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Poverty in the Midst of AffluenceHow Hong Kong Mismanaged Its Prosperity$

Leo F. Goodstadt

Print publication date: 2013

Print ISBN-13: 9789888208210

Published to Hong Kong Scholarship Online: May 2014

DOI: 10.5790/hongkong/9789888208210.001.0001

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The Business of Government: Less Politics, No Welfare

The Business of Government: Less Politics, No Welfare

Chapter:
(p.57) 2 The Business of Government: Less Politics, No Welfare
Source:
Poverty in the Midst of Affluence
Author(s):

Leo F. Goodstadt

Publisher:
Hong Kong University Press
DOI:10.5790/hongkong/9789888208210.003.0003

Abstract and Keywords

When a political system is as dominated by business interests as it is in Hong Kong and where social expenditure is not permitted to hinder the pursuit of profits, the credibility of both the policy makers and their decisions must always be in danger. However, this chapter shows that the community does not judge the government and its merits by the social benefits which it provides. Income inequality does not provoke unrest, and the affluent do not arouse envy, however unfairly the workforce is rewarded for its sustained high productivity and its resilience. Incompetence is criticised, but is not politically fatal. The real test of Chief Executives and their ministers turns out to be mostly about their ethics.

Keywords:   Hong Kong, Poverty, Social welfare, Comprehensive Social Security Assistance, Healthcare, Education, Housing, Government policy, Legislation, Social inequality, Ethics

Hong Kong has always been a deeply ‘pro-establishment’ society. Support for democratic reforms has never meant a call for radical change. Most people share the same commitment to ‘small government, low taxation’ as officials and the business and professional elite. The average household would rather go hungry than seek Comprehensive Social Security Assistance (CSSA) when they lose their jobs (as the data in Chapter 6 will show). And the elderly have been even more reluctant to rely on social security benefits (as Chapter 6 will also show). The public have deep respect for the law and the courts, for the police and the Independent Commission Against Corruption (ICAC). Almost everyone cooperates spontaneously with government departments and their rules and regulations, whether in renewing an identity card or in applying for school places for their children. This chapter will present the polling and other indicators that reveal how conservative this community has been in its attitudes towards social as well as political issues.

Hong Kong has been exceptional for the lack of serious public pressure on the government to accept responsibility for the wellbeing of vulnerable members of the community. In the absence of universal suffrage, the community could impose no direct political sanctions on incompetent or uncaring members of the government, although the public has also shown a surprising capacity to veto the survival of those in power. The legislature has had only limited powers to alter official policies or to allocate public expenditure, and throughout this century, those in high office were able to reduce the provision of public housing and social services with impunity. Yet, political stability and social harmony, if anything, strengthened, as this chapter later explains. This combination of polite politics and social maturity reflected Hong Kong’s historical realities, and these qualities were openly acknowledged by the Mainland authorities in the last century.1 Over the years, the community had been conditioned to accept that there were sacrifices and compromises which must be made in order to ensure Hong Kong’s (p.58) survival. In particular, a ‘high degree of autonomy’ and the principle of ‘Hong Kong people ruling Hong Kong’ could only be achieved through unconditional compliance with the Basic Law, the 1990 constitutional blueprint for post-colonial Hong Kong.

The Basic Law was intended to put an end to controversy about the role of democracy in Hong Kong. Political reform would be carefully controlled. Universal suffrage in the selection of the chief executive and legislators was ‘the ultimate aim’, and political change would be ‘gradual and orderly’. Social reform would be even more restricted. ‘The development and improvement’ of social welfare was made subject first to ‘economic conditions’ and linked to ‘social needs’ only second (Article 145). The vaguest mention was made of rights to social services, and no entitlements were bestowed on the needy and the vulnerable. By contrast, the Basic Law elaborated in detail the rights and freedoms of business, and it pledged commitment to unrestricted capitalism and the most conservative budgetary policies.2

