Global capitalist system, not China, explains Hong Kong's rough political times

Laura Dodge says China's selective adoption of market-driven capitalism is changing Hong Kong's traditional power structures, but this is only a reflection of global business trends

PUBLISHED : Friday, 30 October, 2015, 3:04pm
UPDATED : Friday, 30 October, 2015, 3:04pm

I was lucky to live in Hong Kong in the heyday of the late 1980s and 1990s, when its freewheeling economy was in full bloom. The financial sector was hiring at record pace; peddlers of electronics, athletic gear and copy watches spilled onto the streets; nearly no one spoke Putonghua; and a ride on the Star Ferry lasted about 15 minutes, with clear blue skies and smooth waters along the way.

How things have changed. This "Pearl of the Orient" - in fact, the "pearl" of British mercantilism - has lost some of its lustre in the years since the handover. And it's not due to China's efforts to keep a lid on liberal democracy in the city.

Hong Kong's economic engine has always depended on proximity to China, even though its people tried hard to maintain at least a figurative distance

Of course, China has the money and the manpower to do what it likes in Hong Kong. But it is the global capitalist system on which Hong Kong's economy has thrived for the past 200 years, and not China, that explains the rough political undercurrents in the city.

As China's selective adoption of market-driven capitalism infiltrates Hong Kong, it has been splintering the city's traditional power structures. Hong Kong's corporate elite - once a mix of international constituents strictly aligned with the West - has slowly shifted its allegiance towards Beijing. Meanwhile, the city's large but fragmented petty capitalist class grows increasingly displaced by mainland-owned or mainland-oriented corporate interests.

Hong Kong's economic engine has always depended on proximity to China, even though its people tried hard to maintain at least a figurative distance. The modern Hong Kong conglomerates that trace their origins to British mercantilism, such as Jardine Matheson, HSBC and The Wharf Holdings, ran the city according to the interests of their capitalist operations.

Other Hongkongers, meanwhile, made money as petty capitalists - small-scale producers and retailers producing for the hongs, which paid tribute to the British mercantile state (and some to China).

Petty capitalism still drives much of Hong Kong's economy. But some companies, including Cheung Kong and CITIC (to name just two), have surpassed the British to become mascots of modern mercantilism, involved in everything from real estate to electric power to ports to trade. And they are more important to Hong Kong's economy than British hongs ever were.

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Hong Kong's six biggest conglomerates account for about 23 cents of every dollar that residents spend, controlling Hong Kong's biggest mobile-phone network, its electrical system, its bus system, the vast majority of the buildings making up its iconic skyline, plus two-thirds of its private housing market and 90 per cent of its supermarket sales.

The leaders of these and other conglomerates direct Hong Kong's future not just by dominating its economy, but also by comprising most of the functional constituencies in the Legislative Council. In this way, conglomerates pay tribute to Beijing in the form of political allegiance.

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It is no surprise that most functional constituencies are fairly well aligned with Beijing. What is remarkable is that these political alliances are similar to political structures preceding China's takeover of Hong Kong in 1997. Consider that at the end of 2014, mainland Chinese companies occupied over a fifth of top-tier office buildings - increasing their occupancy rate by over 60 per cent in six years. Mainland banks account for almost half of all branches in the city. Even in financial markets, mainland institutions seem to be taking over.

But the Chinese companies that are buying up real estate not just in Hong Kong, but in London, Africa, Manhattan and Ohio serve the same global capitalist system as Hong Kong's previous rulers. So let's not mistake the political friction in Hong Kong as the result of China's autocratic disposition. What we're really seeing is a kind of capitalist square dance, a change of patrons and partners. And for that reason, Hong Kong's liberal-leaning populace has less to fear from China than the corporatised capitalist system that propelled China to power.

Laura Dodge is a political scientist and writer