Opinion – Remedies for Socio-Economic Woes in Hong Kong

On October 16, Hong Kong Chief Executive Carrie Lam revealed her policy address to tackle social and economic woes in Hong Kong amidst the ongoing protests and her government’s legitimacy crisis. The policy address is focusing on the long-term solutions, embracing the aspects of housing, land supply, transport subsidies, labor welfare, and technological and economic development. 

First and foremost, the government earmarked HK$5 billion for transitional housing projects to provide 10,000 units within the next three years. It also doubles the cap on the value of properties from HK$4 million to HK$8 million for those first-time home buyers eligible for a mortgage loan of a maximum cover of 90 percent loan-to-value ratio.

Moreover, 3,300 youth hostel places will be provided for the young people, while 12,000 pre-sale flats will be provided under the Home Ownership Scheme and Green Form Subsidized Home Ownership Scheme.

Some real estate developers welcome the doubling of the lending cap for first-time home buyers. Some homeowners want to raise the prices of their properties immediately, trying to reap quick profits in the short run.

Yet, critics have warned that the new policy initiative would have not only an unintended consequence of stimulating a short-term increase in property prices, but also triggering the rise of negative equity of some homebuyers because the prices of properties would likely decline steadily. 

Second, the government invokes the Lands Resumption Ordinance to develop three types of private land for developing public housing and starter homes: the privately-owned brownfield sites in the New Territories, the private land which was zoned for housing development but without detailed plans, and the urban private land located in Cha Kwo Ling village, Ngau Ci Wan village and Chuk Yuen United village. 

These are positive steps forward in solving the problem of insufficient land supply, apart from the already planned Lantau Tomorrow Vision that will witness the completion of 17,00 hectares of artificial islands near the Lantau Island around 2032. Carrie Lam appealed to the business sector for supporting the government’s new land policy.

Nevertheless, some businesspeople have immediately criticized the government’s initiatives. It remains to be seen how the Lands Resumption Ordinance would be utilized effectively in the process of acquiring more land to develop public housing and starter homes. The process would likely require government officials to lobby for support from landowners in the affected districts and areas.

In the long run, if Carrie Lam’s land policy were smoothly implemented later, and when the Lantau Tomorrow Vision were realized, the supply of land for housing units would inevitably change in Hong Kong, thereby generally reducing the prices of properties in the early 2030s.

It is important to note that many commentators in the mainland mass media have already criticized Hong Kong capitalists for “ignoring” public interest by accumulating large amounts of economic profits without contributing much of their proceeds to the welfare of the society.

From a “socialist” perspective, Hong Kong remains a highly capitalistic society where land developers and big business people have exerted tremendous influence on the government. As such, some social democrats and protestors have long advocated the need for “socialist” solutions to tackle the income gap between the rich and the poor, including the necessity of a comprehensive social welfare system and an overdue tax reform that has traditionally been designed in favor of the business sector. 

However, the government of Hong Kong is constantly in a dilemma. On the one hand, it adheres to a “positive non-interventionist policy,” which implies a relatively hands-off approach to tackling the income gap between the rich and the poor. On the other hand, all the Chief Executives have since 1997 been selected and supported by the business elites who constantly occupy a large proportion of the membership of the Election Committee that elects him or her.  

A fundamental problem of Hong Kong’s ongoing legitimacy crisis is that while many people hope for a more drastic and more “socialist” approach to tackling social welfare, and perhaps the tax system too, the principle of  “one country, two systems” aims at maintaining the existing status quo and lifestyle. As such, it is natural that some businesspeople oppose any drastic “socialist-style” reforms that run counter to the capitalist system. 

Quite often, the Hong Kong government lacks the political will to change its outdated “positive non-intervention” by adopting “hardline” policy measures that can alienate the business sector. In 2006, the former Financial Secretary Henry Tang proposed to broaden the tax base by introducing goods and service tax, but his proposal met swift opposition from political parties and the business sector.