China’s leaders had decided that it would be harmful to the national interest if Hong Kong’s capitalist system did not continue to flourish after 1997, and it was generally believed that the co-option of business leaders into the political structure had been a key factor in the economy’s impressive performance in the past.3 At the same time, Mainland officials shared the business community’s misgivings about increased social expenditure because they were genuinely alarmed that the colonial administration would seek to dissipate the government’s financial reserves through spending on social services.4 Leading Mainland officials joined forces with the business and professional elite to denounce increased welfare spending, thus providing a practical demonstration of how the pro-business commitments of the Basic Law would be implemented after it came into effect in 1997.5 An eloquent statement of intent was made in 1994 by the highest ranking Mainland official in Hong Kong at a prestigious business forum. He issued a dire warning about welfare expenditure. ‘We see disconcerting signs of attempted [policy] changes, proposed in the name of lofty causes,’ he said. ‘It is true,’ he went on, that ‘the poor and the old should be taken care of.’ But they should expect only limited state help because of the costs involved: ‘the cost to tax-payers . . . to budgetary balance . . . to Hong Kong’s overall economic structure and its free market orientation.’ It was unfortunate that the one, concrete example he cited of a potentially unaffordable welfare initiative was a pension scheme, the absence of which has continued to burden Hong Kong’s ageing community into this century.6 By contrast, the Mainland was to tackle the nation’s pension gap with increasing determination from 1997 despite its much lower levels of income per head and the shortage of social services generally by comparison with Hong Kong.7

(p.59) The Basic Law ensured that the protection of business interests would be the first priority for official policy-makers and made it ‘extremely difficult for [the legislature] to pass any bill against the interests of the business class’.8 These constitutional arrangements fixed the balance of political power and reduced potential competition between rival economic and social interests. The Central People’s Government retained overriding control and maintained a considerable presence in the Special Administrative Region, with an average of 7,756 new arrivals with official status each year between 2009 and 2011.9 Beijing’s intervention in local affairs was limited but decisive, especially in the selection of the Chief Executive and the approval of ministerial and other senior appointments.

Within Hong Kong, the Special Administrative Region government was the most powerful political actor. There were three other contestants for influence over government policies and spending: the business and professional elite, the legislature and the community. This chapter will explore this balance of power and its consequences for social development. It will also review the community’s relationship with its rulers and seek to explain the public’s tolerance of the large gap between its expectations and the behaviour of both government and business.

Business Takes the Lead

The Basic Law made business pre-eminent in the political system, and the government’s subsequent deference to business interests seemed almost limitless. The government’s propensity to favour business was, however, far more a matter of political convenience than is usually thought, this chapter will argue. On the whole, the collaboration was voluntary, and when officials believed they had been threatened or pressured in negotiations with tycoons, they were free to publicly disclose the facts, if they chose, without fear of retaliation.10

Relations between government and business were made all the easier by the background of the first Chief Executive, Tung Chee Hwa. He had spent his entire career in business, and his approach to economic affairs was shaped very largely by his commercial experiences.11 The Chief Executive had been selected for office by a small body of individuals dominated by business interests, and he depended heavily on the same group for his re-selection in 2002. In managing the government, business support was essential for Tung because his private-sector background had not equipped him to mobilise the bureaucracy, develop a political coalition or rally the public’s support.12 Hence, he and his ministers needed the backing of the business community and its functional constituency (p.60) representatives in the Legislative Council to get the government’s legislative and financial proposals through the legislature unscathed.

Tung’s successor, Donald Tsang Yam-kuen, was a career civil servant. His diligent efforts to bond with Hong Kong’s business leaders eventually left him battling to refute allegations about improper acceptance of ‘hospitality involving yachts and private jets’ and his arrangements for a luxury post-retirement residence. His defence of this conduct before the Legislative Council included a naive account of his relations with tycoons. ‘The several people with whom I travelled on private jets or returned to Hong Kong from Macao on yachts are ordinary friends of mine,’ he declared, ‘not friends close enough to affect my impartiality when handling official business.’ As Chief Executive, he needed the know-how of business leaders, he stated, and he was not to blame when ‘the frequency of socializing’ with them rose from ‘one or two evenings a week’ to ‘several evenings’ plus ‘luncheon and breakfast meetings’.13

