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Hong Kong now ranks third behind New Zealand and Singapore in terms of its financial sector, according to the latest report by the World Economic Forum. Photo: EPA

Hong Kong loses crown as world's best financial sector, but city's education ranking surges

City maintains overall standing with World Economic Forum and surges in education

Hong Kong no longer has the best financial sector in the world, losing its top ranking to New Zealand and Singapore, the latest report from the World Economic Forum says.

Despite losing its crown in finance, Hong Kong held its place as the seventh most competitive economy in the world for the third year in a row in the 2015-16 World Economic Forum Global Competitiveness report, released on Tuesday.

The city also maintained its top ranking for the highest quality infrastructure in the world, while seeing a strong improvement in higher education and training, surging from 22nd place to 13th.

Hong Kong's drop from first to third place in financial market development was mostly driven by a tumble in the trustworthiness and confidence ranking, which fell five places.

World Economic Forum economist Attilio Di Battista told the Post the change was primarily due to a shift in methodology, which had severely affected Hong Kong's "strength of legal rights" score for financiers.

"This penalises Hong Kong, making it go down from first to 24th in this indicator … This is the main reason for the swap between Hong Kong and New Zealand at the top of the ranking," he said.

Baptist University department of economics associate professor Cheng Yuk-shing said the fall could also be due to the mainland market turbulence.

"The so-called violent intervention in the market adversely affected China-related stocks in Hong Kong and probably that will raise concerns," he said.

The report called Hong Kong's performance across the 12 categories "remarkably consistent". Photo: SCMP Pictures

The World Economic Forum ranks financial market development on several factors, including soundness of banks, regulation of securities exchanges and legal protection for borrowers.

"[Hong Kong's] performance - almost unchanged from last year - is remarkably consistent across the 12 pillars," the report stated.

The report singled out innovation as one of Hong Kong's weakest areas, ranking only 27th in the world.

A Hong Kong government spokeswoman said the city still had a highly competitive financial services industry, ranked second by the IMD’s World Competitiveness Yearbook and third in the Global Financial Centres Index.

“Nevertheless, there is no room for complacency,” she said. “The government will continue to work closely with regulators and industry to align with the international regulatory reform agenda to promote stability of the financial system, improve market quality and strengthen investor protection.”

In comparison, China's economy was ranked 28th in terms of competitiveness - the same as last year.

The report gave China particularly low rankings for the quality of its institutions, its financial sector and its adoption of new technology.

The weakening of the yuan, the stock market crash, rapid credit growth and a stalling property market had cast some doubt on the mainland's economic prospects, though a hard landing was unlikely, the report said.

"China must pursue market-oriented reforms, promote entrepreneurship and nurture talent to continue to move up the value chain," it said.

Additional reporting by Kwong Man-ki

This article appeared in the South China Morning Post print edition as: HK loses crown for top finance sector
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