The special administrative region (SAR) has been named the country's most competitive city for the third consecutive year in an annual study by the China Institute of City Competitiveness.

However, the report said the city was also facing a shortage of resources and manpower that might affect its future development.

The institute studied the competitiveness of 289 cities in terms of their business and financial market development, educational levels and technological advancement, among other things.

Shanghai and Beijing came in second and third.

Hong Kong also took the top spot for being a world-class cosmopolitan city, followed by Beijing and Shanghai.

The study said Beijing's international image had been strengthened as it prepares to host next year's Olympics.

The cooperation between Hong Kong and Shenzhen won praise as the most outstanding example of how cities can collaborate to aid their mutual development.

The SAR government was also named the country's most honest.

Institute chairman Gui Qiangfang said Hong Kong was strong in terms of its financial market development and unlikely to be lose the top spot any time soon.

But he said the city could not afford to rest on its laurels as it had fallen from fourth place last year to sixth this year for competitive growth.

He said the latest findings did not indicate Hong Kong's competitiveness was declining, but rather how the development of other cities had intensified.

He said Hong Kong needed to maintain its legal system and free economy, and cooperate with mainland cities in hi-tech industries to offset the impact caused by its shortage of resources and manpower.

Institute vice-chairman Raymond Tse urged mainland authorities to relax the restriction on capital flows to Hong Kong.

"Hong Kong will benefit a great deal if it can absorb capital from the mainland," he said.

The report named Hangzhou in Zhejiang Province as the best city for living and Kunming in Yunnan Province as the best travel destination. Suzhou in Jiangsu Province topped the list for best investment environment among mainland cities.

(China Daily December 28, 2007)