The third Chief Executive, Leung Chun-ying, was widely regarded as being more distant from the business and professional elite, many of whose most prominent members had endorsed his election rival, Henry Tang Ying-yen. But Leung proved no less enthusiastic about the government-business nexus than the two earlier Chief Executives. His 2013 Policy Address, for example, provoked instant controversy by setting up a Financial Services Development Council, which was to be formed as a private company and not subject to the legislature’s scrutiny as advisory bodies normally were. Almost 20 per cent of its members were reported to be executives of Mainland enterprises with close ties to the national leadership. The Council was attacked as adding a new dimension to cronyism through its co-option of Mainland business representatives into the Hong Kong power structure.14

The Rise of Cronyism

Political reforms between 1985 and 1995 had offset business influence within the political system through the introduction of elected (especially directly-elected) legislators.15 The Basic Law tilted the political balance back in favour of business, which helps to explain the widespread feeling among the community from the late 1990s that the doors had been opened wide to cronyism. In the post-1997 environment, access and influence have been the most visible evidence of the privileged status of the business community and its leaders even though there were personal rivalries within the business community and frequent conflicts between individual firms and the government.16 Hong Kong now had its ‘princelings’, the tycoons’ sons and daughters who were routinely co-opted into the power structure.17 Directors of (p.61) the six largest development conglomerates were appointed in rapidly rising numbers, the media reported, to influential statutory bodies and advisory committees.18 The government-business nexus was fulfilling its traditional function: providing business leaders with opportunities to benefit personally from public status and political access in return for their cooperation with the government to offset public opposition.

In post-colonial Hong Kong, the danger of cronyism at first caused more concern overseas than locally. In 1998, Tung announced that the government had redefined the traditional economic policy of ‘noninterventionism’. In future, it would identify growth industries and create new profit opportunities for the private sector.19 The International Monetary Fund reviewed Hong Kong’s economic performance and declined to endorse Tung’s initiative.20 In 1999, the public was alarmed by the controversial Cyberport deal. This project combined a world-class IT hub with a residential complex on 26 hectares of public land and was to be a partnership between the government and a member of the Li Ka-shing family.21 Rival property tycoons claimed that if the site had been sold by competitive tender, the terms would have been far less favourable to the project’s developer, and there was a flood of allegations of cronyism.22 The criticism was persistent, and the technology minister was still battling seven years later to convince the community that Cyberport was worth the money.23

A flagrant example of prolonged favouritism for business as a whole was the official resistance to a proposed competition law. For three decades, the government had knowingly left the public vulnerable to exploitation because of restricted competition in many sectors, from supermarkets to housing. Officials were brazen in their defence of price rigging and restrictive practices, both before and after the British departure.24 The government’s intransigence provoked mounting community resentment, and from 2005, the second Chief Executive made repeated promises to end market abuses. The government and the business community managed, however, to delay reforms for several years with the unlikely argument that legislation would jeopardise the survival of small and medium-sized enterprises (SMEs). The legislation was finally passed in 2012 by which date ‘over 120 economies worldwide’ — including the Mainland — had already enacted competition laws, the commerce minister admitted.25

The most determined resistance came from the property sector. Developers had long refused to supply basic information about the size and facilities of new flats, and they had been left free to circulate misleading price information. This scandalous behaviour had first aroused criticism in the 1980s, and legal remedies had been under discussion (p.62) since 1992. Even after legislation had finally been passed, developers were threatening court action to block the new law.26

The Case for Competition

Collusion between government and business to prevent legal measures to enforce competition has been interpreted as proof that officials have abdicated the power to interfere with profit-seeking even if it leads to overt exploitation of the public. That conclusion would be misleading. Concessions to business were not forced on the government but were generally made by ministers and senior officials who shared the same economic preconceptions as the business elite.

The telecommunications industry, for example, was dominated by property-related interests. When developers entered the industry in this century, they accepted the draconian regulations enacted in 1995 to promote competition and which had been modelled on United States, European and Australian practices. Significantly, officials took the credit for the substantial benefits which consumers obtained as a result of the competitive market.27 Similarly, the colonial administration had severely restricted competition in the banking industry from 1965 on the grounds that excessive competition had led to that year’s banking crisis. The government enforced an interest-rate cartel and imposed restrictions on foreign banks seeking to enter Hong Kong until 2001, when the cartel was wound up and barriers to foreign bank branches removed. Banks were no longer protected against free and open competition in the domestic market, and the banking industry flourished as never before.

