All kingdoms must come to an end. Hong Kong’s tycoons are now learning that money isn’t power. Belief is power. And he who is most committed wins. Groups, from the Taliban to the Communist Party of China, have demonstrated that belief is the source of true power. And the downfall of the city’s vaunted tycoons represents the folly of Hong Kong’s past and business culture – that profit is all that matters.
China’s current campaign against mainland tycoons and selected industries does not bode well for Hong Kong’s establishment. While property conglomerate Sun Hung Kai and the Real Estate Development Association have denied any directives from the central government, the first rule of “Communist Party 101” is to wait for an official denial before confirming the truth.
Despite their regular and unalloyed pledges of fealty and love to China, as well as the admission that Hong Kong faces a residential property shortage and tremendous wealth inequality, the property tycoons refuse to accept responsibility for being a key actor in the ongoing crisis.
Instead, they shift the blame to the Hong Kong government’s inadequate land supply management. Demand – how land is developed and sold – is an inescapable part of Hong Kong’s social and economic woes.
The professed love and loyalty of Hong Kong’s tycoons and hongs (British-owned trading houses concerned with trade with China) will be sorely tested in the upcoming economic and social rectification campaign. The absorption of the city into the Greater Bay Area and Northern Metropolis is as much a political and economic exercise.
What the tycoons don’t understand is that their money doesn’t necessarily translate into power or a partnership with the central government. The fact is their very existence represents a political threat to the central government that does not trust or countenance power sharing.
And that the business practices of local tycoons are a root cause of social instability that led to the 2019 riots. For decades the government and private sector failed to address the fundamental, structural economic problems facing the city. Instead, they collaborated on a high property price policy that has led to the end game of laissez-faire capitalism in the city.
After all, selling 200-square-foot private flats for families is immoral. Yet, Hong Kong developers continue to merrily offer them for sale despite edicts from Beijing to stop this grotesque exploitation. Compare this to Singapore, where the size and quality of public and private flats are strictly regulated.
The local tycoons still believe that if they phlegmatically tow the politically correct line, exhort their love for China and host enough expensive seafood dinners, that the central government will somehow acquiesce and partner with them in building the new Hong Kong where they retain a lucrative role.
Directors of major developers have told me in the past that politics – local or international – are the last thing on their family owners’ minds when making investment decisions. They claim their boardrooms are apolitical and focused on profit. Perhaps that is the very problem when trying to live with a single-party governed sovereign, where politics, not money, is the currency of power, and who resents being treated as the new colonial master.
The tycoons and British hongs have outlived their economic purpose under the colonial economic model. Ignoring monopoly or oligopolistic abuses in exchange for attracting private capital to build key local infrastructure such as private flats or utilities can no longer be tolerated.
Since 1997, government officials and the business establishment have defended a high property price economy without understanding the huge economic and social costs it imposes. Only Beijing can end the collusion between government officials and monopolies.
The property tycoons are ill prepared for winds of change because none of their new generation has cultivated the same kind of deep personal relationships that their patriarchs had developed over decades from the 1970s.
These Ivy league educated, progeny are more comfortable playing golf in Stoke Park or Pebble Beach than dining with party officials. They embody Hong Kong’s current dilemma – that wealth creation is more defined by which family you belong to or who you married rather than what you created.
Difficult and bold decisions will have to be made because Hong Kong is unsustainable in a continuing state of crisis.
The very notion of competing power centres in a resource as important as land cannot be tolerated by the CCP. And China’s economic influence over the last thirty years in numerous industries including technology means that Hong Kong’s tycoons have almost nothing to offer to the development of China. The country does not need the tycoons’ money, connections or knowledge, which only extend to property speculation and conglomerate monopolies.
The tycoons’ love of the motherland will be sorely tested when Hong Kong’s land policies are substantially reformed to conform to the mainland’s command economy structure. Besides ending land banking, the Hong Kong government could easily expropriate all the tycoons’ land banks.
Other common policies imposed in other countries include selectively deploying rent controls, controlling flat sales so developers can’t restrict sales to a paltry hundred flats over the weekend, restricting flat sales to citizens or permanent residents of Hong Kong rather than allowing them to be used as an investment asset by outsiders. Designating the type and size of flats, management fees and improving financing terms can all be amended to easily work against developers’ profits.
The preferential land allocation of the ding land ownership policy of the Heung Yee Kuk in the New Territories represents the biggest challenge to the central government. Their functional constituency and rights are clearly entrenched and protected in the Basic Law despite the problems it causes to reforming land policies. But, if the government can pass national security legislation in three days, surely it can easily amend land policies.
Broad tax reforms such as implementing an inheritance and dividends tax will be needed to compensate for changes in the government’s property tax revenues. None of these are palatable to developers who prefer noblesse oblige to real policies. In other countries, land is a strategic resource important for long-term industrial, economic and social development, not just as raw material for the enrichment of a handful of families.