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Illustration: Stephen Case
Opinion
Lawrence J. Lau
Lawrence J. Lau

Neither violence, nor Beijing, can fix Hong Kong’s housing shortage and lack of a social safety net

  • Many Hongkongers have lost out due to economic changes, and many have deep-seated distrust of mainland China
  • The Hong Kong government must first address their financial insecurities, before it can work on fostering a sense of Chinese identity
Hong Kong is now going through one of its worst-ever crises. It did not have to happen, but this is not the time for recriminations. An independent inquiry over the extradition bill affair may help us learn how such a crisis may be avoided in the future, but cannot provide guidance on how to move forward.
Some blame foreign countries for instigating and supporting the protest movement. Some blame supporters of Taiwan independence for egging the protesters along. Some blame certain wealthy individuals, especially former mainland residents, who may have the incentive to trash the bill. All may have lent support to the protesters, not for the good of Hong Kong, but for their own self-interest. However, it is not enough to blame them – we must understand why they succeeded.

To find a way forward, one must recognise that the current disturbances reflect deep-rooted, but until now largely latent, anger and discontent among lower-income groups in Hong Kong, especially younger people. The discontent and perceived lack of hope provided the environment for domestic and foreign agitators to succeed.

There are two main sources of local anger and discontent. First, economic globalisation has indeed benefited every country and region in the world in the aggregate, including mainland China and Hong Kong. However, while globalisation brought prosperity everywhere, it also created winners and losers.

Unfortunately, though there are, in principle, enough gains for everyone to be better off, the free market cannot compensate the losers. It is up to each government to undertake redistribution of gains from economic globalisation so that everyone wins. This has not been done in most countries and regions, including Hong Kong. It has resulted in stagnant or even declining living standards for the lower-income groups and soaring income and wealth disparities.

The supporters of US President Donald Trump and Brexit are the losers from economic globalisation. Their lives have scarcely improved over 40 years while some of their compatriots have become many times better off. That is why they have abandoned the traditional political elite.
The same is true in Hong Kong. The poor have largely been left to fend for themselves. This is most apparent in the deteriorating housing situation. The mainland, by contrast, successfully implemented a programme of poverty eradication – by 2020, no one on the mainland will be below the poverty line, according to the 2010 standard.
Second, a substantial proportion of people in Hong Kong fear communism. They are not necessarily anti-communists, but fear and distrust communists because of history, personal experience or pure propaganda. Thus, the extradition bill was portrayed as allowing suspects in Hong Kong to be sent back to the mainland, arousing people’s worst fears.

It does not matter that the bill requires “double criminality”; for example, a Falun Gong follower from the mainland will not be sent back because it is not a crime to practise Falun Gong in Hong Kong, and the extradition request has to come from the highest prosecutorial authority of each country or region.

However, while the fear may not be completely justified, it is real. Moreover, most younger people lack a sense of Chinese national identity because Chinese history has become an optional subject in Hong Kong secondary schools.

It will take time to alleviate fear and build mutual trust, which requires more interaction between Hong Kong and mainland residents rather than less. It will take even longer to generate a sense of national identity among young people. But this we must do; Hong Kong will always be a part of China. What the Hong Kong government can do now is start working on Hong Kong’s livelihood problems in earnest immediately.

The most pressing problem is residential housing for the lower-income groups. It is unconscionable that so many people have to live in cages and tiny, unsafe, subdivided flats. But this problem is of Hong Kong’s own doing. Around 7 per cent of Hong Kong’s land is for housing. More than 60 per cent is used for country parks or other green areas. A very slight reduction of the country parks, say 1 per cent, will provide ample land for public housing. Of course Hong Kong should also undertake land reclamation at the same time.

How Carrie Lam can cool the anger – address the housing crisis

Hong Kong’s government must take the lead to increase the supply of land for affordable residential housing. Once it becomes credible that land supply will increase, expectations will change and the price of land and resultant price of housing will begin stabilising. Real estate developers who accumulate sizeable land banks will know it is time to develop and sell.

There may be fearmongering that an increase in land supply will lead to a collapse of the private housing market, affecting middle-class households who own their homes. But as long as the new land is used primarily for public housing, its impact on the prices of private flats should be limited.

The second pressing problem is the totally inadequate social safety net. No one can retire on the Mandatory Provident Fund alone. The current disturbances may lead to a rise in the unemployment rate, but there is no public unemployment insurance in Hong Kong. Health care is spotty and characterised by long waits (of months and years). There should be a long-term plan to fix these problems.

To be trusted, government must listen harder to all Hongkongers

Unfortunately, the SAR government has an ideological aversion to long-term planning. The principle of “positive non-interventionism” has been ingrained in the mindset of some of our bureaucrats since British rule, but it is a luxury Hong Kong can no longer afford. The government must also stop relying on land sales as a critical source of revenue and end the high land-price policy.

Violence cannot solve Hong Kong’s problems. The rule of law, a core value and a key comparative advantage of Hong Kong, must be upheld.

Beijing also cannot solve Hong Kong’s problems. It is up to the people of Hong Kong to plan and work together to solve their own problems peacefully and rationally.

Lawrence J. Lau is Ralph and Claire Landau Professor of Economics, Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong

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