Super-rich tycoons have been given a free pass to soak Hong Kong people for years thanks to laissez-faire anarchism, and now the city’s richest man is shedding crocodile tears over the eclipse of the mythical ‘Hong Kong dream’.
I am never interested in such words of wisdom as told by Li Ka-shing a few days ago. However, his scurrilous remarks about Hong Kong people whipped up such a complex mixture of emotions that I think I should write something about it and share a blog post wrestling with the difficult subject of political land economy.
In a press conference of CK Hutchison Holdings held on Wednesday, Li first broke his silence on the upcoming Chief Executive election, and then moved on to mourn over the city’s waning competitiveness. ‘I love Hong Kong. I really want to see again the Hong Kong that we’re proud of. But now GDP growth rate is just at 2 percent….’ A bit emotional and probably holding some tears, he then mentioned his rags-to-riches story of ‘Hong Kong dream’ and hurled allegations against Hong Kong people, who are described as ‘just keen on property speculation, making more profits, constructing taller buildings, etc., while forgetting visions for life long long time ago’. Isn’t it ridiculous that one of the richest billionaires in Asia knows how to cross-dress as a conscientious social activist and latch on to the discourse of social justice?
Housing prices in Hong Kong have gone into the stratosphere for years. Local real-estate developers are demonstrably notorious for fiddling regulations to fleece home buyers in every possible way. To jack up prices, a lot of flats of private housing estates supplied in recent years are known to be ‘inflated’: with high management fees, over-sized bay windows, poor area efficiency and extremely small bedrooms. Once upon a time Li was seen as an admirable entrepreneur to be modelled on in the eyes of Hong Kong people. But as young people find it more and more difficult to get on the housing ladder and we realise that the tentacles of his business empire reached into every nook and cranny of people’s lives, his reputation has lost lustre long time ago.
In 1998 during the Asian financial crisis, property prices plummeted in free fall. A lot of home buyers defaulted on their purchases for fear of interest rate hikes and further economic uncertainties. Despite the gloomy economy and calls for mercy, in the name of honouring the ‘spirit of the contract’, Li’s CK Property Holdings still sued these troubled buyers for the difference between the original purchase price and the resale price of forfeited flats. Hong Kong people are still smarting from the wounds of negative equity and mortgage-related suicide news stories those days. The title of ‘the devil who devours people’, as once a local Catholic priest put it, does justice to him, and other fat cats of that ilk.
But that is only part of the story. C. Y. Leung also knew how to capture this public enmity towards the real-estate plutocrats in his election campaign. What do we have now after his five-year tenure? There is an increase of land supply and private housing units, but we also witness the madness of land grab among the Chinese developers, tiny ‘luxury’ bedspace flats, expansion of invisible slums and ghettoisation, etc. In fact, these property tycoons are often mistaken to be the only party responsible for the housing problem. To find out the real culprits, we need to unravel the ambiguous relationship between the government and the developers and use some historical imagination.
Let’s take a look at the government income structure. According to the 2017-18 Budget shown in the picture on the left, land premium accounted for almost 20% of total government revenue, with 10.4% coming from stamp duties. However, the real profits gained by the government from the real-estate market make up more than 30% if we take into account the profits tax contributed by the other big players such as Henderson, Sun Hung Kai, China Resources, etc.
The role of these tycoons cannot be understood merely as property developers which helped supply private housing units. The gigantic share of land-related revenue in government budget could also be imagined as the ancient practice of tax farming run in the Roman Empire. In tax farming, the task of collecting tax was reassigned by the central state to private individuals known as ‘publicans’. The publicans also paid tax to the central authority of the Empire for a fixed period of time. These tax collectors were outsourced by the state and underwrote the responsibility to collect tax from the ordinary folks. The system was known to be efficient for the state to run in such a vast stretch of land. Stable income was guaranteed by the publicans, but at the same time, in order to gain sufficient tax revenue for the state, these publicans were also loathed by the general public. The system was riddled with so much corruption and abuse that among historians it was believed to one factor that brought the downfall of the Empire.
The British colonial government also reinvented this ancient technique to apply a form of financial indirect rule in Hong Kong. The magical doctrine of ‘positive non-interventionism’ advanced by Sir John Cowperthwaite in 1971 in some way gave us an illusion that the success of Hong Kong as an Asian miracle was attributed to the total absence of state intervention. The ‘invisible hand’ by the state in this Asian Tiger’s story is only invisible to us the ordinary folks, but not the ruling class. In order to ensure steady income in the midst of volatile global economy, it makes sense for the government to prop up the housing market – through the property tycoons as the middle men. There is little incentive for the government to turn on its head and roll out any unfriendly policies that diminish its stable income while for years this technique of wealth creation – through limited supply of land and lifting up land sale prices – has made a generation of people become rich.
The history of Kingswood Villas in Tin Shui Wai, dubbed by the media as the ‘City of Sadness’, is a good example of this ambiguous state-market relationship. According to a report whistle-blowed by the local English newspaper South China Morning Post, a private memorandum was signed between the colonial government and developer Mightycity (owned by Li Ka-shing’s Cheung Kong Holdings and China Resources),commercial developments in public and subsidised housing estates are not allowed ‘to compete with the private shops in any way that would damage their viability’. The secret deal also revealed that ‘a permanent market was planned on the site … to cater for the needs of the private residential development. [Mightycity] however objected to it on the grounds that the market may compete with the commercial facility within their private developments’, read the Tin Shui Wai Outline Development Plan in 1989. The property magnates are so powerful that they can throw a spanner in the works of government’s development plan.
If the housing prices tumble down, Li Ka-shing is not the only loser (after all, his business is diversified enough to offset such risks), but a potential bubble burst will certainly impinge on the government revenue. As the former head of the Central Policy Unit Leo F. Goodstadt put it, big businesses and the government since colonial times have always been ‘uneasy partners’ that form a symbiotic relationship with each other. They can’t survive without the other half. Remember C. Y. Leung’s promise of annihilating property hegemony? Well, the government simply won’t kill the goose that lays the golden eggs.
‘If you can’t buy a flat, it’s my fault. I complain too much. I don’t have vision. I’m greedy.’ That’s a widespread sentiment shared by many young people in Hong Kong, and today, Li Ka-shing’s advice is still sacralised. Too many Hong Kong people simply misrecognise the power game behind and unconsciously subject themselves to what Pierre Bourdieu called ‘symbolic violence’ – I can’t buy a home because it is my failure. We are susceptible to human emotions without dwelling on the unequal structures lying deep beneath the surface. On pontificating about ‘visions for Hong Kong’, Superman Li is just weeping crocodile tears. He should have read the gospel story in the Bible and followed what the publican said in the temple, ‘God be merciful to me a sinner.’