Hong Kong, the Middle East's gateway to China

In 1997 when Hong Kong returned to China as a Special Administrative Region the pessimists expected the former British colony to be over-run by millions of mainland Chinese, and for other cities in China to gradually takeover Hong Kong's role as a gateway to the most populous nation on earth.

'What happened is that the power of Hong Kong exploded into China and was a catalyst for change,' says James E. Thompson, Chairman of Hong Kong based logistics giant Crown Worldwide Group. 'Hong Kong became the biggest investor into China.'

Today about one third of the booming Chinese economy's trade is routed through Hong Kong. From the express train to the airport you pass through the main container terminals, stacked high with goods on their way to the rest of the world from China.

'Sure there are other cities in China. It is a very big place,' says Mike Rowse, Director General of InvestHK, a government agency. 'But Hong Kong has a convertible currency, English is the official language and the legal system is based on English common law.

'On the other hand, Shanghai is a domestic economy serving the Yangtze River Delta and over a thousand kilometres from Hong Kong. Moreover, Hong Kong is an international city and gives easy access to 450 million consumers across nine provinces in southern China. So there is plenty of room for other cities though only one has the advantages of Hong Kong.'

However, Hong Kong has had domestic problems of its own since 1997. The Asian economic crisis in 1998 hit the local stock market and brought a sky-high property market crashing to earth. This was compounded by the impact of the bursting of the Tech bubble in early 2000, and the nadir came in 2003 with the SARS health crisis.

But the domestic market recovered sharply in 2004 with property values almost recovering to 1998 levels. The opening of the sixth tallest building in the world, the 88-storey International Financial Centre II in the central business district, also heralded a re-emergence of business confidence in the territory.

Tourists also returned after the decimation of the industry in 2003 during SARS reaching a record high of close to 22 million visitors in 2004. And this upturn should continue through 2005 with the opening of Disneyland Hong Kong on September 12.

Nonetheless, while the domestic headlines were scary, the tremendous flow of trade from China continued undisturbed through the ports of Hong Kong. In the depths of the SARS crisis there was perhaps only one person staying in the Hyatt Hotel but the containers still moved inexorably through the docks recording double-digit growth in imports and exports.

'It's true that Hong Kong has an excellent infrastructure for international business, but I say it's the people who make Hong Kong the success it is. Whatever the challenge, the people here see the opportunities,' says Steve Alexander, Deputy Executive Director of the Hong Kong Trade Development Council, the agency tasked with promoting trade.

'Being the world's 10th largest economy, despite a population of less seven million and a land mass a fraction of Dubai tells its own story.'

The investment by Dubai Ports International in the port of Hong Kong - through its recent $1.6 billion acquisition of the assets of CSX World Terminals - is a sign that the strength of Hong Kong as a gateway to the Middle East has not gone unnoticed. And it is hard to believe that this will be the last big investment from the Arab world.