Was it only 20 years ago that we were at the Convention Center in Hong Kong celebrating the return of Hong Kong to China on July 1, 1997? The night before, in searing rain that disguised the tears of many colonials, we watched the last Gov. Chris Pattern sail away from Victoria Harbor.
The next day, as the impeccably white-gloved Chinese People‘s Liberation Army soldier unfurled China’s national flag to signal the creation of the Hong Kong Special Administrative Region, I recall thinking what Deng Xiaoping would have thought if he had been alive to witness this event. What did it mean to have “One Country, Two Systems” where Hong Kong residents could still “dance and race as before,” at least for 50 years?
Fast forward 20 years, after not one, but two global financial crises, the world has changed beyond anyone’s imagination. Hong Kong is still rated as the most competitive and free economy in the world, at least by some measures, but there is little doubt this standing is under threat, as many other nations and cities begin to overtake in the area of innovation and technological skills.
Economically, Hong Kong has prospered visibly, from $177 billion gross domestic product in 1997 to $319 billion, rising by 80 percent, building on her strengths of superior infrastructure, free port and low-tax status, and her superior financial and logistic hubs. But over this period, China has grown spectacularly 11-fold from just under $1 trillion to $11.2 trillion in GDP, becoming the second-largest national economy in the world and the world’s leading trading nation, with more trading partners than the US.
Financially, Hong Kong has done well, with the market capitalization of the Hong Kong stock exchange rising 7.7 times to $3.2 trillion, but much of this was propelled by the listings of Chinese enterprises.
Indeed, Red Chips and H share listings moved from 16 percent of total main board market capitalization in 1997 to 40 percent this year, with the peak being over half in 2008.
In comparison, the mainland stock market capitalization, which was one-half of Hong Kong’s in 1997, grew 34 times to reach $7.3 trillion in value. What is remarkable is that Shenzhen (from literal green rice fields only 40 years ago) has a stock market valuation at $3.2 trillion, reaching the seventh position in the world, one rank above that of HKEx.
But these achievement were not all wine and roses.
What hindered Hong Kong from greater glories and its full potential was its toxic politics.
It did not help that Hong Kong policies under her first chief executive were driven askew by the outbreak of the Asian Financial Crisis on July 2, 1997, when Thailand devalued the baht. It was the shock of recession, particularly in real estate prices, that woke the Hong Kong middle class that when it comes to push and shove, they were the ones footing the bill. They watched aghast when Hong Kong tycoons pressured the Hong Kong Administration to abandon the 85,000 housing policy that would deny over a million Hong Kong youth from ever thinking about owning an affordable home.
Even if only 60 percent of the target of building 85,000 affordable units was achieved, just over 1 million units would have been made available over the last two decades.
The supply side intervention had the temporary effect of making Hong Kong one of the most expensive real estate markets in the world, but the long-term implications on social and political stability became more apparent over time.
Denied the opportunity of realistically affording their own homes, facing greater competition in the job market and not being able to afford startups because of high rents, Hong Kong’s youth turned toward the politics of protest and opposition to whatever the administration wanted.
Politics no longer became a search for compromise, but hardened toward more inward-looking localism.
The polarization of society stalled reforms in their tracks, making Hong Kong more and more inward looking, frustrating not only reform-minded civil servants, but also those who felt that Hong Kong was losing its international standing, a key comparative advantage that differentiated Hong Kong from her Mainland competitors.
Whilst the idealism of youth is to be admired, Hong Kong politics has always smacked of being “too simplistic, too naive,” as one national leader remarked in some frustration. Even Lord Patten, in his last visit to Hong Kong, had to remind Hong Kong’s youth that politics must be pragmatic and realistic, seeking to achieve goals step by step, rather than asking for the impossible.
The global political landscape has changed profoundly, so much so that anyone who asks for the return of the good old days is dreaming in Trumpland. Who would have thought that a new US President would preside over the deconstruction of the American neo-liberal order in less than 150 days in office? Who would have dreamed that Brexit may even reduce Great Britain to Little England?
Localists who think they will find sympathy in foreign lands would find that geopolitics has demonstrated there are no permanent friends, only perfidious allies.
What of Hong Kong’s future? The reality is that with only 30 years left from the One Country, Two System promise, Hong Kong cannot remain the same as in 1997. If no consensus can be achieved well before 2047, then the Special Economic Region status will revert to that of any other city in China. And by that time, if Shenzhen and the rest of the Pearl River Delta grow at the current pace, Hong Kong would be a smaller cousin in the race of giants.
The Lion Rock spirit is all about those who built Hong Kong from a barren rock to one of the most vibrant cities in the world. It was never about relying on the state or mainland for help, just not to hinder. But what is hindering Hong Kong’s ascendance into the next three decades is the lack of a community social consensus. Unless that is built -- and this is not just the responsibility of the next chief executive -- the Lion Rock spirit will not be rekindled.
By Andrew Sheng
Andrew Sheng is a distinguished fellow at Asia Global Institute, University of Hong Kong. -- Ed.
(Asia News Network)
