Seeking change while preserving stability

People who browse the Hong Kong edition of China Daily and similar state-subsidized organs will have noticed a recent spate of opinion pieces calling for the Big Lychee’s next administration to move away from commitment to free markets and non-interventionism – typically described as a ‘colonial’ policy – to more hands-on economic management. Maddeningly, the writers give no idea of what sort of government interference or guidance they would like to see. This is in contrast with vested interests like the industrial lobby, who demand cheap land and labour so they can bring factories back, or quasi-visionaries like legislator Regina Ip, who pushes 1960s-style research/hi-tech dirigisme. Reading between the lines, you get the impression that the China Daily contributors may be less interested in picking new winners than in bringing much-loathed sectors like property and finance down to size for the, perhaps understandable, sheer exuberation of it.

Today’s South China Morning Post reports that Chief Executive-elect CY Leung expects to intervene, in some way, somehow, at some time. “It will be impossible to maintain the city’s prosperity and stability,” he says, “if the new government is indifferent to changes in the external environment.” The story arises from a Xinhua interview in which CY says the government’s ‘big market, small government’ policy makes Hong Kong depend too much on [the] market.”

The outgoing administration’s  ‘big market, small government’ slogan was never much more than an excuse to leave land sales and production of new housing stock in the hands of the developers, and to leave those tycoons’ other cartels alone. Officials were perfectly happy to have a state-owned Disneyland, the world’s biggest public housing system and entities like the Mortgage Corporation and the Trade Development Council competing unfairly with private-sector providers. The apparently gullible, or simply ideologically myopic, Heritage Foundation fell for it and awarded Hong Kong its Solar System’s Freest Economy award year after year.

That title will no doubt pass to Singapore, Ireland or some other unlikely-sounding place during CY Leung’s first term. The Xinhua interview is finely crafted to push all the right buttons and in particular assure existing interests that nothing radical will happen. ‘Reform Without Change’ and ‘Greater Affordability of Housing, But No Drop in Prices’ are the mantras. But it seems highly likely that the intervention CY is planning comes down to land. I would guess that the ‘changes in the external environment’ he mentions would be such factors as very low interest rates, which push money into local real estate as fast as the Fed can print it, and the emergence of Mainland investors as a major, space-hogging presence in the local property market – a leading reason why we have over 200,000 empty apartments in town.

You wouldn’t have thought that an interview with ex-colonial official Sir David Akers-Jones could be interesting, but Time Out has valiantly pulled it off, more or less, and the Leung supporter’s thoughts also suggest that the next administration is going to take the kid laissez-faire gloves off where land is concerned. “The shortage of housing supply has always been the only major reason of Hong Kong people’s unhappiness,” he intones, lamenting the 10-years’ lost output of affordable homes that will surely rank highly in any list of outgoing CE Donald Tsang’s disasters.

Free-market purists won’t like the sort of housing measures we might see. The Wall Street Journal warns: “…there is only one market-friendly solution: release more land for development.” But what does ‘market-friendly’ mean when the supply-demand balance is massively distorted by, say, a million more Mainland nouveaux riches looking to buy a new overpriced luxury unit or three here?

Maybe CY will attach conditions to residential land sales: units must be cheap, no-frills and aimed at locals. Maybe he will work out a system to bar Mainlanders from purchasing homes here. Maybe he will even find a way to encourage absentee landlords to let out empty flats. The people of Hong Kong will say ‘hurray’. The Heritage Foundation, Lion Rock Institute and Wall Street Journal – like the French philosopher – will growl their dissatisfaction that while it may work in practice, it doesn’t work in theory. But we will not wake up one morning to find the People’s Number Three Tractor Factory opening down the road, or New Territories banana plantations being turned into communes.


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14 Responses to Seeking change while preserving stability

  1. Maugrim says:

    Whilst falling residential prices will impact upon the middle class’s prime assets, a failure to do something about the present state of the housing market will damage HK for years to come as it will create generations for whom life is hopeless. That is, people who will simply ‘give up’ at the prospect of studying for years, working long hours in a low paid job all just to aspire to buy an overpriced box out in the sticks. The best thing CY can do is to effect changes that impact upon ordinary people’s lives and their well being.

