HONG KONG ECONOMY
Mind the Gap
by

How should Hong Kong ‘drain the swamp’?

The convictions of Hong Kong officials Donald Tsang and Rafael Hui with property tycoon Thomas Kwok shows how high the developer-official collusion has climbed.

PUBLISHED : Monday, 13 March, 2017, 7:45am
UPDATED : Monday, 13 March, 2017, 7:45am

When Kellyanne Conway, current counsellor to the President of the US, joined the Trump campaign last year she remarked to the candidate Donald Trump “that he should be polling stronger because he was running against a joyless candidate.”

In Hong Kong’s race for Chief Executive, we are confronted with joyless candidates, joyless policies and a joyless election.

A long suffering and forgotten section of the population yearns for solutions, with or without democratic elections. Yet only the underclass in the US manages to overturn the system in the most subversive election ever. But even as a special administrative region, none of the candidates have elaborated about hopeful quality of life or positive business policies.

I’m still looking for a good speech from one of them: engaging, interesting, showing us their heart and what they truly care about. Instead, I’ve seen more passionate interviews for the manager position of a convenience store.

Twenty years running and there is still no solution to a real estate problem that is easily solved if political leadership existed.

The call to “Make America Great” or “America First” doesn’t resonate in this city. Hong Kong is the most expensive housing market in the world for the seventh year in a row. The median home price was 18.1 times the median annual pretax household income last year, according to a recent annual report from Demographia.

No wonder foreign business people say Hong Kong has lost its zing. Like a marathon poker session, Hong Kong’s property game has concluded. A small number of winners hold all the chips while the rest of the population and economy must bear a heavy price.

After all, can Hong Kong properties become even more expensive than 18.1 times household income? No one knows, but you can be sure developers will do anything in their power to sustain high prices. Yields may be low but speculators in Hong Kong flats invest for capital gain rather than income. So the bubble continues to percolate.

Think of Hong Kong as the company RIM, the company behind the near dead Blackberry smartphone. As long as it has over a billion dollars of cash on the balance sheet and no debt, RIM will grimly lurch forward like a tech zombie even though it killed itself with the tech blunder of this generation.

Hong Kong too, appears to have passed its prime a generation ago, lost its way, but is sustained by huge financial reserves.

Just twenty years after 1997 the city is stuck in it a generational crisis of leadership. Collusion with property developers and cartels has become so entrenched in the civil service that serving them is as natural as breathing.

Our generation of post-1997 leadership has produced the convictions of two important government officials: Donald Tsang Yam-kuen and Rafael Hui Si-yan; and Sun Hung Kai Properties’ tycoon Thomas Kwok Ping-kwong.

In total, it demonstrates how high the collusion between developers and government officials has become, and probably how much more there is that’s undiscovered. How do you “drain the swamp” in Hong Kong?

Whether you agree or not, over the last 20 years China and the Chinese people are sure about the direction of the nation’s rise from poverty to become a global power. Hong Kong’s leadership is so unsure of itself and directionless.

But, Hong Kong is not dying. Its vast financial reserves still grow. The stout ability to survive of its citizenry endures.

It’s not knowing whether Hong Kong is dying or living that depresses everyone and the economy.

Peter Guy is a financial writer and former international banker

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