared with Hong Kong’s enormous economy, it’s nothing. In 2012, Hong Kong put 15 billion HKD into technological R&D (with 50% from public institutions), which took only 0.72% of Hong Kong’s GDP, while Singapore and South Korea invested around 2-3% of their GDP in technology alone.

Hong Kong’s economy relies heavily on traditional industries and lacks new blood. For a long time, Hong Kong has been focusing on its four economic pillars: trading and logistics industry, financial service industry, professional business support and tourism industry, and real estate.

These industries take up to 60% of Hong Kong’s GDP. Hong Kong only has to make sure that they thrive then it will certainly make ongoing economic progress. For government decision makers, developing traditional industries that are already strong is prior to exploring new sectors. Therefore, the government is not putting enough resources to develop the tech industry and is not making enough policies to help entrepreneurs. This has become the last straw to break the camel's back when entrepreneurs are passionate to innovate and create.

Political games are also exacerbating the situation where Hong Kong already lacks effective policies. After the proposal of establishing the Ministry of Technology got rejected, the government determined to establish an Innovation and Technology Bureau later in 2014. In February 2015, the plan was presented again to the Finance Committee of the Legislative Meeting, but was blew off once more. Appropriations bill suffered the same fate in the meeting, it’s unclear when the government would finally take them into consideration.

Reluctantly, in March this year, Hong Kong Chief Executive Leung Chun-ying announced the appointment of Nicholas Yang, former vice president of Hong Kong Polytech University, as his chief innovation and technology consultant for a term without pay yet immediate effect.

Innovation and technology industries are very competitive and are changing every single day. Without proper funding, any plan to build up these industries is just pure speculation and empty talk. The political game and bureaucracy are also obstacles for these industries to grow. Leung Chun-ying emphasized that the reason for his appointments of Nicholas Yang as a consultant is to help Hong Kong grasp every opportunity of innovation and technology development. He hoped that Yang could boost innovation and technological development before the Innovation and Technology Bureau is finally established.

Innovation and technology is vital to Hong Kong, and is also relevant to people’s daily livelihood. The government is aware of the urgency and importance of this matter, but we still have to wait for its future moves to see how much the government can achieve.

Survival precedes entrepreneurship, people are under great pressure

Hong Kong has one of the most stressful social environments in the world. There is a popular saying in Hong Kong: When you stop working, it’s time for you to stop having food. 

Since Hong Kong has the best higher education in the world, it’s not surprising that this city also possesses people with great talent. It is also the stressful social environment that pushes them to prioritize stable jobs over unpredictable ones.

Benefiting from Hong Kong's unique geographical location and duty-free policy, people can buy cheap products of good quality in Hong Kong. For college graduates, their average wage is between 10 thousand and 15 thousand HKD (8 thousand RMB to 12 thousand RMB). IT workers with ten years of working experience earn an average of 20-30 thousand HKD while those in finance companies can easily earn millions. Such income gap left people with no choices but to enter fields other than IT.

The overwhelming housing price also puts great pressure on wage earners, which will possibly cost them forever. This stops graduate students dreaming of becoming entrepreneurs from even trying to start their own business. The housing price in downtown Hong Kong is over a hundred thousand HKD for each acre on average. The rural area is also expensive for house buyers, with an average price of 50-60 thousand HKD per acre. As for renting, old and rundown apartments in downtown cost about 7 to 8 thousand. Even if you simply just want to rent a bed, you still have to pay for over 4 thousand. On the accommodation website of Hong Kong, most ads are about room sharing and renting a bed. Without basic income, people can’t even have a place to live.

Comparatively however, in Shenzhen, newly graduated students can earn an average of 4 thousand RMB to 8 thousand RMB. After working for five years, most people earn an average of 10 to 15 thousand. Many people that have been working for 8 or 10 years can earn 20 to 30 thousand monthly. Accommodation for one person in downtown areas like Futian and Nanshan districts is about 2 to 4 thousand RMB per month. If you live in surburbs like Buji, Bantian and Xixiang, the rent will be lower. You can even rent a decent room with 1 thousand RMB per month in inner-city countryside.

Hong Kong has established the public housing system, a system designed to support low-income residents. Such group can enjoy subsidized housing if their household income falls below a certain amount. They can rent public houses at discounted rate, which is similar to the mainland policy. However, this system can not fix everything because there will always be people who need a place to live while housing is limited. Some young white collar workers even choose to be unemployed or to have lesser salary in order to qualify for housing assistance. When high housing price has a huge negative impact on the young generation, how can they have passion and dreams for entrepreneurship?

In Hong Kong, it’s also incredibly expensive to have a car because parking cost people a great deal of money. Ordinary white collar workers can hardly find a parking spot in downtown Hong Kong. For people who work in the CBD, they might have to pay around 8 thousand HKD a month for their parking space.

Now, I would like to show you a very interesting report. According to Durex’s Global Sex Survey, Hong Kong people have the least sex in the world, only a bit more than Japan. The survey shows that Hong Kong people have sex for about 79 times per year, which means they have sex for less than 7 times a month. Chen Weilong, assistant clinical professor of surgery at the Medical School of Sun Yat-Sen University, commented that Hong Kong people live under great pressure, which explained why they have less sex compared to people from other regions.

When people are still struggling to make ends meet, they would naturally lack the passion and courage to start their own businesses. Creativity and innovation will be greatly oppressed when people are living under great pressure, not to mention becoming extraordinary individuals like Steve Jobs, Wang Xing, or Ma Yun, who even started his empire with his wife. In Hong Kong, it’s more about survival and executing orders for most people.

A young man named General Cat who’s currently working in Hong Kong wrote a thought-provoking article on ONE, a leading digital magazine platform in China. “Everyday I take the metro and pass through 8 stations to get to Kowloon for work and gradually, it occurred to me that couples in Hong Kong rarely hold hands in the metro and in the street. Of course, we need to exclude the tourists hanging out at the seashore in Tsim Sha Tsui.” General Cat wrote in his article: “There isn’t much space here. People rush in and rush out, everybody is going on about their lives. It's so difficult to march at the same pace.”

“At the Milan station in Mong Kok, I saw a fancy mink coat in the showcase, hanging quietly and shrouded in loneliness,” in the end he wrote. Internet entrepreneurs in Hong Kong are just like that mink coat. They are alone, and they don’t make a sound.

[The article is published and edited with authorization from the author @Nan Qidao, please note the reference and hyperlink when reproduce.]

Translated by Garret Lee (Senior Translator at ECHO), working for TMTpost.