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.
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