For millions of Hong Kongers that marks the 15th anniversary of its return to Chinese sovereignty. There has been much reflection on how the city has changed and what its future holds, but to many, it isn't a moment to celebrate: Hong Kong has in recent years, been marred by grievances from pollution to corruption scandals to human rights to a widening gap between rich and poor, eventually to witness its GDP overtaken by regional rival Singapore.
China has kept its promise to retain the freewheeling capitalist system of the former British colony, but residents have grown increasingly uneasy about being ruled by the country’s authoritarian leaders. Only 1,200 elites among Hong Kong’s 7 million residents had the right to vote for their chief executive. Public mistrust of the central government in Beijing is at its highest at 37% since the handover in 1997, while approval ratings for Leung Chun-ying, the incoming Hong Kong chief executive, have dropped sharply even before his inauguration.
"We still cannot choose our chief executive, and that has caused many problems," said Andrew Shum, 25, who is organizing one of the demonstrations this weekend near where Chinese President Hu Jin Tao will be leading meetings. "People don't trust the chief executive, because they don't have a voice in voting for him." Many believe Beijing heavily influenced Leung Chun-ying's election, adding urgency to Hong Kongers' calls for full democracy.
15 years after the handover, Hong Kong faces a wide set of challenges, analysts say: Property prices have soared to their highest levels since 1997; the gap between rich and poor, already the greatest in Asia, is at its highest level in four decades; air pollution continues to worsen; and no clear path has been presented to usher in a system to allow the public to democratically elect leaders. Beijing has previously said that direct elections of the chief executive may be held as early as 2017, but has not provided any guarantees. The Communist Party of China is deeply unpopular especially among the young in Hong Kong.
15 years ago: Handover of Hong Kong
Moreover, Hong Kongers are annoyed by an influx of wealthy mainland visitors shopping at luxury goods outlets, which has helped push up rents and drive out local businesses. Some are outraged by mainland Chinese women who come to Hong Kong to give birth, seeking prized Hong Kong residency for their children and a way around the mainland’s one-child policy. Even little things like ads with simplified Chinese characters used on the mainland, rather than the traditional Chinese characters used in Hong Kong, have drawn residents’ ire.
“People are generally unhappy about the widening gap between the rich and the poor, and they are unhappy that the government can’t do much about it,” said Joseph Cheng, a political science professor at City University of Hong Kong. “They are critical about the collusion between government and big business and they are worried about the declining international economic competitiveness of the territory.”
"It is harder today to jump up to the middle class than in 1997, when you could still do it with hard work alone," said Gordon Hon, 39, a Hong Kong resident with a two-year university certificate in social work who leads rock climbing and other outdoor pursuits.
Plutocracy: Hong Kong becomes a territory ruled by billionaires
The share of Hong Kong's poor has risen from 14.8% in 1995 to 18% today, and while GDP has grown by 30% in the last ten years, median monthly income has been virtually stagnant, inching from HK$10,000 in 2001 to HK$11,000 today, partly due to the minimum wage law of last year.
In Hong Kong, the term “property hegemony” is widely used to describe how a few tycoon dynasties control most of the economy, with business empires spanning property, construction, hotels, transportation, telecoms, retail and banking. Just the four richest tycoon families (led respectively by Li Ka-shing, the Kwok brothers, Lee Shau-kee and Cheng Yu-tung) control roughly half of the economy. It is often said that for every dollar spent in Hong Kong, five cents goes into the pocket of Li Ka-shing.
It is however, not to be confused into that Hong Kong has declined. In 1995, Fortune magazine famously predicted the death of Hong Kong under Chinese rule.That didn't happen, instead island flourished since the handover; its $176 billion GDP in 1997 grew to $243 billion in 2011, while GDP per capita rose from $27,000 to $34,000 in the same period, according to the International Monetary Fund.
