Blame our civil service for the second class city that Hong Kong has become
‘The Donald Tsang conviction showed that the civil service is entirely too comfortable and cosy colluding with the city’s property tycoons’
Peddling a vision of a dystopian future for Hong Kong won’t make me many friends. But, when asked for a realistic prediction, I can only offer that Hong Kong will be to China what Monaco is for the rest of Europe.
This idea has been offered before, but it has broader implications for the economy. Like Monaco or any other low tax regime, low income taxes, and zero capital gains taxes are great only if you are rich in terms of capital or income. The wealthy don’t have to do anything, they are rich. But they do need a playground.
Hong Kong is a perfect Monaco for China’s new rich. Indeed, for a certain class what counts for success in this town is who you’re related or married to. Inheriting and divorcing for your share of wealth is more successful (and easier) business strategy than doing start-ups.
The city easily assumes Monaco’s financial service and banking centre role- efficiently servicing the rich in property, wealth management and acting as its international financial centre.
But, unlike Hong Kong, the average waiter and bartender in Monaco isn’t trapped and doesn’t have to face ridiculously expensive real estate prices. As a member of the EU their citizens have easy access across the border into southwest France and to cheaper rent. Monaco, an expensive to live principality and haven for the rich, actually doesn’t penalise the average worker.
On the other hand, a waiter in Hong Kong making HK$12,000 (US$1,546) a month lives in a shared 350 square foot flat with four roommates. After rent and living expenses he has about HK$2,000 to save for a down payment on a HK$3 million down payment for a flat, which will take him about 25 years.
It’s just in time for him to retire with paltry savings and begin collecting cardboard boxes off the street. Indeed, according to some analysts the recent record setting prices paid by mainland companies at the government land auction at Kai Tak would result in 350 square foot flats costing HK$11 million after construction costs.
Every generation is full of lost kids who need to hear they are not alone. But, in Hong Kong no one is going to save them and their future is being taken over by Mainland Chinese graduates. Today, you walk around the office towers of International Financial Centre and you hear more Putonghua than Cantonese being spoken. Local graduates have become second class citizens in their own country.
This is the new economy where all the best paying, entry level financial jobs are going to mainland Chinese rather than Hong Kong Chinese. It was only 30 years ago that I remember Hongkongers mocking overseas Chinese for poor Cantonese speaking skills. Now mainlanders treat Cantonese like Latin: a language that is only useful if you want to converse with a dead Roman.
The only salvation for housing may lie in China. When the Guangzhou-Shenzhen-Hong Kong Express Rail Link is finally completed it might offer hope for Hongkongers to be able to buy cheaper and larger flats across the border. It’s an easier compromise than a fruitless struggle with this city’s property tycoons. Ultimately, the only counterbalance is a political class, which in Hong Kong has been completely compromised.
The more civil servants I talk to, off the record in frank conversations, the less I think that Hong Kong people are capable of running Hong Kong at this point of our economic and political development. The Donald Tsang conviction showed that the civil service is entirely too comfortable and cosy colluding with the city’s property tycoons.
Hong Kong’s elite has little empathy for the rest of us and you cannot expect meaningful reform from a group that staunchly defends status quo. They are “friends” and the borderline corruption that I have described in previous columns is on public display. There is too much bureaucratic gravity locked into maintaining the status quo.
Every time I raise one of the many suggestions for breaking the property market cartel and their monopoly on flat supply I receive blank stares from civil servants. Proposing expropriation or restrictions on land banks owned by big development companies only draws inaction from civil servants. They respond that it can’t be done and that the bureaucracy would resist any radical changes. But, these kind of actions are taken in China and other countries.
If we can’t “Make Hong Kong Great Again” then we ought to “Make Hong Kong Part of China” as quickly as possible to end the economically and politically polarised society created by our deeply flawed governance. Did I just describe a dystopia?
Peter Guy is a financial writer and former international banker