'No jobs, no hope,
no future'
With a million-strong work-force now barely 250,000, Hongkongers queue to find work in mainland. Has HK a future? Peter Goodspeed, National Post.
Sept 1, 2002

HONG KONG - With the enthusiasm of a little boy creating an imaginary world, Sir Gordon Wu shuffles items on his desk, trying to explain his vision of Hong Kong's future.

A calculator becomes Hong Kong. Two pencils become an unbuilt 30-kilometre causeway linking Hong Kong and the former Portuguese colony of Macau on the west side of the Pearl River Delta. An eraser springs to life as a new container port, just south of Hong Kong's new international airport.

"My belief is we have got to serve China in the best way we can," he says. "We must develop ourselves into a logistics centre."

"God has been nice to Hong Kong," he says, tapping his desk. "If you notice in the Pearl River, right after Hong Kong, it becomes shallow. So, we should be the Rotterdam of the Far East."

A billionaire who made his fortune building toll roads, power generating plants and hotels in southern China, Sir Gordon insists Hong Kong has to reinvent itself.

The city is in the middle of its worst economic crisis in decades.

Unemployment has reached record highs; deflation has savaged property values and slashed wages; bankruptcies have tripled; growth has stagnated and retail sales have collapsed.

Sitting in his wood-panelled office, atop a 64-storey skyscraper with sweeping views of Hong Kong harbour and the city's cloud-draped mountains to the north, Sir Gordon worries about "the masses," saying they have been hit hardest by the sudden downturn.

"The reason we are not doing so well is we are now noticing the effects of the industries that have gone away," he says. "The local employment factor has shrunk and that is what is hurting the masses."

At one time, Hong Kong factories employed a million people, churning out toys and textiles, handicrafts and ceramics. But now there are fewer than 250,000 manufacturing jobs left in the city of 6.8 million people.

All the other jobs shifted north into China, where Hong Kong entrepreneurs employ five million low-wage mainland Chinese workers in 50,000 Hong Kong-owned factories.

In a city where almost half the population has less than a Grade 10 education, that sort of sudden transformation is traumatic.

To survive the competition with China, Hong Kong has to claw its way back to prosperity, Sir Gordon says.

"One cannot afford to be arrogant," he says. "If one does get arrogant, we are lost. Hong Kong's future, as I see it, is a middleman who helps to shepherd the private sector of Chinese enterprises into the world."

On the streets of Wanchai, not far from Sir Gordon's skyscraper, Liu Chong-sing squats on the sidewalk waiting for work.

He hauls garbage to a nearby waste transfer station from the stores and stalls that line Wanchai's crowded alleyways and he makes general deliveries.

Crouched on a stool in the humid heat, next to a hand-drawn cardboard sign advertising his business, the 58-year-old isn't as optimistic as Sir Gordon.

He thinks Hong Kong's dreams are over and says the city is confronting a new, far grimmer reality.

"The mood is very gloomy," Mr. Liu says. "Every person is saying things will only be worse next year. Everybody is worried. No one in the government seems to know what to do."

Five years ago, Hong Kong faced a similar uncertainty as 156 years of British colonial rule came to an end and the territory returned to China.

Then, the world was full of doomsday scenarios in which PLA soldiers patrolled Hong Kong's streets, muzzled the press and arrested dissidents, while communist officials slowly dismantled Hong Kong's British legal system.

That nightmare never materialised.

Hong Kong's current problems have less to do with Chinese interference than with China's emergence as an increasingly open, global economic power.

Snared by the British from the Qing Dynasty in 1841 as a spoil of the Opium Wars, Hong Kong owes its very existence to China's traditional repugnance for foreign trade.

For decades, the city flourished as a glittering gateway into China, when China itself was closed to the rest of the world.

Hong Kong still handles about one-third of China's $260-billion a year in exports, but the city's monopoly has disappeared. Hong Kong returned to China just as China threw open all its doors to international trade.

Now, many multi-nationals view Beijing, Shanghai and Shenzhen as logical and cheaper alternatives to Hong Kong for their China operations.

