Hong Kong may be getting its groove back. Ever since the handover to Chinese sovereignty in July 1997, the city has been struggling to find a new role. The British colony had built its vibrant economy on a bustling manufacturing base, churning out cheap toys and electronics. In the 1980s, when manufacturers started moving their production over the border in pursuit of low-cost labor in China, the city moved up the ladder into sophisticated financial services. But the Asian financial crisis hit hard, throwing tens of thousands out of work. The government fumbled a series of decisions, creating the impression that cronyism might be eroding Hong Kong’s unbending rule of law. Suddenly Shanghai and Singapore loomed as ever-greater threats. Economists and business leaders wondered about the city’s long-term future as a financial center. Young graduates complained that they had little to dream of. The city seemed to have lost its nerve. But recently an Internet frenzy has reignited its entrepreneurial, competitive drive. Hong Kong is filled with a renewed “cowboy spirit,” says CS First Boston Internet analyst Jay Chang.
The change started when Richard Li clinched government backing to build Cyberport in March 1999 with a promise to turn Hong Kong into Asia’s Silicon Harbor. Skeptics scoffed that the project was nothing but a glorified property deal. Though a handful of brilliant Netpreneurs had set up high-tech companies, raising money was a problem for most young would-be entrepreneurs. In December 1998, a government venture-capital fund started seeding high-tech companies. Smelling opportunity, a legion of venture capitalists started pouring into Hong Kong last year. In the past six months alone, scores of Internet companies have been launched. Only a few have been listed so far–and each has sparked stampedes of excited investors. Rajeev Gupta, Internet analyst for Goldman Sachs in Hong Kong, estimates that tech and tech-related stocks now account for more than 50 percent of the trading volume on the Hang Seng index. “Hong Kong has definitely proved that it is possible for people who are total newcomers to put a footprint here,” says Yat Siu, founder of Outblaze.com, a company that provides e-mail and other tools to start-ups. “Entrepreneurship is now huge.”
Especially in the tenements of Sheung Wan district, where a new, creative buzz is in the air. Ambitious young graduates sport earrings and baggy pants, not dull suits. The city’s cyberpioneers toil over computers amid the shouts of fruit sellers. In one peeling building, designers at Hong Kong’s hottest Web consultant, Lemon.com, helped an upstart local telecom company called Sunday set up a creative Web site designed to help kids escape the cramped world of their tiny apartments by designing their own personal fantasy online. Customers log on and customize their own cyberrooms, choosing furniture, even choosing different hairstyles and clothing for their Web personas. “Most kids in Asia don’t have their own rooms,” says David Mok, founder of Lemon.com, who aims to “bring privacy to people with no space.”
The new sense of opportunity is trickling out beyond the world of cyber-business, too. Louis Wan, the 23-year-old floppy-haired bass guitarist for Circle, was about to lose hope when AsiaMix.com came along. Hong Kong’s music industry is controlled by a handful of recording companies that produce slickly packaged Canto-pop stars who sing peppy love songs. Though his band had won top awards at local competitions, no recording company had shown any interest in Circle’s hard-core electronic music. The band was stuck on an impoverished circuit of gigs at universities and small pubs. AsiaMix.com discovered them playing at Hong Kong University three months ago and picked them up. Thanks to exposure online, Circle now hopes to land a recording contract; a well-known Japanese heavy-metal band has contacted them, expressing interest in their music. “There are so few opportunities for a band in Hong Kong,” says Wan. “The Internet makes things fairer. It gives us hope.”
There’s a lot in Hong Kong that hasn’t changed, of course. A handful of property tycoons still control a vast chunk of the city’s economy. With their hefty war chests, they are launching huge new Internet companies that may dominate e-commerce, too. Upstart tycoon Jimmy Lai, for example, is trying to take on the city’s two giant supermarket chains with a new online grocery service. Breaking through their distribution channels is tough. Property tycoon Li Ka-shing, who controls one of the supermarket chains, has recently tied up with the Hong Kong Shanghai Bank to create a $400 million future e-commerce venture, too.
But out there in cyberspace there’s room for newcomers. From sites selling Chinese medicine to forums for complaints against bad service, new Internet businesses are cropping up every day. “For the little guy, it’s really great right now,” says Hansen Cheah, founder of AsiaTech, Hong Kong’s leading venture-capital fund. “Entrepreneurship has always been around, but now there’s money for it to expand.” “There is the feeling,” says Hong Kong University economist Michael Enright, “that the Internet may be [Hong Kong’s] savior.” For the city’s creative little guys, that’s way cool.
