The View

Hong Kong needs to wake up and smell the coffee to stay relevant

This city must break the nexus between its vested interests and government, for Hong Kong to remain relevant.

PUBLISHED : Thursday, 29 June, 2017, 12:16pm
UPDATED : Friday, 30 June, 2017, 12:43pm

The future belongs to those who can change it.

“Now we are finally masters of our own house,” said Hong Kong’s first Chief Executive Tung Chee-hwa, in a speech on that rainy night on June 30 in 1997. That has proven to be a fateful remark 20 years on.

During a 20-year period of great change and upheaval, where China emerged as an economic power and decisively overtook Hong Kong’s perceived superiority, the city’s paltry mantra was to “get close to China” or “no changes after 1997”. Hong Kong’s stubborn inability to adapt in the face of facts is largely responsible for its current woes.

One outcome is that the Basic Law has been diminished. It was needed in 1997 because neither side knew what to expect, and needed constitutional guidelines.

Today, Beijing is more confident about its formula for governance and feels that “One Country, Two Systems”, with an emphasis on “one country” works better.

Hong Kong’s government and business elite failed to convincingly explain and sell the “Hong Kong story” to Beijing. By concentrating on their own interests, they have gradually and perniciously weakened the city.

Hong Kong’s dilemma is that it’s the only place that tries to combine civic freedoms with an absence of democracy. It’s the centre of its political problems. In 1997, leaders were too short-sighted to recognise this flawed construct.

Two possible outcomes will necessarily evolve – a tendency towards authoritarianism and suppression of dissent, or permission for Hong Kong to freely elect its own mayor as other Western cities do, without any suspected threat to sovereignty.

Liberal democracy or representative government – however you define it – has historically been difficult for nation states to attain.

European countries fought and struggled through centuries of wars and revolutions before finally arriving at a peaceful way to resolve conflict through the European Union.

In my conversations with tycoons and government leaders, I sense that they are not interested or enlightened enough to build a political or economic vision unique to Hong Kong, outside of trite slogans.

It’s no surprise that the businessman-tycoon-turned-chief-executive collided with its manifest shortcomings twice over the last 20 years. An executive-led government was supposed to work, because the rationale was that the city was at its core a business-oriented society. However, an inclusive society is more than just about the freedom to make money.

In 1999, the Cyberport land deal symbolised Hong Kong’s slide into an openly compromised, shameless, tycoon-influenced government policy.

Mainlanders instinctively sense which direction China is heading. Hong Kong people are utterly confused and demoralised, because their leaders are without direction, and absent of any defined competitive advantages. It has resulted in significant policy drift on numerous fronts from economic to quality of life issues.

Instead of a renewed, post-1997 city full of opportunities for everyone, capitalist dynamism diminished once the established elite entrenched themselves to maintain their wealth. The challenge now is to prevent Hong Kong’s dynamism from deteriorating into complacency and decay.

However, the rise and fall of nations, empires and cities have been going on a long time, and the cycle is no different for Hong Kong.

Income inequality has reached its highest level in more than four decades according to government data as the rising property market squeezes the city’s most vulnerable citizens and risks fuelling social tensions.

Government plans to free up more land for public and private housing over the next 10 years may not work. It will have to intervene on the demand side of the problem. Controlling and restricting who can buy Hong Kong property will outrage developers. But that’s the only way to gain control of an oligopoly.

This can only be accomplished if the government decides that the local residential property market is too important to be left to private developers – a breathtaking political decision.

Declaring that it’s a strategic resource necessary for social and economic stability, rather than raw material for speculation and profit is the only way to address market failure.

Karl Marx accurately painted the scenario faced by capitalist societies like Hong Kong; a massive and irreversible wealth concentration among the elites, which makes the rest of us vassals to the state.

Hong Kong is not part of China. It is China. That’s the outcome of the last 20 years and perhaps the way forward to solving the city’s most urgent problems.

Peter Guy is a financial writer and former international banker