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Chapter 33 : The External Dimension
33.1 The past decade has witnessed an unprecedented transformation of the Hong Kong economy; the speed and extent of which are probably unmatched in the annals of history. Hong Kong has evolved from a centre of export-based domestic production into an Asian economic hub. Hong Kong companies control and service businesses and production facilities located in south China, throughout the Asia-Pacific region, and more widely.

33.2 As the economies of the world and the region begin to open up, structural adjustments will sweep through the global market. These changes will inevitably alter the economic landscape as businesses seek out fresh opportunities in new areas. While the changes will take time to unfold fully, the realignment of global capital and trade flows must present great opportunities and challenges for Hong Kong in the coming decade. The process has indeed already started through the opening of China and the liberalization of many economies in the Asia-Pacific region.

33.3 Hong Kong today ranks as the eighth largest trading entity in the world. Ten years ago it ranked a mere thirteenth. In just one decade, the total value of exports and imports have increased almost 6-fold. More important than growth is the changing pattern and composition of the trade flows. A decade ago, domestic exports constituted 28% of total exports, but today they are only 8%, playing second fiddle to re-exports. The value of trade between Hong Kong and China has risen from 26% of total trade to 35%, while that between Hong Kong and the other Asian economies has remained at 30%. These trade flow figures reflect shifts in the comparative advantage of cities and regions. They are in part driven by investment flows that either originate from Hong Kong or use the territory as a base of operation.

33.4 Today, more than 50,000 Hong Kong businesses have operations overseas. According to a recent survey Hong Kong companies employ some 5 million workers in China alone. Many companies have grown greatly as their operations have expanded overseas; manufacturing is the prime example. This has stimulated the growth of other companies in the areas of banking, finance, insurance, real estate, business services, imports and exports, telecommunications, transportation, and legal and accounting services. Equally spectacular has been the emergence of numerous new companies that provide high value added services for specialized markets, many with fairly small operations. This array of companies provides services to a large network of businesses and facilities in the region and throughout the world. The Hong Kong economy has become more heterogeneous and diversified as it has matured.

33.5 These developments are likely to continue and grow in the future. They bring enormous opportunities as well as challenges. Foremost among these challenges is the task of educating and training a workforce with the requisite skills to operate and work in diverse environments. As Hong Kong develops into Asia's economic hub, its workforce will stand a better chance of remaining competitive if it is endowed with these qualities. We consider in the following paragraphs how our growing internationalism may be reflected in our higher education.

33.6 Universities and other higher education institutions operate in an international context. The codification and transmission of some existing knowledge can be undertaken, not very satisfactorily, in a parochial manner, but adding to the stock and creating new knowledge is almost wholly dependent on an awareness of what is happening globally and on contact with colleagues in a variety of countries and disciplines. Hitherto, HEIs in Hong Kong have been protected from localisation and introspection by their rapid rate of expansion. It has simply not been possible to staff them by local recruitment because the number of potential academic staff produced in earlier years was too small. That situation is now changing. With stabilisation of numbers, the postgraduate output (the usual source of academic staff) will be adequate to provide for the future recruitment needs of the institutions. Indeed, as we saw in paragraph 30.15, there may be over-supply.

33.7 It will therefore be possible, and even tempting, to staff the HEIs very largely with academics who have no experience outside Hong Kong. It is a temptation which must be resisted. Higher education in Hong Kong, like commerce and industry, depends for its vigour on having inputs from many cultures. If our HEIs are to attain and remain in world class positions, if they are to pursue excellence in the ways suggested in Chapter 29, it is vital that they include members of staff who are as familiar with libraries and laboratories in Beijing, Canberra, both Cambridges and Tokyo as they are with those in Hong Kong itself (see also paragraph 28.2).

