Hong Kong's pulse slowing down

In 1995, before the handover of Hong Kong to China, Time magazine's sister magazine Fortune published a special report titled The death of Hong Kong.

Early last month, on the eve of the 10th anniversary of Hong Kong's handover, Time did some research and retracted Fortune's 1995 commentary, saying "Hong Kong is more alive than ever."

Late last month, Fortune also published an article saying: "Oops! Hong Kong is hardly dead," and declaring the magazine's prediction as wrong. Leaving aside the issue of whether the political situation is getting worse, how is Hong Kong's economy doing?

When people examine Hong Kong's "liveliness," they often only look at its stock market. It's true that the Hong Kong stock market index and market turnover reached a new high this year and that it has profited from investment in China. But the stock market cannot represent the situation of the entire economy, and especially not the impact of Chinese policies.

Listed Chinese companies are conducting a lot of shady business. In 2003, Liu Jinbao (劉金寶), who was then vice president of the Hong Kong branch of the Bank of China, was summoned under the "double regulations," meaning that a Chinese Communist Party member is summoned to come to a certain place at a certain time for questioning. This was considered classified information and the Hong Kong Stock Exchange wasn't notified until the situation was already getting out of hand.

This influenced share prices and people who had been in the know were able to make a lot of money out of it. The "double regulations" is a phenomenon unique to China that influences Hong Kong's status as an international financial center.

The nominal GDP per capita reported by the IMF for 1997 and last year were US$27,055 and US$27,466 respectively for Hong Kong, and US$13,835 and US$15,482 respectively for Taiwan, meaning that Hong Kong's growth has not kept up with Taiwan's.

The report that Hong Kong's Hang Seng Bank published at the end of last month said that Hong Kong's economy is reviving.

But there are still problems. The unemployment rate is twice as high as 10 years ago.

Hong Kong's Census and Statistics Department last month reported a Gini coefficient that reflected a vastly unequal distribution of wealth in Hong Kong. It reached a historical high of 0.533, the highest of the "four Asian tigers."

The median household income last year was HK$17,250 (US$2,200), which is HK$250 less than the HK$17,500 it was in 1996.

The gap between high and low income groups is widening. In 1996, 6.7 percent of households had a monthly income of around HK$4,000. Last year, this grew to 9.2 percent, while the number of households with an income of more than HK$40,000 increased from 15 percent to 17 percent.

Information from hospital management offices shows that the number of patients in psychiatric sections of public hospitals has risen by 90 percent. Among the causes cited are the ups and downs of the economy and the psychological pressure this entails.

Politicians and media who keep saying that Taiwan's economy is on the decline and that the nation should open more to China would do well to give these figures some serious thought.

It should also be noted that China and Hong Kong signing the Closer Economic Partnership Arrangement (CEPA) in 2003 gave Hong Kong many advantages. This year saw a fourth agreement, implementing 40 new measures for opening up more. Open travel between Hong Kong and China has been a reality for four years.