Even Hong Kong Chief Executive Tung Chee-hwa's family firm, Orient Overseas, has invested more than $300-million in property developments in Shanghai, Beijing and Hangzhou.

In the past four years, Hong Kong has endured two recessions and watched unemployment climb to an unprecedented 7.8% -- a brutal shock to a city that complained of labour shortages for 35 years.

In coming weeks, unemployment is expected to swell to 8%, as graduating students look for work. Some high school and university graduates haven't found work in three years.

For decades after the communists seized control of the mainland in 1949, thousands of people risked their lives to escape China's poverty and oppression, in exchange for Hong Kong's freedom and opportunity.

Now, as many as 12,000 Hong Kong young people stand in line for hours at job fairs to pay recruiters to find them work in China.

Restaurant owner Leung Sing Wai has just launched plans to recruit 1,000 Hong Kong high school graduates to work in a chain of "Abalone King" restaurants he plans to open. But all the new restaurants will be on the mainland.

"Teenagers in Hong Kong these days have no jobs, no hope, no future and no direction," Mr. Leung says. "I hope I can give them a chance and a sense of direction."

One of the biggest impacts of Hong Kong's recession has been the total collapse of the real estate market. Property prices have plummeted by 60%, leaving as many as 100,000 people owing banks more than their properties are worth.

Cheap housing just across the border in Shenzhen has further undercut the battered housing market.

As a result, even though construction cranes still dot the skyline, many new buildings remain empty and developers are offering buyers previously unheard of deals -- $16,000 cash-back rebates, interest-free loans, free hotel accommodation during a building's construction or a three-year free supply of electricity, water, gas, rice, edible oil, soya sauce and salt -- just to close a deal on a new apartment.

Deflation is endemic. Prices have fallen steadily since October, 1998. They have already fallen 11% and are expected to drop another 2.8% this year.

As a result, wages are being slashed as employers ride out the storm. Starting salaries in Hong Kong are now 12% lower than they were under the British.

According to a survey by City University, the number of families living under the poverty line in Hong Kong has more than doubled -- to 28% -- since the mid-1990s.

Some 450,000 households, or 1.75 million people, now earn less than US$750 a month, the amount necessary for basic sustenance in the world's most expensive city.

"Incomes have fallen steadily for the poorest 20% of our society in the last few years," says Chua Hoi-wai of the Hong Kong Council of Social Services. "Conversely, the richest 20% have become richer."

When Chris Patten, Hong Kong's last British Governor, handed the colony over to China in 1997, he compared the city to a Rolls-Royce and advised China's leaders not to tinker with the engine or mess with the tires. Just get in and drive, he said.

At the time, Mr. Patten was able to boast that Hong Kong's gross domestic product (GDP) had grown 30% in the last five years of British rule. Exports had grown 76%, investments by 61% and the territory's financial reserves by 65%.

In the five years before the handover, Hong Kong's stock market grew a stunning 250%. By August, 1997, the Hang Seng Index had hit a peak of 16,673 points.

Now it is trading at 10,424 points -- 62.5% lower.

Hong Kong is paying a price for its economic turmoil.

Family violence has increased and suicide hotlines are getting more calls as the psychological impact of insurmountable debt, job loss and the constant worry over bills mount.

"Just last week we had two women in our job-retraining program who tried to commit suicide," said Elizabeth Tang, chief executive officer of the Hong Kong Federation of Trade Unions. "They were classic cases -- unemployed six months, they had family problems and they didn't know where to go."

Hong Kong has the most basic of social safety nets. To qualify for social assistance, you have to be virtually destitute. There is no unemployment insurance or old age pension.

Under British rule, the foundations of Hong Kong's economic success were real estate, low taxes, small government, a stable currency, an adaptable labour force and an efficient bureaucracy. Now, all those look shaky.

The territory, which used to be famous for its pragmatism and promise, is now constantly rocked by protests.