33.8 What is true of the staff is also true of the students. Undergraduate education gains immeasurably from contact with fellow students from different countries and cultures, and postgraduate work needs a global flow of ideas. There is, of course, a substantial subsidy from the Hong Kong taxpayer towards the education of extraterritorial students in our HEIs, and it is for this reason that their numbers are limited (see paragraph 33.15), but the contribution which they make is not confined to their time on campus. Students from other countries tend to develop an affinity with their place of higher education which can express itself in commercial or diplomatic benefits later in their lives. Some other higher education systems have a policy of taking much larger proportions of extraterritorial students than does Hong Kong. Singapore, for example, acts as a regional centre for higher education. Hong Kong should also become one.

33.9 Although all international contacts are of value, the most important external linkage which our HEIs will have in the future will undoubtedly be with the economy and education system of China. Both were, until a decade or so ago, much influenced by Soviet models of a monolithic kind, but recent decentralisation has given much wider and more flexible opportunities for collaboration. There are already joint research work, joint teaching arrangements and visiting scholar schemes between HEIs in Hong Kong and China, some supported by government funds specifically allocated for those purposes, but the scale is so far fairly modest. Another small development is research carried out by Hong Kong HEIs in relation to enchancing products made in China by Hong Kong firms - the manufacturers apparently finding it difficult to get market-orientated research carried out in China itself. An area of great potential for our HEIs is in industrial consultancy and services for Chinese enterprises, including governmental agencies concerned with health care and the social services. They have expertise here which is largely lacking in China's own universities. They may also act as "middlemen" for firms in the west and the Pacific rim who wish to engage in technology transfer to China, but prefer to do it via Hong Kong because they understand and trust the infrastructure better than that in China itself. As the Hong Kong border with China becomes increasingly permeable, however, the consideration in the context of China which is likely to have the largest impact on higher education planning in Hong Kong will be the provision and employment of graduate manpower.

33.10 The opportunity for a young person in China to enter higher education is at present less than one-tenth of the opportunity in Hong Kong. The Chinese tertiary system is thus highly competitive and elitist compared with the situation in Hong Kong, where almost anyone able and wishing to benefit from higher education can do so. It follows that Chinese graduates are likely to be, on average, of better intellectual quality in some respects than local ones, although their opportunities to develop their talents may have been inhibited by lack of material provision. Since graduates from China will not demand higher pay than those from Hong Kong, and may even be satisfied with less, we need to consider what circumstance might incline an employer to prefer the Hong Kong product.

33.11 The most obvious reason for an employer to take on a Hong Kong graduate rather than one from China is the unavailability of the latter. At present there is a limitation on the direct importation of graduate labour from China (a trial scheme allowing 1,000 into Hong Kong began in April 1994), but PRC professionals who have worked outside China for at least two years may enter employment in Hong Kong outside the quota. There are also few restrictions on entrants with "official" passports, and there are probably around 60,000 PRC cadres working in mainland companies in Hong Kong : they are not, however, available to the open labour market. Nearly all of these graduates from China will be on temporary contracts. Permanent immigration is much more severely limited. North of the border, Hong Kong employers do use Chinese graduates in the enterprises which they have established in Guangdong, Shanghai and elsewhere, but the labour market is not entirely flexible, and supply may not match demand. A recent Institution of Mechanical Engineers study of China found western "factory phobia" creeping in - with good students opting for the financial sector rather than engineering.

33.12 Apart from questions of availability, we need to consider what other advantages products from the Hong Kong higher education system may have over their counterparts from China when competing for employment. One factor which we have referred to a number of times (see, for example, Chapters 18 and 29) is multilingualisim. Hong Kong is a multilingual society and English is supposedly used as the medium of instruction in much of tertiary and some of secondary education. There are, however, as we have noted earlier, doubts about the communicative skills of Hong Kong graduates and it should not be taken for granted that they will out-perform those from China. Certainly some graduates from the better Chinese universities have very good command of both English and Putonghua. This is an area where there should be no complacency. If Hong Kong is to give its graduates a competitive edge through their language and communication skills, a great deal of hard work is required of both students and teachers.