The government’s intervention in this century to protect the community’s interests in telecommunications and banking deprives the government-business nexus of the excuse that restrictions on business profits inevitably jeopardise the economy and undermine investor confidence. On the contrary, the impressive progress of the telecommunications industry and the exceptional stability of banking during the Asian and global financial crises indicated how economic performance can be enhanced by measures to protect the public from monopolies and unfair trading practices.

The government retained its autonomy in dealing with the property sector even though the first and second Chief Executives bowed to its demands for the government to withdraw from the housing market (except for the lowest income groups) and to restrict the supply of new building sites in order to minimise pressure on property values. But concessions had important limits. From 1991, Hong Kong bank regulators had imposed tight restrictions on the freedom of the banking industry to lend to the property sector. These loan ceilings were imposed in (p.63) defiance of the worldwide trend to abolish controls of this sort. The restrictions reduced the earnings of both the banks and the property sector. The banks could not freely expand the volume of their lucrative mortgage business. The developers could not maximise their profits by pumping up speculation and exploiting bubble markets.

The government from 1998 intervened at will to halt whatever it judged to be unhealthy property price surges. In 2009, the restrictions on mortgage lending were raised to record levels to counter an incipient bubble.28 In 2012, the government responded to claims that an influx of Mainland buyers was driving up prices to irrational heights by imposing a penal rate of stamp duty on all property purchases, from which Hong Kong ‘permanent residents’ alone were exempt.29 Such discrimination against offshore investors was unprecedented. Property developers were bitterly resentful of the exceptional severity of this intervention in their sector.30 The government could not be budged, however. Financial stability had to come first.

Mainland Partners

From the Mainland’s standpoint, the choice of business leaders to be the Chinese Communist Party’s partners in Hong Kong paid off handsomely. Their political loyalty was demonstrated in the aftermath of the 500,000-strong march in 2003 to protest against the formula put forward by the government ‘to discharge its responsibility to protect the state by implementing Article 23 of the Basic Law, to ensure that national security is not threatened by serious criminal offences’.31 This demonstration had gone ahead despite a personal plea to the public from Premier Wen Jiabao on the eve of the march to trust the Special Administrative Region’s government.32 Business leaders, however, responded promptly to his request for loyal support.33 Their fidelity to China’s leaders did not waver in subsequent controversies over Mainland proposals which the general public opposed. (This issue is dealt with at greater length in Chapter 7.)

The large family conglomerates also earned the patronage of China’s leadership because of their willingness to underwrite major development projects on the Mainland and the massive IPOs floated in Hong Kong by state-owned enterprises.34 Not that the Hong Kong tycoons could take their profits for granted. Many encountered well-publicised difficulties with local governments over property, transport, power and retail projects. These investors, however, had ample access to Mainland power-holders at both national and regional level. They did not need Special Administrative Region government officials to intercede on their behalf.

(p.64) Another group of businesses emerged in this century, which was less favourably placed in dealing with the Mainland’s bureaucracies. These were the 56,000 firms which had set up enterprises in Guangdong Province where they had 10 million workers on their payroll by 2007.35 They were being crippled, they complained, by the costs of complying with new national as well provincial policies to halt pollution and improve workers’ welfare. Hong Kong officials had been able to do little to protect these businesses.36 As the previous chapter explained, the Mainland authorities regarded these firms as low-tech, low-wage producers which had no place in Guangdong’s modernisation programme.

In the wider Hong Kong context, these Mainland measures intensified business mistrust of all social reforms. Mainland initiatives were bankrupting Hong Kong firms in Guangdong, the second Chief Executive publicly stated.37 A substantial number of Hong Kong entrepreneurs and investors thus had first-hand experience of how better protection for the labour force, the environment and the consumer could trim profit margins. Their Mainland tribulations seemed to justify unrelenting business opposition whenever proposals surfaced in Hong Kong for minimum wages, shorter workings hours, tougher environmental controls, competition legislation and new taxes.

At the Mainland’s Mercy

The inability of Hong Kong’s first two Chief Executives to protect the interests of its entrepreneurs and investors who, since the 1980s, had responded to the Mainland’s calls to take a leading role in the industrialisation of Guangdong Province was a major turning point, politically as well as economically. It marked an important break with the past and revealed unanticipated limits to the Special Administrative Region’s political authority.

