An opinion from FT.
Hong Kong should focus its fight on the tycoon economy
By Joe Studwell
The real target is the anti-competitive, anti-consumer economy, writes Joe Studwell
Hong Kong stepped back from the brink on Thursday night, when chief executive CY Leung belatedly authorised a senior official to “hold talks” with protesters and those same protesters decided, for now, not to enter government buildings. It was a fortunate outcome. Beijing would characterise the occupation of official property as an attack on the Chinese state.
What Hong Kong needs is not a strategy that backs Xi Jinping, the Chinese president, into a corner, but one that resonates with his own mindset. This is why the protesters should refocus on Hong Kong’s tycoon economy, and the anti-competitive, anti-consumer arrangements that define it. You may think, like the Heritage Foundation, that Hong Kong is a free market. However, except for external trade, it is not. Instead it is what one of the richest men in the city once described to me as “a nice bowl of fish soup”. That soup is fed to the few, making ordinary people poorer, stoking resentment, and indirectly contributing to acute pollution.
Cartels are everywhere in Hong Kong. Supermarkets are a duopoly, one whose pricing power allows the chains to charge higher prices for the same products in some of Hong Kong’s most deprived areas. Drug stores are a duopoly. Buses are a cartel: high-priced, mostly cash-only, running shoddy, dirty diesel vehicles with drivers who earn a pittance. Electricity is provided by two, expensive monopolies that handle everything from generation to distribution, one on Hong Kong island and the other in Kowloon. The container ports are an oligopoly, with the world’s highest handling charges. Yet they will not supply onshore electricity to vessels, which must instead run diesel generators that pollute the city air.
The biggest stitch-up remains the lousy construction standards and sky-high costs in a residential property market dominated by the “Four Families”, which in the 1990s were estimated to be selling property for between two and four times what it cost to develop.
You may think of the territory as a free market but, except for external trade, it is not
Add in the jiggery-pokery of a Boys’ Own stock market with 1970s-style governance, and a taxation system that tycoons circumvent by taking out their money through tax-free dividends, and you begin to get the picture.
Hong Kong has had a Competition Ordinance and a Competition Commission since 2012. But so far nothing has changed. In a striking contrast with mainland China, where the Communist party after 1989 first increased transfer payments to the urban poor, and then increased transfers and cut taxes for the rural poor in the 2000s, the Hong Kong government lets a colonial rentier economy carry merrily on.
Mr Xi launched his new administration with not only a brutal anti-corruption campaign, but also an anti-monopoly drive. Unfortunately he seems unaware that Hong Kong is at least as rigged as the mainland.
So here is a plan. Speak to Mr Xi in terms he understands. Refocus the protests on the cartels. I am no protester, but it is not hard to think of peaceful tactics that would be difficult for the tycoons to ignore as they sweep into their basement car parks and ascend in private elevators to their penthouse offices. Where possible, boycott the cartels.
Would this be the end for the tycoons? Not at all. In my experience they are people of extraordinary entrepreneurial acumen. Like all of us, they enjoy a capacious free lunch. But if that is taken away they will adjust and add more value to the economy by doing so.
It is time for Hong Kong to work for the majority. If the protesters make Mr Xi understand the economic problem, it becomes easier to compromise on the politics – probably with a more open nomination process in 2022. I hold, perhaps wrongly, that Beijing’s intransigence is born of ignorance, not malice.
The writer is author of ‘How Asia Works: success and failure in the world’s most dynamic region’
