Is Hong Kong’s fractured governance likely to affect its economy?
As long as Hong Kong can preserve internet freedom, good education and health services, and the rule of law, our economy will ignore the politics
I well remember the venerable A. De O. Sales, who was chairman of the old Urban Council in the 1970’s, criticising his opponents for engaging in “parish pump politics”.
A marvellous political insult for one who was an expert proponent of er... the same – but one that would be regarded as a virtue today.
The recent elections to the Legislative Council have thrown up a second generation of very young democrats who are well-educated, well informed about the world, and a lot savvier than the first generation of democrats; their predecessors.
They may be a bunch of hotheads, but they are likely to play the game much smarter than the previous generation of hotheads.
Politics is about the art of the possible; of getting things done; of compromise. The withdrawal of some high profile democrats before the election almost certainly swayed an increase in the democratic vote and the turnout.
This was smart politics for an opposition constantly divided by the establishment.
Hong Kong’s fractured governance has attracted a great deal of publicity – but is it likely to affect Hong Kong’s economy? Looking at past data, probably not. It is difficult to find any indicators to prove that politics has had much impact at all.
Some argue that growth has slowed in recent years because the government has been filibustered out of votes. This doesn’t come out in the figures as government spending as a proportion of the economy has shown a steady rise since 2013.
During Occupy Central there were lamentations of doom about the future of the economy but, although some retail businesses were dented (mainly owned by the fat cats), it didn’t impact our overall economy.
Retail did suffer at the end of 2014 but bounced back sharply in the next quarter. In any case, it is only 4 per cent of the Hong Kong economy and the sector has been declining since 2010.
The fact that Paris and Milan are now more cool than Hong Kong is more important to mainland shoppers than squabbles in the Town Council.
Hong Kong is a uniquely business city and the fall in economic activity in China has hit us hard. GDP growth, exports and imports have all shown falls since 2013. The limited impact of politics on business would have been obscured by these global factors.
Our stock market certainly underperformed China during Occupy Central but any relationship is confused by the irrational rise of the Shanghai market that rose 130 per cent, peaked in June 2015, and collapsed in a heap by August. Any fears were quickly recovered as the market took its lead from Shanghai, albeit less exuberantly.
The Hang Seng Index must be thinking that the economy will be better under the new LegCo than the previous one as it leapt 1.5 per cent on Monday following the surprisingly good results for the democrats.
This naturally does not include the assumption, by many international observers, of direct Chinese central government intervention on our politics.
This is unlikely, for we have had a vigorous democratic voice for years. China is much better at infiltrating Hong Kong slowly and in keeping the dissension south of the Shum Chun River. Intervention would prove One County Two Systems to be a lie, and destroy any goodwill with Taiwan. The 23-year-old Nathan Law, stuck on a barren rock in the South China Sea, is hardly a threat to modern China.
Half of our GDP relies on logistics and finance; global businesses that are here to exploit an efficient society, low taxes, and the time zone. The policy level of government might be a decision-free zone (much of it self-inflicted) – but who cares when the civil service is so good.
Our waste is collected, public transport is excellent, we have a health service that is almost free, and few of us are affected by crime. We have no lethal violence on the streets, something that France, Germany and Belgium might envy.
We may just have been lucky with the economy remaining largely unaffected by the political pantomime. An uncompromising government meeting a politically savvy opposition surely cannot be without consequence forever.
I was at a conference a while ago where three dot com entrepreneurs from the mainland were asked why they had moved their families to Hong Kong. They said, “internet freedom, good education and health services, and the rule of law”.
As long as Hong Kong can preserve those, our economy will ignore the politics.
Richard Harris is chief executive of Port Shelter Investment Management