Great divide between Hong Kong’s haves and have nots fuels anger
KATHY CHUTHE WALL STREET JOURNALOCTOBER 21, 2014 12:00AM
A KEY reason why protesters in Hong Kong are demanding free elections for the first time is their dissatisfaction with the state of the city’s economy and the pro-business establishment that runs it.
Hong Kong has one of the world’s biggest wealth gaps and its highest property prices. Years of stagnant wage growth have created deep frustration among students and the middle class.
One target of their frustration is the city’s tycoons, a handful of families and colonial-era conglomerates that control most real estate, many of the retailers and nearly all utilities and buses.
“Tycoons don’t need sympathy, but they’re between a rock and a hard place,” said Jean-Pierre Lehmann, a visiting professor in the University of Hong Kong’s business and economics program. “Hong Kong has a number of critical problems, such as inequality, and the tycoons are seen as being an emblem of that.”
To be sure, protesters are angry about the rising influence of mainland China on the former British colony, but when asked, many students will express frustration with their economic prospects.
Many of the city’s tycoons have been noticeably silent on the protests. Those who have spoken out have urged an end to the protests while finding gentle words for the pro-democracy movement.
Asia’s richest man, Hong Kong tycoon Li Ka-shing, who Forbes says is worth $US31.4 billion ($35.9bn), last week said he understood the “passion” of students but urged them to go home.
The tycoons’ words don’t resonate with protesters such as Arnold Chung, 19, who expects to live with his parents for years. Average starting salaries for university graduates have risen 1 per cent annually over the past 17 years, to $HK198,000 Hong Kong dollars ($29,000) a year, lagging behind inflation and the rise in house prices. “The young generation doesn’t listen to Li Ka-shing,” said Mr Chung. “We expect rich people to say this (protest) will disturb the economy.”
Even as thousands of protesters took to the streets, Mr Li’s Cheung Kong property development arm was unveiling apartments that totalled 15sq m. The apartments, about the size of a one-car garage, haven’t been priced yet, but slightly larger units have recently sold for between $HK1.77 million and $HK$3.6m.
Once seen as the proud symbols of Hong Kong’s rising power, these tycoons have faced criticism for getting richer while residents fall behind. Many have benefited from China’s growth, which aligns their interests with Beijing and further alienates them from the protesters.
“These people are seen to be making a lot of profit with the government’s help,” said Joseph Cheng, a professor of political science at the City University of Hong Kong.
Hong Kong’s tycoons range from Mr Li, whose empire began with a factory making plastic flowers, to colonial-era conglomerates such as Jardine Matheson Holdings, run by the Keswick family, which got rich by trading opium and other goods in the mid-1800s.
They are typically family-run empires that have large real estate businesses — five Hong Kong companies account for 70 per cent of the private residential market, according to brokerage firm CLSA — and government concessions in industries such as telecommunications, ports and transportation. Some own retail outlets in highly concentrated industries such as supermarkets, where two tycoon-owned chains dominate sales, and they have franchises for goods such as Coca-Cola.
The wealth concentrated in these families makes Hong Kong among the most unequal places in the world, and the inequality has grown worse over the past decade. According to Welch Consulting, an economic consulting firm, Hong Kong has 41 billionaires valued at a total of $232bn, equal to 74.4 per cent of the city’s annual economic output. The only country with a higher concentration by this measure is the southern African nation of Swaziland, where the wealth of its one billionaire equals 99 per cent of GDP.
The wealth of the city has become increasingly concentrated. In 2000, 65.6 per cent of the city’s assets were controlled by the wealthiest 10 per cent of its people, according to Credit Suisse. In 2007, the figure was 69.3 per cent and this year it is 77.5 per cent, making the concentration among the highest in the world and the growth among the fastest.
Some other tycoons have carefully spoken out. Peter Woo, chairman of property developer Wheelock, this month said the pro-democracy protests could not continue, saying the city had already won because people had the right to protest.
Jardine Matheson said “any expression of views should also respect the rights of fellow citizens”.
Most of these companies have felt the protests first-hand. Students blocked the road in front of Mr Li’s headquarters and they forced a third of the Chow Tai Fook jewellery stores, controlled by the family of Cheng Yu-tung, to close. Guests at Jardine Matheson’s Mandarin Oriental Hotel had to walk to their rooms because the street was closed.
One way the tycoons exert control over Hong Kong is through the 1200-member committee that has selected the city’s chief executive. While some members are elected by the public, most are selected by business groups. A new version of this committee will likely be used to approve the candidates for the next chief executive’s election in 2017. Protesters want candidates to be nominated by the public.
Negotiations between the city and students are likely to start tomorrow and one area city officials have said could be negotiated is the make-up of that committee. While that could erode the tycoons’ power, few expect the change to be dramatic. “Beijing has relied on co-operation with the tycoons to control the selection of the chief executive,” said David Webb, a former investment banker who runs corporate governance site Webb-Site.com. “There’s no way that they’re going to shift the composition of the committee from the tycoons to the pro-democracy camp.”
The tycoons’ difficult position was illustrated before the protests exploded, when China’s leaders called them to Beijing to get them to publicly support the rules it had approved for elections in the city. They dutifully travelled to Beijing, met President Xi Jinping, among others, and made statements afterwards.
The effort didn’t help much. “Their sway on public opinion is declining, particularly among those below 30,” said Willy Lam, an adjunct professor at the Chinese University of Hong Kong’s Centre for China Studies. “But nonetheless, Beijing still subscribes to the old belief that Hong Kong people are economic animals, and these tycoons are major employers.”
Then when the protests hit, most of the tycoons went quiet.
The Wall Street Journal
http://m.theaustralian.com.au/business/wall-street-journal/great-divide-between-hong-kongs-haves-and-have-nots-fuels-anger/story-fnay3ubk-1227096551065