Historically, in dealings with the rest of the world, Hong Kong officials had mounted uninhibited campaigns to maintain Hong Kong’s access to its overseas markets and to defend Hong Kong firms against trade discrimination. Among the two most important historical examples were direct confrontations with Washington and London.

  • Hong Kong officials induced Washington to lift the ban that it had imposed — with the agreement of the British Foreign Office — on all United States shipments to Hong Kong as part of its 1950 economic and financial blockade of China. Despite the Cold War obsessions of American political leaders, Hong Kong won a special status which indirectly enabled China to obtain access to international trade and financial markets via Hong Kong until the embargo was lifted in 1971.38

  • (p.65) Hong Kong officials were so ruthless in fighting restrictions on Hong Kong textile exports to the United Kingdom that the senior British negotiator commented in 1961: ‘Crudely stated, the position of the Hong Kong Delegation was that, if [Britain] was going to be ruined, it might as well be at the hands of Hong Kong as those of third countries.’39

In the contemporary world, Hong Kong officials continued to boast of their vigour in defending external business opportunities. Their efforts ranged from active involvement in international and regional arrangements for banking supervision and currency cooperation to legal and tax agreements with foreign governments, as well as unrestrained comment on the policies of the United States and the European Union.40 When it came to the Mainland, however, Hong Kong felt it had to be more diplomatic. Officials claimed that they had no right to interfere with the decisions made by Mainland authorities. Even the business community shared this reluctance to express disagreement. For example, the new national labour and environmental policies discussed earlier aroused strident protests in Beijing from foreign businesses which were in marked contrast to the more muted complaints from Hong Kong’s trade associations.41

The Special Administrative Region government had only limited scope to intervene on behalf of Hong Kong firms. The third Chief Executive, nevertheless, was willing to declare that ‘I see it as my responsibility to safeguard the interests of Hong Kong’. ‘We need more support’ from the Mainland authorities, he went on, identifying in particular a need for ‘clearer procedures’ and ‘better co-operation at the regional level’.42 Unfortunately, even the Central People’s Government itself had serious difficulties in achieving goals of this sort, while the Special Administrative Region had little bargaining power when dealing with local Mainland leaders. Among the more notorious examples of local authorities’ insubordination has been their defiance of both national law and the financial regulators in raising bank loans for unauthorised business and investment projects. These illegitimate borrowings totalled USD 1.66 trillion at the end of 2010.43

Thus, there was a significant difference between what Hong Kong officials traditionally achieved in defending Hong Kong’s global export markets and what they could deliver for Hong Kong investors and manufacturers on the Mainland. The balance within the government-business nexus shifted in response to this development. In the past, the business community was not just the government’s political partner. It was also a ‘client’ whose profits depended directly on the performance of trade and financial officials in negotiating market access for Hong Kong exports, which gave business a powerful incentive to support the (p.66) government’s policies in general. For post-industrial Hong Kong with the export trade operating under liberal World Trade Organisation (WTO) rules, business profits were no longer at the mercy of quotas, tariffs and trade restrictions. The direct link between business survival and the government’s trade and financial policies had gone.

The targets for market exploitation altered in consequence.

  • Until 1978 and Deng Xiaoping’s ‘open door’ policies, Hong Kong could exploit world markets with a clear conscience. Manufacturing for export generated burgeoning profits and higher wages at the expense of protectionist Western economies.

  • From 1978, Hong Kong manufacturers could maintain their export competitiveness by relocating to the Mainland. Here, they were free to exploit the low wages, cheap land, tax and tariff privileges and the wide exemption from labour and environmental regulations offered by Guangdong and other provinces. From 2003, Guangdong sought to halt this exploitation.

  • In this century, Hong Kong itself became the main market for exploitation. Here, the principal targets were the residential property market, the labour force and the retail consumer. Government policies, as the last chapter made clear, created new opportunities to exploit home-buyers and low-skilled workers, and there was no competition law to protect consumers until 2012.

The business ethic of contemporary Hong Kong was summed up by a leading property tycoon.

