by Florian Spinell
The People’s Republic of China has just “elected” its new leadership. For many years, China has adhered to the slogan: “Let some get rich first.” This has led to an ever-increasing social and economic inequality in the country. The new administration, therefore, has declared that one of its major goals in the next decade is to mitigate the vast income disparity among Chinese citizens in order to create a more “harmonious society”.
Hong Kong, China’s Special Administrative Region does not receive much consideration by the world’s press, but it is nevertheless facing the same increasing disparities as the rest of China. The city, located in the south of the Chinese industrial city Shenzhen, is both heaven and hell, depending on whom you ask. To wealthy tourists or influential people, Hong Kong is an immense heaven filled with anything you could ever dream of and more; to the poor immigrants and migrant workers, Hong Kong is an oppressive Hell, bleak and destitute and devoid of hope. With a Gini coefficient of 43.4, Hong Kong is a city with one of the widest gaps between its rich and poor residents. According to the Hong Kong Council of Social Services, more than 1.1 million people, or 17 percent of Hong Kong’s population, lived below the poverty line in 2011, earning less than HK$3,500 ($450) per month. It defines poverty as earning less than half of the average monthly income.
Hong Kong has become two completely distinct worlds: There is Hong Kong Island and Kowloon (and recently, also the New Territories), where an array of luxury shops sells expensive bags, shoes and jewelry to the tremendously wealthy.The other side of Hong Kong houses the so-called cage people: residents living in ultra small dwellings, barely able eke out a living and residing to begging in the dirty streets. About 100,000 people in Hong Kong live in these “cage homes”. With one toilet per floor and just a few square feet to their name, thousands of cage- dwellers live no better than animals. The paradox is that the tenants, who are among the city’s poorest residents, proportionally end up paying among the highest rents.
This housing price disparity is due to the extremely fickle Chinese housing market and it is one of the most expensive in the world. A managing director of a U.S. bank said:”The only place where a rich banker feels extremely poor is Hong Kong.”
Part of the volatility is due to Hong Kong’s land scarcity and the exceedingly high population. However, another major cause lays in the fact that only half of the parliament is directly elected. Therefore, they have little fear of public accountability. The chief executive, many lawmakers, and legislative councilors are not elected by universal suffrage, but by census suffrage based on occupational category. Hence, the poor have no right to vote and the government has no need or desire to listen to the voices of the poor. Moreover, property developers, tremendously powerful men with strong government connections, have monopolized the housing market.
In order to stop housing prices from rising further, the new Chief Executive Leung has introduced increased stamp duties for short- term investors and a new stamp duty for non-permanent residents. Latter policy helps to discourage buyers from mainland China from investing in Hong Kong.
Despite these actions, Leung has to be careful not to undermine China’s interests. There are many rich Chinese and high-ranking Chinese officials holding top-class properties in Hong Kong, properties purchased at these bloated prices. Thus, they would be quite unhappy to learn that the return on their investment will decrease significantly.
Nevertheless, Leung must find a way to deal with unrest in his country. There have been several protests over the last couple of years about housing, food inflation, and about Leung’s election as Chief Executive.
The management of the housing problem by the PRC will be critical for its acceptance by Hong Kong residents, who already have negative sentiments towards the PRC and the CPC. Since the CPC considers Hong Kong to be part of China, it must find a favorable and diplomatic solution to the underlying problem. Although Hong Kong’s main problem is land scarcity, the most promising way would be to stop the CPC from interfering with the Hong Kong government and to break up the existing monopolies.
Chief Executive Leung has a hefty task before him. He must deal delicately with the rich and he must also save his citizens. It is doubtful whether this will happen, but, as after every election, the announcements are promising and political changes bring new prospects.