A more “socialist” solution of broadening the tax base in Hong Kong would perhaps necessitate the idea of introducing a progressive tax system, which must meet the opposition from many citizens including businesspeople. 

Hence, the crux of the problem in Hong Kong is the persistence of a structural contradiction of capitalism, namely the inevitability of capitalist “domination” and yet the worsening social tensions between the capitalist class and lower classes. In fact, the ongoing protests in Hong Kong since June 2019 have their cross-class character. Many members of the middle and lower classes are unhappy with both the socio-economic and political development of Hong Kong.

Their demand for “universal suffrage” has socio-economic implications, meaning that if Hong Kong were democratized along the “Western” line, then the elected representatives of middle and lower classes would have a greater political say in the political system, thus balancing the influence and power of the dominant capitalist class. After all, the Hong Kong Legislative Council has an in-built mechanism, namely functional constituencies, that protect the interests of the capitalists and businesspeople.

Carrie Lam’s other policy measures attempt to ameliorate the livelihood of citizens of middle and lower classes, such as an increase in annual transport subsidies, increases in the household and child allowances for the working family, and an annual allowance for students at the kindergarten, primary and secondary levels. 

However, from a critical perspective, the government has failed to show its political leadership by proposing and imposing rental control. Rents remain relatively high in Hong Kong, especially for those poor and the needy who are living in very small housing units. High rents have made them difficult to sustain their living. The government could have done more to address the high rents for the poor and the needy. Nor does it set up any committee to study the feasibility of rent control in the coming years.

In 1973, the British colonial government prohibited landlords from increasing rents beyond 90 percent of the market rate for two years. They could not raise rents more than 30 percent when they negotiated new tenancy leases with tenants. After the 1997 Asian financial crisis, rent control was abolished.

It is perhaps the ripe time for the government to reconsider rent control from now until early 2030s, when the Lantau Vision Tomorrow will be completed. Otherwise, high rental rates are still haunting the livelihood of many citizens of the middle-lower and lower classes.

Rent control demands political will and leadership from the government. First, if the government has the will to address this problem, it would perhaps have to figure out the average rents of different sizes of housing units in each of the eighteen districts, which show very wide discrepancies in the living standards and their class character. Second, a formula applicable to different types of housing units, ranging from private to public, would perhaps have to be worked out to determine an acceptable percentage increase in the annual rent.

Third and finally, the government needs a strong capacity in mobilizing different departments, like electricity, water supply, inland revenue, and district offices, to check whether small apartment units were redesigned to become “cage homes” with rental prices fetched up to an unreasonably high level. The alienation of many citizens, who live in all these small housing units and who bear with high rents, has long been neglected, including some young people who have seen little prospects in their current livelihood and future development.

Nor does the Hong Kong government follow the example of Macau, where the Wealth Partaking Scheme has been constituting an annual cash disbursement policy to the holders of Macau resident identity cards since 2008. The Wealth Partaking Scheme in Macau brings about a feeling of happiness to many ordinary citizens, who regard the casino-driven economy as returning its fruits of success to the society.

Unlike Macau where the social welfare system is far more generous and comprehensive, the Hong Kong solutions of mitigating the poverty of many ordinary people remain relatively piecemeal, constantly incremental and perhaps over-cautious.

In short, Chief Executive Carrie Lam has been trying to address the socio-economic demands of the ordinary citizens. Her policy address does tackle some of the social and economic woes in Hong Kong, but most solutions are of long-term nature. The short-term measures are lacking, especially rent control, although transport subsidies can be regarded as short-term initiatives to reduce the financial burden of middle and lower classes.

Indeed, a combined socio-economic approach to solving socio-economic discontent cannot address the political grievances of many ordinary citizens in Hong Kong. Ultimately, political problems require effective political solutions. As such, the policy address in Hong Kong cannot minimize the protests effectively.