Residents here used to teach their children to avoid politics and focus on making money. But now, Hong Kong people are clamouring for their rights and street protests have become commonplace.

"In Hong Kong, you can still shout," said Margaret Ng, a member of the Legislative Council. "But the government need not listen."

At the handover in 1997, Hong Kong's government passed from a British colonial administration to a triumvirate of Chief Executive Tung Chee-hwa, who is subject to few formal controls, an obedient civil service and a business class that has always twitched to the interests of the external power -- be it British or Chinese.

Mr. Tung, a wealthy shipping tycoon, was "re-elected" Hong Kong's Chief Executive this year by an 800-member "election committee," after Chinese leaders made it clear he was their only choice for the job.

Public opinion polls showed only 16% of Hong Kong residents supported his re-appointment.

Increasingly vocal critics claim Mr. Tung's administration is floundering. They complain the government seldom consults the public and say it frequently ignores directly elected politicians.

Mr. Tung's style, say those who know him, is autocratic and secretive. He doesn't care for -- or even try to win -- public approval and he steadfastly believes society needs strong government, by a well-educated, disciplined elite, who know better than "the masses".

The result is a government that is pleasing to Beijing and is heavily influenced by Hong Kong's tycoons. But it is also increasingly more remote from the people who are suffering most in the recession.

"The community is in turmoil," says Emily Lau, a leading pro-democracy politician and leader of the Frontier party. "Many people don't see a way out for Hong Kong under Mr. Tung's leadership."

Satisfaction with the performance of the Hong Kong government is now barely half what it was at the beginning of Chinese rule, say polls conducted by the Transition Project at Hong Kong's Baptist University.

In fact, more Hong Kong residents now approve of the performance of the Chinese government in Beijing than give a thumbs up to their own government in Hong Kong.

"Prosperity has departed for many and even more fear for their continued prosperity," the most recent Transition Project report says.

"There is a long-term decline in satisfaction with life in Hong Kong," the study said. "Reports that indicate more and more professionals are willing to work elsewhere simply reflect a loss of satisfaction with life in Hong Kong, which once rivaled that found anywhere else in the world."

Mr. Tung has desperately tried spending his way out of recession, relying on the pool of foreign reserves left behind by the British, the world's third largest.

Hong Kong has unveiled some US$7.7-billion in government-supported infrastructure spending and other projects over the next 15 years.

It has produced the government's first deficit budgets in decades and pushed government spending up to 24% of GDP, from a British benchmark of only 17%.

Mr. Tung is even talking of raising taxes, something hugely unpopular in a city that has long boasted of a 15% personal tax rate and a 16% maximum tax on businesses.

Right now, the government is reviewing proposals to impose a border-crossing fee on people going to and from China and is toying with the possibility of a general sales tax.

Mr. Tung has also just recently completed an overhaul of his administration, replacing top civil servants with political appointees who answer directly to him.

Critics say the move will increase the Chief Executive's power at the expense of an already weakened and undemocratic Legislative Council. Mr. Tung's supporters say it will allow him to act decisively to overcome a lethargic bureaucracy.

Mr. Tung, who has been criticised for sharing Beijing's dislike for democracy, has abolished Hong Kong's elected municipal councils, the only governing bodies that were directly elected, and reinstated appointed members to district councils.

He has also passed laws requiring protesters to obtain "no-objection" letters from police and has prohibited demonstrations that are "against national interests."

There have been occasions as well, where people who make China's communist leaders uncomfortable -- human rights advocates and dozens of Falun Gong members -- were denied entry to previously visa-free Hong Kong.

Even Hong Kong's much vaunted independent judiciary was damaged when the government successfully appealed to Beijing to overrule the territory's Final Court of Appeals in a case involving immigration issues.

"Hong Kong takes small steps away from democracy day by day," said Martin Lee, a legislative councillor and chairman of the Democratic Party of Hong Kong.

"Eventually, Hong Kong is going to end up just another big Chinese city," he said. "The same as Shenzhen or Shanghai, just more expensive and a little bit further south."
National Post