Thus empowered, the civil service has been behaving without regard to the public interest, as delays shrink supply, while boosting prices. A substantial amount of floor space would have been available already if government authority were exercised responsibly.
Yet, the same law could allow the chief executive to instruct the civil service to act to minimize social damage. Maximizing public revenue is not always consistent with the goal of social and economic stability. After all, Hong Kong is facing a clear and present danger that the property bubble will end in tears for many.
Dissatisfaction with this state of affairs is not confined to the powerless.
Victor Li Tzar-kuoi (李澤鉅), the son of Hong Kong’s most powerful property baron, Li Ka-shing (李嘉誠), astonished the public recently, saying in court testimony that it was a “painful experience” to deal with the government’s imperious Urban Renewal Authority.
Another roadblock is the Hong Kong dollar’s exchange-rate peg to the US dollar under the antiquated currency-board arrangement, a colonial relic still used by Gibraltar, the Falklands Islands and St Helena (territories with a combined population of roughly 40,000). Under this system, the US Federal Reserve in Washington sets Hong Kong’s interest rates and money supply.
The mantra since the handover to China in 1997 has been that this system has served Hong Kong well.
However, the high rate of asset inflation in Hong Kong is due partly to an undervalued currency, set at HK$7.8 to US$1 since 1983 (though allowed to trade within a narrow band between HK$7.75 and HK$7.85 since 2005). Market forces have set the real effective exchange rate by jacking up asset prices.
Hong Kong, a trading economy par excellence, thrives on market forces. Yet its policymakers remain frozen on the issue of the exchange rate.
The betting in Hong Kong today is that, unless Leung can somehow reboot his administration, he is likely to follow Tung in leaving office before his term expires.
Sin-ming Shaw, a former fellow at University of Oxford, is an investor based in Asia and Argentina.
Copyright: Project Syndicate