Hong Kong's financial industries topped the world in 2011, but no other new industries created
Hong Kong has steadily cemented its position as a global financial center. It became the largest market in the world for IPO (Initial Public Offering), it is the host to the largest pool of hedge fund assets invested in Asia and the most popular center for hedge fund startups. Moreover, mainland Chinese deposited $590 billion into Hong Kong in 2011 - that is more than the entire GDP of oil-rich Saudi Arabia. Hong Kong becomes Asia's top asset management center with $1.3 trillion in assets under management.
Hong Kong’s net foreign assets are the highest in the world at 288% of GDP, ahead of second-placed Switzerland on 157%., its currency, the Hong Kong dollar, is the ninth most traded currency in the world. The economy of Hong Kong is widely seen as robust, being ranked as the world's freest economy according to Index of Economic Freedom by the Heritage Foundation. Economic prosperity allows Hong Kong to build up a foreign reserves of $294.6 billion, more than even Germany.
The city's economy grew every year except in 2009, during the world economy abyss. Annual GDP growth has been 4.5% on average, and unemployment is never higher than 6%. With 41.92 million in tourist arrivals, Hong Kong tourism is second in Asia only to motherland China. Last year, Hong Kong exported $428 billion worth of goods, the fourth largest exporter in Asia after China, Japan and South Korea. The territory is the world's largest entrepot trading hub and its stock exchange the 6th biggest. But still it has fallen behind Singapore.
So what went wrong for Hong Kong?
Singapore overtaking Hong Kong's GDP
Hong Kong relies basically on its four core industries; financial services, tourism, professional services, and entrepot trading. The government once bet on "six new pillar industries" for growth; cultural and creative industries, medical services, education, innovation and technology, testing and certification services, and environmental industries - their development, so far, has been negligible. Simple as that, Hong Kong fails to make the transition towards a high-value-added, knowledge-based economy.
In contrast, rival Singapore has been highly successful in promoting new industries. Less than 2 years after its launch, the Singaporean gambling industries is now the world's second largest after Macau. Its high-tech industries blossomed and is now the #2 producer of silicon wafer in the world after Taiwan. The diversification into biotech and life sciences materialized, with Singaporean scientists now making inventions and exporting pharmaceuticals. Not only that, the city-state is now also the medical, IT, communication and R&D hub in Southeast Asia.
Singapore and Hong Kong both lost their manufacturing industries to neighboring low cost competition, but Singapore compensated that by shifting to high-tech manufacturing. Hong Kong, on the other hand, did almost nothing to reverse that.
Failure to diversify into high tech knowledge economy now haunting Hong Kong
It would be unfair to put the blame entirely on Hong Kong though, unlike Singapore who borders less-advanced states, Hong Kong's close proximity to Taiwan and South Korea, two of the world's leading IT manufacturing centers, and Japan, one of the world's most high-tech nation, means competition is much more stiffer than its Southeast Asian rivals. But the city could have carved out supporting niche industries just like Switzerland, Luxembourg or Liechtenstein, who are all surrounded by economic, financial and technological powerhouse France, Germany and Italy.
Hong Kong's overly powerful oligarchs - the tycoons, is also a hindrance to the creation of new industries. Unlike Singapore who works to suppress any groups from becoming too dominant, Hong Kong tolerates supreme power yielded by its most prominent businessmen. New technologies may bring upon radical change in wealth, just look at how Microsoft's Bill Gates, Oracle's Larry Ellison, Dell's Michael Dell, Amazon.com's Jeff Bezos, Google's Larry Page and Sergey Brin, and Facebook's Mark Zuckerberg catapulted to the top of billionaire list in the shortest time.
The wealthiest Hong Kong business dynasties would definitely wish to maintain the status quo at all costs, and with their sway on the economy, it is of no wonder Hong Kong remains stuck to its 'traditional industries' while Singapore surged ahead with its technological industries.
And apparently, the Lion City wins the game not by stubbornly trying to compete in traditional industries (Singapore still lag behind Hong Kong in financial services, tourism, professional services, and entrepot trading), but through success in the creation of multiple new industries.
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