The exposure of four Shanghai judges over their acts of gross indiscretion has made a mockery of the city's high-profile bid to become an international financial center.

An impartial judiciary that is seen to dispense justice fairly and equitably is widely considered to be a key advantage of Hong Kong and other international financial centers. It is reasonable to assume that most international financial institutions would only want to conduct cross-border transactions in a jurisdiction where they can reasonably expect a fair court hearing in case of a dispute.

Financial contracts involving complex transactions are sometimes open to interpretation. Any doubt about the court's integrity would render such documents meaningless.

The Shanghai government is taking the case most seriously. It has dismissed the judges who were captured on video suggesting they were treated to favors, including sex services. The case apparently is still under investigation. And the Shanghai government has mounted a campaign to root out corruption in the judiciary.

Government officials called this a lesson which should be taken to heart. It should also serve as a lesson for Hong Kong at a time when its own independent judiciary is alleged to be challenged by political influence.

Many Hong Kong business leaders, lofty economists and influential commentators have been sounding the alarm that their city will lose out to Shanghai as the region's premier financial center. When that happens, they warned, Hong Kong will become just another secondary city with little relevance to the mainland's development.

But none of these doomsayers have been able to make any suggestion other than further integration with the mainland to help Hong Kong escape such a fate. It's not clear how much more integration can shield Hong Kong against competition from Shanghai, Guangzhou or Shenzhen, for that matter.

There are those who maintain that economic integration, though important and unavoidable, is not the only answer to the myriad challenges facing Hong Kong. On the surface, Shanghai does look like an indomitable challenger. It enjoys the advantage of size, and a vast industrial hinterland in the Yangtze River Delta region that extends along the mighty river and its many tributaries all the way from the coast on the east to Sichuan in the west.

In this region, no other city comes close to Shanghai as a service center and port. Whatever constraints Shanghai has in realizing its dream to be a financial center and global trade hub can be wiped aside by the proposed free trade zone that was approved by the State Council last month.

Indeed, the free trade zone appears to have deepened Hong Kong's paranoia. This is the time when Hong Kong people should stick together to uphold and defend the few advantages the city continues to enjoy. The Hong Kong government has rightly adhered to policies designed to preserve and promote its free market environment.

The existence of this environment depends on several primary factors, including minimal government intervention, a low tax regime, an efficient civil service and, more importantly, to some, the rule of law embodied in an independent and corruption-free judiciary.

Tax incentives are cheap, government intervention can be minimized and an efficient civil service can be built. But a fine judicial tradition that commands public respect and trust takes years, if not generations, to establish.

Hong Kong has it.

The author is a veteran current affairs commentator.

(HK Edition 08/13/2013 page1)