New Nails in Hong Kong’s Coffin

It was Hong Kong’s new Chief Executive Carrie Lam’s big day, her first annual policy address and one to lay out her agenda for her whole five-year term. But it just happened to coincide with the denial of entry into Hong Kong of a senior member of Britain’s ruling Conservative Party, Benedict Rogers, vice-chairman of the party’s Human Rights Committee.

The following day, Lam was forced to admit that the decision to bar this singularly un-revolutionary figure had been taken by Beijing. Toeing the Beijing line, she claimed that this was a foreign policy matter, not a domestic one for Hong Kong.

This sledgehammer tactic against a mild-mannered foreign critic of human rights issues in China made it clear that Lam was even less willing to stand up for Hong Kong’s values than her predecessor, the openly Beijing-leaning Leung Chun-ying. It further exposed the social rift where the judiciary, while claiming to be independent, has been used to disbar elected pro-democracy members of the Legislative Council. This has so increased the pro-government majority that it is now able to manipulate the chamber’s rules to clamp down on debate and scrutiny of the legislative program.

Lam, a lifelong bureaucrat, has been trying very hard to be a politician. In contrast to her predecessor, CY Leung, she recognizes that engagement with the people and an appearance of being responsive to issues of public concern is important. But judging from her October 11 policy address, a long list of plans, policies and petty handouts showed she has a mastery of the bureaucratic machinery but less idea that real leadership consists of tackling tough, fundamental issues.

In addition to a modest 40-minute speech, Lam published a 200-page Policy Agenda covering almost every department. Roughly one third of the hundreds of items listed were deemed to be “new initiatives.” But most of them seemed more set on keeping civil servants busy by expressing pious hope for alleviation of all ills. Thus her government will “strengthen co-parenting support for divorced/separated parents and their children” and “Maintain and Enhance Hong Kong’s role as a premier international convention, exhibition and sourcing center.”

There were myriad exhortations and plans to engage with the mainland in almost every conceivable sphere and take advantage of all the wondrous opportunities of Beijing’s Belt and Road Initiative (BRI). Likewise Lam parroted Beijing’s One Country obsession by emphasizing cooperation with what is now bizarrely deemed the “Bay Area” supposedly comprising Hong Kong, Macau and unspecific parts of Guangdong. Where is this bay on the map?

To give Lam’s speech its political due, enough sensible but small measures to alleviate particular problems for the old, the sick, and low-income families and to speed up the adoption of new technology, in which Hong Kong has lagged far behind. However, the sheer volume of bureaucratic initiatives, most of which were already known from leaks and earlier statements, could not cover up the lack of major substance. Multiple mini-measures administered by the civil service are not going to change Hong Kong’s yawning income and social gaps.

Lam placed much emphasis on a proposal to reduce corporate tax on the first HK$2 million (US$256,000) from 16.5 percent to 8.25 percent to help small businesses and increase tax write-offs of research and development spending. But these are not exactly radical measures and are at best marginal to entrepreneurs struggling to make any profit in the face of sky-high costs for premises etc. Lashings of government money for R&D and official efforts to liaise with high tech enterprises in neighboring Shenzhen show an intent to spur the economy in a new direction. But similar efforts in the past have shown scant result.

On the much bigger subject of the tax system as a whole, which is inordinately based on land and property revenues and stamp duties and property transactions there was nothing but the promise of another talk-fest. She will chair a “Summit on the New Directions for Taxation” to formulate “forward looking tax policies” – whatever that means.

The chief executive indicated that, given the size of fiscal reserves, it should not necessary to accumulate budget surpluses to the extent of the past. What that amounts to in actual tax and spending terms however remains to be seen. There were few dollar numbers in the address so Hong Kong will have to wait till the budget due early in 2018 to see whether there is any significant shift.

On the most sensitive issues of all economic issues, the cost of housing, she again offered a few palliatives but the ever-cautious bureaucrat pushed the fundamental issue of land supply and pricing down the road, with decisions to be made following yet more consultations, mostly with interested parties. The Talk Force on Land Supply is supposed to produce a “visionary land supply strategy” but the outcome is seen by critics to be yet more compromises based on the principle that “consensus” must be reached – which means not upsetting the developer cartel or the Heung Yee Kuk, the powerbase of the feudal bosses of the New Territories.

The main new item is a “starter home” program to provide semi-subsidized flats for sale to a large segment of the population not poor enough for government rental housing (itself in short supply) and not wealthy enough for the ultra-expensive private sector. However, there are estimated to be 93,000 eligible households so eventual production of 3,000 units a year is not going to have much impact. The private market meanwhile shows little sign weakening as developers trickle new project onto the market and the secondary market is constrained by rules and additional stamp duties which are supposed to limit speculation but actually limit secondary supply to the benefit of the primary market.

Lam also steered clear of overt political issues as though not talking about them would make them go away. Thus enactment of treason and subversion legislation is necessary under Article 23 of the Basic Law but the government will “act prudently” to “create a favourable social environment for it.”

Another Beijing favorite issue did however get a boost: Chinese history will become a compulsory subject at junior secondary level from 2018/19. The value of “Understanding Chinese History and Culture, and Developments of Our Country” depends on what is taught.

As for progress on political reform, notably the selection of the Chief Executive, the message was: Forget it. “We cannot afford the reality and rashly embark on political reform once again” – the reality being the 2014 Umbrella movement of mass protests for more democracy, which she described as unlawful and had “led to social conflicts.” She evidently has no concept that social conflict was the result of policies of the government of which she was then Chief Secretary.