Hong Kong's Wealth Resting on an Achilles' Heel

By Hosking, Patrick | The Independent (London, England), February 4, 1996 | Go to article overview
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Hong Kong's Wealth Resting on an Achilles' Heel

Hosking, Patrick, The Independent (London, England)

I'M JUST back from a week in Hong Kong. The changes have been dramatic since I worked there briefly 17 years ago. The very skyline is altered - the skyscrapers are twice as high and thrice as densely packed. The round-windowed Jardine Matheson building - known jocularly as the tower of a thousand arseholes - was a landmark then. Now it is just another tower block, one dwarfed by the beautiful Bank of China building and a gaudy carbuncle called Central Plaza.

The harbour is busier than ever, though the brown-sailed junks have gone. In the heart of the city, life has been elevated a storey - out of the noisy dusty streets and into sanitised air-conditioned shopping malls.

One startling change is the level of prices. Hong Kong used to be a shopper's paradise. Nowadays there is little on offer that cannot be got for the same price in London and cheaper in New York. I could find only one exception - compact discs.

It's now less than 18 months before the territory is handed back to China. For some, this means anxious analysis of every hawkish statement from Peking. But for most people, it seems to be business as usual.

Indeed, the very hand-over is regarded as a profit opportunity - every hotel in town is already booked solid for the night of 30 June 1997. At midnight, out goes the British Governor, Chris Patten. In comes an executive appointed by Peking. But the capitalist system will continue for the next 50 years, China has promised.

Anywhere else, the impending change would have induced paralysis or flight. But for most Hong Kong Chinese there is no choice but to stay on. And encouragingly, some of those who do have passports have left only to return.

Meanwhile, the boom continues, albeit in muted form. Growth this year is expected to be a healthy 5 per cent. The stock market is buoyant. If there doesn't seem as much construction activity as usual in the city, it is because half the building industry has decamped to Chep Lap Kok, where a new airport the size of Heathrow is rising out of the South China Sea (see page 7). Only retailers are having a tough time, and that may be something to do with their prices. Inflation, a serious problem for the past five years, is at last abating.

Confidence is rising among the business community. The near- universal view now is that Peking, for all the rhetoric and Patten-bashing, is far too pragmatic to risk damaging such a jewel. The territory will be allowed to go on doing what it does best - making money. The new regime may be more corrupt and more bureaucratic, and certainly less tolerant of criticism, but it won't risk destroying the golden goose.

I buy almost all of this, but I nevertheless left Hong Kong with one niggling doubt. The entire economy is built on property, indeed on some of the highest values and rents in the world. Huge personal and corporate loans are secured on that property. That inevitably makes for instability.

My doomsday scenario goes like this. The new authorities act heavy-handedly over a trivial matter. Civil liberties groups respond muscularly, fearing any clampdown as the thin end of a wedge. The dispute escalates with neither side prepared to lose face.

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