Beijing Comes for Hong Kong’s Elite

And their friends

As a cat plays with a mouse, so Beijing is playing with its former friends, the Hong Kong elite, and its bureaucrat handmaidens. Since the imposition of the National Security Law on Hong Kong in mid-2020, almost all visible opposition to the local administration let alone to Beijing has been wiped out.

Guided by a not-so-invisible hand from the north, this has been locally accomplished, whether by jailing elected representatives, frightening unions, NGOs, and sundry other critics to disband their organizations, closing one newspaper and coopting the rest, making it clear to judges that they are not independent of the executive, let alone of the Chinese Communist Party.

Yet now the worm is beginning to turn on these forever-opportunists as Beijing tries to steal some of the clothes of the now crushed opposition. Recently Beijing’s Liaison Office in Hong Kong, which is supposed to be just a conduit, sent its boss Luo Huining and various associates out into the streets, housing estates, wet markets, and cage homes of Hong Kong, supposedly to collect the views of ordinary folk about their problems, issues of concern and what the government should do about them. It met 3,985 people, mostly in lower income situations such as cage homes.

The Liaison Office then came up with a list of 500 things the government should be doing to alleviate problems. Though not yet revealed, these doubtless focus on policies proposed by the pro-democracy parties now many of whose elected leaders are now in jail.

The Liaison Office is now associated with such crucial issues as the shortage of public housing, the plight of low-income families, and the slow development of new railways. Chief Executive in name, Carrie Lam, has had to welcome such supposed contributions to knowledge and policymaking, although such direct interference in her own domain should be shocking. She has long been aware that she is a puppet. But the Liaison Office has now made this clearer than ever to Hong Kong at large.

The 500 points are not aimed at her personally but a whole apparatus, the business elite as weak as the bureaucracy. The Liaison Office knows that Beijing is highly unpopular among the majority in Hong Kong, rich or poor. As well as crushing its declared opponents, it must now try at least to gain some backing, whether that is jobs for a new potential elite of local cadres or among the disadvantaged who need better housing and services.

However, as a still aspirant society, it is not clear whether focusing on the most disadvantaged does much more than frighten the better-off who fear for their property values, and taxes. Many in the middle-income bracket care about liberal education too.

This is not a game all can win. A particular, if unannounced, target for Beijing is the property developers, giants who also control much retailing and utility services such as power. It does not help their cause that the mainland itself is in the process of falling out of love with the idea that ever-buoyant property markets are a good thing when actually they lead not only to excess debts a la Evergrande but in practice widen wealth gaps. Hong Kong’s wealth gaps are a stark contrast to President Xi Jinping’s focus on Common Prosperity. It is also having to confront the reality that local governments cannot forever finance themselves largely by selling land. Ditto Hong Kong as the demographics shift.

 The Liaison Office intervention came on the heels of Lam’s annual policy speech in which she unveiled a plan for a 2.5 million-population new city in the north of Hong Kong, adjoining Shenzhen, to which it would be further connected by new railways. On the back burner by implication was an earlier plan for expanding Hong Kong and its housing potential by creating new islands off Lantau in the south of the territory. This was always a hare-brained scheme.

As for the new northern metropolis, the first reaction from the stock market was that this was good news for the major developers who already own much of the land there and have been developing it only at the slow pace needed to maximize their already gigantic profits.

However, the government itself still has lots of land in the area and could start building public housing whenever it wants. It also has compulsory acquisition powers which it seldom uses out of deference to the vested interests, in this case, the local villages mafia organization known as the Heung Yee Kuk as well as the big developers. Brutal market logic says that if the housing stock rises faster than the population, prices will fall unless supported by cheaper money. Any serious attempt at a massive housing program is also a threat to existing property values, particularly if the era of zero or negative real interest rates comes to an end. Or if Hong Kong can no longer maintain a significant price premium over Shenzhen or other entities in the Greater Bay Area (population 70 million) to which it is supposed to become ever closer.

Of course, none of this new city may happen and it could just be seen as political advertising. In reality development in that northern region has been plodding along for years. Hong Kong’s housing problems are as much about issues other than shortage of buildings. Population growth is now very modest and unlikely to increase given its own demographics, those of the mainland and the reduced – for some at least – advantages of living in Hong Kong compared with Shenzhen now that “patriotism” and party rule are killing liberalism.

The Hong Kong elite is just beginning to see that it has been used, however loyal they have appeared, even as their children leave get foreign education and passports. The upper ranks of the expat class are also only just beginning to wonder whether there really is a future for lawyers and accountants, doctors and architects, even bankers who do not have a very specific qualification, let alone the ability to speak Chinese.

Of course. Some will always be needed but being a resident of a Greater Bay Area where English is not an official language and where Permanent Identity Cards (which give right of residence) are not as permanent as assumed at least before the 2020 advent of the National Security Law.