33.13 Less readily measured than competence in professional knowledge or communication is the cultural advantage possessed by Hong Kong graduates. They have been brought up in an open society used to accepting ideas and modes of behaviour from a great variety of world-wide sources, both East and West. The mixture can be indigestible, and some of the influences may contain harmful as well as beneficial components, but young people in Hong Kong do learn to filter, to compare, to visualise, and to make choices in ways which may be harder to acquire in more restricted environments. These skills are important in making judgments in the commercial and industrial worlds and, when allied to the day-to-day experience in Hong Kong of a society geared to the market, and their own self-confidence and drive, they provide our graduates with a strong and relevant background when entering employment.

33.14 The rapid growth of the economies of both southern China and other areas close to the Pacific rim suggests that there will be plenty of opportunities for employment of the products of higher education, although there can be arguments as to whether the major demand will be at sub-degree or graduate level. Hong Kong's HEIs will continue, as their primary task, to satisfy manpower needs in Hong Kong itself and in Hong Kong enterprises in Guangdong, but we would expect our graduates increasingly to take advantage of the wider employment opportunities in China (where there will certainly be shortages of skilled personnel in some disciplines) and the region. Conversely, graduates from China and elsewhere will fill more jobs in Hong Kong. We believe that, provided our HEIs can achieve and maintain a reputation for quality of output, this greater flexibility will be to Hong Kong's advantage. We do not see it as influencing the necessary size of our higher education system, at least within the period covered by Chapters 30 and 31.

33.15 Within the Hong Kong HEIs, there is a dilemma with regard to students from China. For the reasons given in paragraph 33.10, it would be possible to improve the matriculant quality at entry by taking students from China in place of many of those recruited locally. This would not, however, satisfy the entirely legitimate expectations of the Hong Kong taxpayers and their children, and there has to be an imposed limit. At the undergraduate and taught postgraduate level this is currently set at 2%, being the proportion of non-Hong Kong students who may be taken in addition to the target numbers for local students. We believe that there would be benefit to Hong Kong's regional role if this were doubled by permitting a further 2% within target numbers. For research postgraduates the considerations are rather different, partly because external inputs are very important in world-class research work and partly because it is difficult to attract good local research students. The permitted proportion of non-Hong Kong students here is 20% (but see paragraph 30.16), this time within overall targets. Currently 17% of Hong Kong's research students come from the PRC. At present there is not a great deal of traffic in the reverse direction, Hong Kong students seeking higher education or research experience outside the territory tending to go to countries other than China, but it has been suggested that universities in Guangdong might in future offer more degree opportunities for full-cost students from Hong Kong to the detriment of higher diploma courses here.

33.16 As we explained in paragraph 33.9, there is already some collaborative work between Hong Kong HEIs and universities and other institutions in China, and this may be expected to grow as bureaucratic impediments diminish. The motivating factor is usually a particular expertise on one side or both: management courses in Hong Kong for Chinese cadres; language courses in Beijing for Hong Kong students. Joint research projects often depend on the availability of material in China. The Hong Kong members of the team commonly contribute, as well as their expertise, better library or laboratory facilities, better international access and, often, the majority of the funding. We would expect and encourage such collaborative research to increase in the coming years as Hong Kong academics exploit the new relationship with China.

33.17 It is important, however, that the growing connections between Hong Kong and China in every aspect of higher education should not become exclusive or introspective. Probably Hong Kong's greatest value to China is as its best window on the world, and this applies in higher education as much as in other spheres. As well as looking towards China, Hong Kong HEIs must maintain their long established links with institutions in North America and Europe and must strengthen those with non-Chinese Asia and Australasia. It is not just a question of looking North. Profitable internationalism requires our HEIs to look East, West and South as well. An important group within their gaze should be the Chinese diaspora.

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