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.