The world is unfair and we want to make sure the advantage becomes more and more unfair. That’s the nature of the game.44

Beleaguered Legislators

The Legislative Council ranked third in the power structure, but legislators themselves hardly seemed to count. They were belittled and derided by the government, business and the community. They were made scapegoats for the government’s inability to administer effectively. Pro-democracy Legislative Councillors especially were denounced as more intent on empty protests than on tackling Hong Kong’s problems. Business leaders continued to fear politicians: elections were seen as creating an irresistible temptation for political parties to compete for power through populist welfare programmes and anti-business measures.45

Government ministers led the campaign against the legislature. When Tung Chee Hwa took office, Hong Kong’s prospects had never seemed so promising. ‘A colonial administration gave way to a Special (p.67) Administrative Region Government, which embodies the principle of “Hong Kong people ruling Hong Kong” and enjoys a high degree of autonomy,’ Tung recalled, ‘We, finally, became our own master.’46 The conflicts and contradictions of the colonial era would evaporate. Confrontations with Beijing which had dominated public attention would disappear, he believed, and with them political rancour. The community would be able to unite behind a government made up of individuals who had been shaped by the same experiences; who treasured the same Chinese heritage; and who shared the same future.

The electoral system was designed to create a legislature dominated by business and professional interests and by the organisations which had shown loyalty to the Chinese Communist Party during the colonial era.47 Electoral politics would become of secondary importance.

  • Political activism would decline. The community would become less ‘politicised’ and thus easier to govern because ‘populist’ political parties which advocated universal suffrage would be sidelined.

  • The economic environment would improve. Investors would respond positively to the decline in political ‘populism’ and removal of the threat of higher taxes to pay for improved social services and the danger of new employment legislation which would raise labour costs.48

There was also an assumption that public protests and hostile media reporting suffered by the pre-1997 administration had been the natural response to colonialism. The community would abandon such disruptive activities when ruled by their compatriots to whom they could give their trust. In consequence, there would be no need to buy off public discontent with social programmes.

Tung Chee Hwa was soon to be disappointed, and his team quickly lost patience with the community and its politicians. In 2000, the Secretary for Security issued a warning to ‘would-be demonstrators’. She referred to the way ‘freedom fighters’ discredited their cause — as if there could be any comparison between Hong Kong’s tradition of orderly protests and the violence associated with ‘freedom fighters’. The ‘mass media’ were accused of having ‘become too prone to take things at face value; to jump to conclusions and to pass judgment without an objective inquiry’. She attacked legislators who ‘seem to be more interested in seeing heads roll rather than establishing the facts’. ‘To those at the receiving end of their attack,’ she went on, ‘it would appear as though all they want is “blood”; to pin down culprits in the absence of a thorough investigation.’49

The first post-1997 President of the Legislative Council, Rita Fan Hsu Lai-tai, later expressed dismay at the damage done by this sort of (p.68) official hostility towards legislators. During a confidential discussion at the United States Consulate after she stepped down from her Legislative Council post in 2008, she reportedly identified the source of political conflict in Hong Kong as the arrogant mentality shared by business leaders and senior bureaucrats (who dominated the political system). They expected their decisions to be implemented without question, and they saw no need to mobilise political support for their proposals. In the past, she declared, officials had been happy to acknowledge the input from legislators, which generated goodwill. When Tsang Yam-kuen was Financial Secretary, she went on, he had used this tactic successfully. If as Chief Executive, he had started ‘showing respect and acknowledging the contribution of legislators to proposals the government ultimately adopts, [he would] go a long way in improving LegCo-[SAR government] relations’.50

The low status accorded to legislators as a class was well illustrated in the public consultation on the 2011 Policy Address and the 2012 Budget. The Chief Executive met with 17 groups. The arrangements for these meetings signalled the political standing of the participants.

  • First to be consulted were those with national status: National People’s Congress Deputies, followed by members of the Chinese People’s Political Consultative Conference.

  • Then came the ‘pro-government’ groups: the Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) and then the Federation of Trade Unions (FTU).

  • Next in line were the ‘pro-business’ legislators (newly-founded Economic Synergy first, followed by the less reliable government ally, the Liberal Party).

  • Only then were other legislators invited.

