Swallowing Hong Kong

Hong Kong is thriving despite its government of Beijing-obedient bureaucrats and tycoons. Yet its inner contradictions continue to build up. The theme of the moment from the government and its numerous business and media acolytes is that the future lies with ever-closer integration with the so-called Greater Bay Area, a name borrowed from the high-tech powerhouse of the San Francisco Bay Area in the United States.

This is a recently-created title to describe a collection of nine cities and two special administrative regions (Hong Kong and Macau) adjoining the Pearl River estuary and with Guangzhou at its center. Its total population is about 65 million.

Beijing promotes this as forming an ever-more integrated, greater technological and financial hub of southern China. In reality, its primary purpose appears to be political – to speed up Hong Kong’s absorption into the mainland by offering tax and other carrots and with massive spending on economically dubious infrastructure projects such as the recently-opened US$15 billion Hong Kong-Zhuhai-Macau bridge.

It is not so clear what economic purpose is served by this force-fed integration. There already is a huge amount of cross-border trade and investment. Indeed the development of Shenzhen, now a metropolis of 12 million and China’s leading technology central, was kick-started by Hong Kong money and industries at the beginning of China’s economic liberalization in 1979.

The Hong Kong government is as usual doing Beijing’s bidding with repetitive calls to get closer to the GBA and its opportunities. It is all part of trying to instill patriotism into Hong Kong’s autonomy-minded people by suggesting that future prosperity lies with integration into the GBA.

In doing so it in effect denies Hong Kong’s larger reasons for existence: First, to provide services to the mainland at large, services which for legal, economic policy, institutional or political reasons cannot be supplied by other cities. The primary one is financial and commercial, hence Hong Kong’s role in listing of major Chinese companies, its freedom from exchange controls, lack of tariffs on merchandise trade, low tax rate, and well-developed legal and related services.

Second, for the same reason, is to provide similar services to entities in other parts of Asia, and the world at large. In the days before China’s opening-up, this represented 90 percent of Hong Kong's commerce. The non-mainland portion is now much reduced but remains important and could even increase again should China’s trade growth slow while activity elsewhere in Asia remains strong.

But beyond rhetoric about “Belt and Road,” official interest in this dimension is limited. Links with the Overseas Chinese in the region are much weaker than in the past and there is a condescending attitude to the non-Chinese of south and Southeast Asia.

Another aspect of the GBA push is to try to push Hong Kong as a high-tech hub in conjunction with Shenzhen. Billions of dollars are now being poured into this, mostly through construction of facilities for high-tech industries but also including official financial backing for some new enterprises, and the injection of huge funds into university technology research budgets.

It is claimed that this will help Hong Kong revive its industrial sector though there is no good reason why a commercial center which Hong Kong has been for 80 percent of its modern existence has to have a significant industrial sector. The only exception was between the communist revolution in 1949 which brought manufacturing capital to Hong Kong, until 1979 when it began departing back to the mainland.

The attempt to force-feed new industries now not only is contrary to Hong Kong’s laisser-faire tradition, it smells of an attempt to merge Hong Kong with Shenzhen. Indeed, it includes a HK$20 billion investment in the Hong Kong-Shenzhen Innovation and Technology Park as the “basecamp for I&T development in Hong Kong” – to quote the annual budget speech of Financial Secretary Paul Chan.

In fact the government has a dismal record of in investment projects. Its promotion of a supposed high-tech center called Cyberport, started in 1999, has proved mainly a profitable property development for Hong Kong’s richest family. The separate Hong Kong Science and Technology Park, set up in 2001 by the government to foster the development of innovation and technology, has been criticized by lawmakers and other critics as a hugely expensive white elephant whose tenants were moving out faster than they moved in.

Government investment of majority capital as well as a huge amount of land in Disneyland loses it money while Disney rakes in huge amounts from licensing, management etc. The art of the deal forever eludes Hong Kong officialdom.

All the latest technology talk, however, can do nothing to disguise the fact that the government itself consistently fails to use its powers to bring modern methods to Hong Kong itself. The reason is a mix of lethargy and surrender to the oligarchies and other vested interests which give political support to the government (and employment to retiring civil servants) in return for being left alone.

Efforts to reduce air pollution have been feeble compared with those of most developed-country cities and even some on the mainland. Road and transport policy favor car users – a small and mostly prosperous minority. Rubbish collection and recycling has just about reached the level of Tokyo in 1970. The use of Uber-type taxi-calling services remains technically illegal and is constrained by the rentier company owners of taxi licenses, some of them close to the government, who have threatened disruption should their cozy system (no new urban taxi licenses for 25 years) be forced to compete. That Hong Kong lags so far behind Singapore on all these issues makes a bad joke out of the I&T blather from officials.