Hong Kong’s uneasy economic readjustment

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From the world’s city to China’s world city, Hong Kong’s inevitable economic integration into China will need a political answer to it.

Photo credit: Chris Lusher

I was at a casual discussion seminar hosted by Raymond Mak from Path of Democracy last Saturday. The event, titled, “Do economic problems need political solutions?”, was also joined by Demosisto’s Nathan Law and Bill Tang of the Federation of Trade Unions (FTU).

An interesting combination indeed in terms of their political positions as well as the generations they categorically represent (Tang was born in 1979, Mak is three years younger than Tang, and Law is about to turn 24). The discussion itself was no less enthralling as Tang was being pressed by the other two on the FTU’s seemingly self-contradicting positions having to defend the establishment while the establishment tends to be pro-business. For his credit, Tang did stress the importance of remaining pragmatic in face of three different layers of conflict as he identified: a class conflict, a generational conflict, and a Hong Kong-mainland conflict.

Law, the youngest ever Hong Kong legislator, also shared that pragmaticism albeit in a different way. For him, economics and politics are inseparable, and that the deteriorating livelihood conditions go all the way back to a government that lacks the legitimacy to serve the interests of Hong Kong people nor the savviness to meet the demands of an increasingly innovative society.

As important as they are, topics such as “One Country, Two Systems,” political reform, the Causeway Bay bookseller scandal and the oath-gate saga tend to overshadow the debate on Hong Kong’s economic future. The debate, of course, is also usually a political one. Hong Kong’s various geographical and institutional advantages have allowed it to become and remain a leading financial centre. Those advantages are however perceived by many as slowly eroding, in face of a ‘pan-politicised’ society from Beijing and its supporters’ perspective and of increasing interference from the North in the opposition’s eyes.

The economic reality, however, is that the ‘Pearl of the Orient’ is now nothing but a ‘super-connector’ which will only find itself becoming more and more dependent on the Chinese economic growth engine; and with higher dependency comes greater specialisation. In the past twenty years, Hong Kong’s GDP as a percentage of that of China has shrunk from 16% in 1997 to merely 3% in 2017 when mainland cities – for their own good – are climbing up the ladder. In fact, Hong Kong has itself to blame for missing the opportunities to transform its economy into a more innovation-friendly one when the likes of Shenzhen is already proactively attracting startups and tech companies.

Since the open-door policy of mainland China, its share of Hong Kong’s global trade had a fivefold increase from 9.3% in 1978 to 50.8% in 2016, with China taking over the US as Hong Kong’s largest trading partner since 1985. Specialisation also means that we are likely to have a more skewed workforce. Worse still, workforces in accounting, auditing and banking – the very fields in which Hong Kong claims a competitive advantage – will be at risk in the years amid growing automation and disruptive innovation.

Compared to Taiwan, Hong Kong has even fewer options to leverage against this trend. It goes back to the question of how ‘separable’ and autonomous Hong Kong’s socio-political system can remain even before 2047, when its economy is being marginalised and integrated into the Chinese one. Unfortunately the Hong Kong government has spent less time than it should on handling the political implications and simply played the Belt and Road card and more recently the Great Bay Area plans over and over again without clearing the justifiable political concerns.

This arguably deliberate lack of vision seems even more ironic when the Hong Kong government has just recently concluded its consultation on the Hong Kong 2030+ strategy. What strategy is there when the Hong Kong government is only looking for China – now effectively a state capitalist country – to come up with new economic plans for the whole region with Hong Kong being part of it?

Economic interdependency should not be seen as a negative phenomenon, but given the complicated political environment and the CCP’s habit of achieving political goals through economic means, there indeed needs a political solution to the economic deadlock. Carrie Lam’s team have no lack of able administrators but they are no visionaries. Hong Kong may still claim itself as the freest economy and the gateway between China and the Rest as it celebrates the 20th anniversary of the handover, but the reality is that the city should prepare itself for a lost decade – if not decades.