The city isn’t short of money; it’s
short of happiness. According to World Bank data, Hong Kong’s gross domestic product per capita in 2019 was US$48,700, ahead of Britain’s US$42,300, France’s US$40,500 and Japan’s US$40,200.
Hong Kong also has
huge reserves, representing the savings of generations, managed by the Hong Kong Monetary Authority. The money belongs to the people of Hong Kong and is meant to fight emergencies, which describes the situation today.
The economic system has to evolve from
shareholder capitalism, which focuses on shareholders’ interests, to stakeholder capitalism, which takes responsibility for shareholders, employees, the overall community and the environment. Anti-monopoly legislation has to be strengthened to counter an unpleasant trend in Hong Kong where a wide range of goods and services is sold under oligopolies.
We have to acknowledge that housing is in crisis, justifying an emergency response. Hong Kong’s supply response should include massive
land reclamation, converting parts of
country parks into housing estates and enlisting Beijing’s help to lease land in neighbouring
Guangdong province for Hong Kong’s use.
That said, we wouldn’t want to trigger a crash in Hong Kong’s real estate prices as home ownership represents the life savings of many in the middle class.
The Singapore model, which segregates the expensive private sector from public housing targeted at those who would otherwise not be able to buy, is suited to Hong Kong’s circumstances.
It’s also important to strengthen affordability. The government should study whether to introduce
Universal Basic Income, an idea drawing growing interest in developed societies. It would provide a guaranteed basic income to every adult permanent resident, which in certain respects is the most efficient way to spread around the wealth.
Over time, taxation has to rise. Hong Kong’s maximum personal tax of 17 per cent and corporate tax of 16.5 per cent is too low, compared to the mainland’s 45 per cent and 25 per cent, Singapore’s 22 per cent and 17 per cent and Britain’s 45 per cent and 19 per cent respectively. Hong Kong should also impose a sales tax, which the other places mentioned have.
Of course, any talk of universal income or higher taxation would run into
vocal opposition from vested interests, especially the business sector and the rich. They will cry wolf, but it is time to call their bluff.
Local and foreign investors will eventually realise it remains advantageous to be in Hong Kong, especially with the enhanced benefits of a transformed society. This is especially so as China is on track to become the world’s biggest economy, strengthening the locational benefits of Hong Kong.
Future immigration into Hong Kong will have to be tightly restricted to reduce overcrowding and prevent outsiders from diluting the benefits of
social improvements. Here again, Singapore provides a benchmark. It lets in foreigners who add value but prioritises local residents in career opportunities, senior positions and benefits.
A reformed capitalist system like the one described above is unlikely to frighten Beijing. The system on the mainland, sometimes called “
state capitalism”, resembles stakeholder capitalism, with attention paid to sustainability and the public interest.
Beijing has long promoted stability and prosperity in Hong Kong, so it should be glad to go along with such initiatives. It knows national security cannot be separated from issues of social stability and economic livelihood.
Hong Kong’s renaissance should also encourage the central government to allow
universal suffrage. This would enable the direct election of the chief executive based on “
one person, one vote”. A democratic system would further promote the buy-in of Hongkongers.
So what’s stopping Hong Kong from being born again? The key obstacle is the mindset of the Hong Kong elite in business, politics, the civil service and the professions. Most of these people lack the courage and imagination to adapt.
Typically, these are men and women above 50 who came of age during Hong Kong’s
economic miracle in the 20th century, and they are wedded to obsolete ideas dating back to the British colonial era. There are also some outstanding, far-thinking individuals in these groups, but they are a minority.
The lack of vision is a pity. The entrenched elite fail to see that a rejuvenated Hong Kong would eventually achieve new heights of prosperity, attracting a flood of money and talent from the mainland and overseas.
In 2047, Hong Kong’s status as a special administrative region will end unless an extension is granted by Beijing. We need to turn Hong Kong around now to build up the case for such an extension to be given.
Cheah Cheng Hye is the co- chairman and co-chief investment officer of Value Partners Group, an asset management firm in Hong Kong