  2. Che Guevara says:

    I guess expats will only believe in revolution when there is no Carlsberg left in the fridge? Or when the dividends stop rolling in? It’s coming! China is a naturally chaotic society and can’t abide order. Hong Kong will lead the way in the dissolution of Free Market Communism and the emergence of the New Left.

    “The question is one of fighting the causes and not just the effects. This revolution is bound to fail if it doesn’t succeed in reaching deep inside them, stirring them right down to the bone, and giving them back their stature as human beings. Otherwise, what’s the use?”

    “Hatred is an element of struggle; relentless hatred of the enemy that impels us over and beyond the natural limitations of man and transforms us into effective, violent, selective, and cold killing machines. Our soldiers must be thus; a people without hatred cannot vanquish a brutal enemy.”

  3. Walter De Havilland says:

    Turn the volume up and let this wash over you …

  4. Chopped Onions says:

    But I want a People’s number three tractor factory at the end of my street. It might just be a tad more interesting than the shopping mall that’s there now and, more importantly, if the posters are to be believed, the girls who work in such places are very very cute!

  5. Spud says:

    Would this be the same Aching-Bones who was behind the woeful small house policy that has f’ed up the country parks and made the Kuk into a huge monster nobody dares mess with?

    Or is it the same guy who had granted the rights for HK Resorts to develop a resort in Discovery Bay only to turn it into the major residential development it is today.

  6. Real Tax Payer says:

    @ Chopped Onions : I guess you could the girls not so much cute as attractive !

    But seriously, another thought-provoking piece by Hemlock

    PS: did you read the Time Out link ? Sir David ( and there’s one Sir David who does deserve his Title, unlike another “sir david” that springs to mind) His house in Sham Tseng was knocked down for road-widening , he was paid insufficient to buy a new place, and now he lives in a rented flat in Wanchai.

  7. Joe Blow says:

    In the ’70s there was also a New Left: it wore rim-wire glasses, a beard, a home-knit cardigan and sandals. And an Amnesty International-button. Its wife worked p-t at the Red Wimmen’s Co-op Shop, selling Guatemalan peasants’ bags, real Cuban cane sugar and such.

    Where did it go ?

  8. Reductio says:

    Is it legal to drive a tractor in HK on public roads? Or, even better, a traction engine ? The latter would be especially handy at rush hour.

  9. Aghast says:

    – ‘The emergence of Mainland investors as a major, space-hogging presence in the local property market – a leading reason why we have over 200,000 empty apartments in town’.

    Not really, there was the same percentage of ’empty’ apartments ten years ago, and far more five years ago (over 10%). Anyway the rate now, as in 2001 is about 8% of all units, not really remarkable, and of course including apartments that are for rent or sale but unoccupied.

  10. Chopped Onions says:

    There’s nothing like a girl that can work with a tool…………..ok I’ll get my coat!

  11. Real Tax Payer says:

    Chopped Onions’ “Pipe and Tool Works”

    Hope Tang’s still does as well

  12. nulle says:

    why mess with the capitalist methods? Just only build HOS and public housing estates for a year or three and real estate prices are becomes manageable. This includes land that were reclaimed from older areas. Allow Multi-nationals entry to compete against Wellcome and Park-n-shop.

  13. Hendrick says:

    Very difficult to introduce more supermarket competition. Welcome and ParknShop & Wellcome are in league with the importers, suppliers and distributors. Look what happened to Carrefour. None of the overseas chains would be willing take on the massive investment and risk. Sad to say we’re probably stuck with the duopoly.
    The property market at least has some benefit for those able to buy, and who cares how much Swiss watches, German cars and Louis Vuitton bags are marked up. But how Lee Ka Shing and the Keswicks can sleep at night knowing that they’ve stitched up everyone’s food is beyond belief.
    Knighthoods, of course, for ploughing a little back in.
    Sort this one out if you can CY. Please.

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