Since the 1997 return of Hong Kong to China, the population of the territory, with its already high population density, had grown to 7 million last year because of immigration from China, a recent media report said. In 2003, Hong Kong and China signed a Closer Economic Partnership Arrangement (CEPA) linking their economies more closely to each other. In its wake the gap between rich and poor widened and social problems increased in Hong Kong.
At the end of last month, the US magazine Business Week cited the latest report from the UN Development Program, which showed that Hong Kong had the largest wealth gap of all advanced economies. The report compared the difference between rich and poor around the world using the Gini coefficient. Hong Kong has passed 0.4, a level that is generally seen as a warning sign.
The report said that while Hong Kong has a large number of wealthy people, it also has one of the largest public housing sectors in the world, and, except in the case of foreign maids, there is no minimum wage.
The number of people living in poverty has increased to 500,000 in the 10 years since Hong Kong was returned to China, figures from Hong Kong’s Society for Community Organization show. This indicates that the government’s theory that wealth would trickle down to poorer people has failed and that the income of the wealthy does not benefit the poorer levels of society. Instead, the rich are getting richer while the poor are getting poorer.
Why does Hong Kong face these issues? It is closely related to ample capital and speculation in the housing market. The best-selling houses in Hong Kong these days are those priced at around HK$6 million (US$774,000), the threshold for Hong Kong’s Capital Investment Entrant Scheme. Owing to the UK’s past rule in the city, areas such as the education system and social welfare are still much better than in China. Coupled with a passport from the Hong Kong Special Administrative Region not being subject to as many restrictions around the world as a Chinese passport, many senior officials and businesspeople from China have invested the required HK$6 million to gain Hong Kong residency. Many Chinese have bought houses there and then hired immigration consultants to help them immigrate to Hong Kong.
Because many areas of Hong Kong have been opened up to China as a result of the CEPA, corrupt Chinese officials have injected large amounts of dubious cash into Hong Kong. So long as they can launder their money, they do not care whether the cost of housing is reasonable. Once they have laundered their money, it is sent back into China. All this dirty money means that Hong Kong has not benefited from the influx of cash, and it also means many young people will never be able to afford a house.
Taiwanese should pay close attention to Hong Kong’s experience because the administration of President Ma Ying-jeou (馬英九) is in the process of bringing in Chinese investment and signing an economic cooperation framework agreement (ECFA) with China.
Economic benchmarks are indicating that the economic freefall has come to an end, but this is no more than a reflection of the financial situation. Large amounts of capital are leading to stock market and housing speculation, while income distribution over the past 10 years has been highly imbalanced.
Taiwan’s richest 20 percent continues to be more than six times richer than the poorest 20 percent. The Gini coefficient hovers between 0.34 and 0.35, unemployment has broken through 6 percent and salary increases in the industrial and service sectors since 1991 has lagged significantly behind economic growth figures. Since 2000, salary growth has slowed further and even began to drop. In addition, housing prices have been increasing recently.
In addition to idle private capital and a great influx of foreign hot money, the main reason for these increases is the return of the capital of Taiwanese businesspeople. This raises the question of what would happen if astronomical sums of Chinese capital investment were to also flow into Taiwan.
The Council for Economic Planning and Development, which has realized the seriousness of the situation, called a symposium to discuss falling salaries, rising housing costs and deteriorating income distribution. A worried attendant said that if even Hong Kong with its sound legal system could be turned upside down by dirty money from China, then if Taiwan were to sign an ECFA with China without knowing what it is doing, wouldn’t those developers laugh all the way to the bank as speculation drives prices for their development plans in Taipei, Kaohsiung and Taoyuan sky-high, while Taiwan’s young people continue to suffer from the economic crisis and might never be able to afford their own house. Urban residents are certain to be the hardest hit.
So, will an ECFA be a CEPA? Will Taiwan rapidly turn into a second Hong Kong? These are issues that Taiwanese should pay close attention to.
Wu Hui-lin is a researcher at the Chung-Hua Institution for Economic Research.
TRANSLATED BY DREW CAMERON AND PERRY SVENSSON
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.
Since the Russian invasion of Ukraine in February 2022, people have been asking if Taiwan is the next Ukraine. At a G7 meeting of national leaders in January, Japanese Prime Minister Fumio Kishida warned that Taiwan “could be the next Ukraine” if Chinese aggression is not checked. NATO Secretary-General Jens Stoltenberg has said that if Russia is not defeated, then “today, it’s Ukraine, tomorrow it can be Taiwan.” China does not like this rhetoric. Its diplomats ask people to stop saying “Ukraine today, Taiwan tomorrow.” However, the rhetoric and stated ambition of Chinese President Xi Jinping (習近平) on Taiwan shows strong parallels with