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A demonstrator with a child attends an anti-government rally at Edinburgh Place on December 29. Photo: Reuters
Opinion
Janet Pau
Janet Pau

Hong Kong’s economic destiny looks grim, given its ageing population and a younger generation culturally pressured to conform

  • Hong Kong is the fastest-ageing economy in the world, and has the lowest population share of children under 14. The city faces a grim economic fate, unless the older and younger generations can work together to change the growth model
Hong Kong needs an economic transformation to combat slowing growth in its pillar industries and ageing demographics. The older generation of decision-makers needs to invest in preparing the younger workforce, on whom the city’s future will depend.
In the coming decades, Hong Kong will face its demographic destiny. It is the fastest-ageing economy in the world. The largest age cohort – around 650,000 people – will begin turning 60 in 2020, making one-third of Hong Kong’s population essentially retirees. Like many other high-income economies, Hong Kong’s economy and political system are disproportionately captured by the post-war baby-boomer generation.
They expect to reap the rewards of their labour and sacrifice in building Hong Kong throughout their working lives. As this generation ages, resources will be tilted towards providing for them and paying for the exponential costs of longevity – Hong Kong has the longest life expectancy in the world.
While the up-and-coming young working-age population is, on average, much better educated than their elders, there are far fewer of them. Hong Kong has the lowest population share of children aged up to 14 in the world, at 12 per cent: similar to Singapore and slightly lower than Japan and South Korea (both 13 per cent).
More than 90 per cent of these youngsters were born in Hong Kong and, if past surveys provide a glimpse into their attitudes, the majority will have a strong sense of Hong Kong identity. The millennials are not well represented in politics, nor do they have many have economic resources to mobilise in their favour.
Hong Kong’s destiny is also cultural. Twenty-five years ago, Lee Kuan Yew said that culture is destiny, and that Eastern cultures believe that individuals exist in the context of their families. In Hong Kong families, the Chinese value of filial piety, which dictates respectful submission and loyalty to elders, is expected of the next generation.
The young are taught to respect and serve their elders, especially as many need to be tethered financially to their parents to afford to live in the city. The Western millennial phrase, “OK boomer”, perceived as ageist and irreverent, is unlikely to gain traction among Hong Kong’s youth. Yet the frustration of young people has boiled over, as has been apparent in the six-month-long protests.

What is the secret to Hong Kong’s high life expectancy?

A convergence of these destinies – a rapidly ageing population, a shrinking labour force, and a younger generation culturally pressured to conform and submit – does not bode well for Hong Kong’s future economy. Ageing demographics will slow growth. Labour input will turn negative: Hong Kong’s population decline is projected to begin in 2043.

If Hong Kong wants to break free from its destinies, the older and younger generations should tamp down differences and lay the foundation for longer-term competitiveness and growth. Increasing investments in education and skill development will be key in equipping the future workforce for success in a digitally-driven economy, which is likely to be composed largely of jobs that don’t exist yet.

Perhaps as a consequence of the protests, Hong Kong may now be seen as an emerging hub for nerds, misfits, trailblazers and innovators. Globally-minded, defiant and creative young people could be attracted to Hong Kong. It should create incentives for more diffuse ownership of both capital and knowledge, so people have more opportunities to prosper.
Apart from Hong Kong, only four other small, advanced economies with relatively low corporate and personal income taxes have had more than 3 per cent average growth in the past eight years, since the world started recovering from the global financial crisis. Besides Singapore, whose model has been well studied, Hong Kong can take note of the three “I” economies: Iceland, Ireland and Israel.

How have they escaped the destiny of slow growth? They adapted to external circumstances that were challenging at times, and each found a competitive and valuable niche as part of a much bigger economy and market.

As measured by the latest Global Competitiveness Report, they ranked high for ensuring business dynamism, particularly having an entrepreneurial and risk-taking culture, and fostering international co-invention. They also invested in giving their workforce a mix of critical thinking and digital skills to prepare for the future economy.

One-two blow of protests and trade spat won’t kill Hong Kong

The uncomfortable reality is that the Hong Kong government’s long-standing active non-intervention policy needs to evolve. At the same time that it plans for the accelerating costs of supporting the aged, it needs to foster new, higher-value industries and invest in preparing the younger generation for the future.

Hong Kong is a city of constant flux and dynamism, and its people have an insatiable drive to do well, to better their lives and their children’s. The current crisis is an opportunity to awaken the different generations to the need to change Hong Kong’s economic growth model; they share a common purpose – to escape otherwise grim economic destinies and forge a brighter growth path.

Janet Pau is programme director of the Asia Business Council

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