Neither the Democratic Party nor the Civic Party was mentioned by name in the official schedule. It was as if they had no formal status as legitimate organisations in Hong Kong’s political arrangements.51

The Legislative Council’s second post-1997 President, Jasper Tsang Yok-sing, was among the most ideologically respectable public figures in Hong Kong who met all Beijing’s criteria for ‘politically correctness’. Yet, he publicly derided allegations that the government’s work was sabotaged by a recalcitrant legislature. He explained that ‘it would be a gross misconception to think that the legislators spent most of their time trying to obstruct the government’s work’. ‘What is the worry,’ he asked, since ‘government-friendly legislators, or “government-loyalists”, form a majority in the legislature,’ and ‘even the parties which the government has labelled “the opposition” . . . supports 95% of all government proposals.’52

(p.69) Nevertheless, the government continued to regard political activists with serious mistrust. The unelected government insisted on dividing the world into friends and foes: ‘people who are pro-establishment and people who are pan-democratic’, as the Chief Secretary put it in 2011.53 The third Chief Executive, Leung Chun-ying, was alleged to have gone a stage further. He was accused of labelling the pan-democrats as belonging to a category of political foes whom Mao Zedong had relentlessly attacked.54

The government’s mistrust was not reciprocated by politicians in the routine conduct of the legislature’s business. There were occasional ‘pantomime’ protests by a handful of legislators causing brief, theatrical disruptions of proceedings and their even rarer filibusters, which the Council’s President kept within reasonable bounds. The majority of Legislative Councillors were ‘conservative’, both in their behaviour and their views. They were not particularly populist nor advocates of radical welfare reforms. Except for Mainland-related issues, they assumed that the government’s intentions were good and that the civil service was honest and professional. Monitoring was the principal role played by legislators. The good faith assumed by legislators in their dealings with government agencies was also resilient. They tended to believe, for example, that the accuracy of official statements could be largely taken for granted even though this trust has proved misplaced in recent years.

  • Direct Subsidy Scheme (DSS) schools received the same government financial support as the rest of the subsidised school sector but were allowed to charge fees, and they operated with considerable autonomy. In return, they had to provide scholarships or fee remission schemes so that needy students were not excluded from access to this elite education. In 2009, allegations that the schools were breaking the rules were denied in detail by the government.55 The following year, a damning report from the Director of Audit showed that the Education Bureau had misled the Legislative and Executive Councils about DSS schools. Among other irregularities uncovered, at least 40 per cent of the schools did not offer the financial assistance to needy students that they were contracted to provide.56

  • Private hospitals enjoyed a similar ‘light-touch’ relationship with their official regulators. In 2010 and again in 2011, the Legislative Council was given blanket assurances that potential problems had been remedied and that the government was effectively policing private hospitals.57 In 2012, the Director of Audit uncovered irregularities in handling complaints about professional misconduct in the private sector. Patients were in danger of exploitation because of the lack of transparency about fees. He also showed how justified (p.70) legislators’ questions had been about whether or not the private hospitals which had been granted free public land had complied with their commitment to operate on a not-for-profit basis and to provide a quota of free or low-fee beds for the needy.58

In neither case did legislators launch a witch-hunt into why they — and the community — had been so grossly misinformed by the government. (These two incidents are discussed in more detail in Chapter 5.)

A World without Welfare

The Basic Law’s restrictions on the legislature’s powers made it ‘impossible to push for welfare reforms’. As a result, it has been observed, ‘social provision is secondary to economic development and the former must give way to the latter whenever they are in conflict’.59 The Basic Law was designed for a world without welfare. Mainland officials, it was noted earlier, chose to support business interests in denouncing expansion of the social services in the 1990s despite the risk of alienating both the general public and those trade unions which were a major source of political support for Mainland policies.60 Limited social services did not seem an urgent priority because until the 1990s, the youthful immigrant population needed relatively little medical care or social support and could survive squalid housing. Nor did education seem to matter much, with sustained economic growth and a chronic labour shortage.

In the very different conditions of this century, a world without adequate welfare has caused considerable distress. Austerity measures during the recession and privatisation of public services led to the public sector being scaled back. Its costs were transferred increasingly to sick patients, needy students and welfare recipients. Long-term financial commitments to social service development were abandoned. The elderly, the mentally ill and the children and adults with disabilities had to endure agonisingly protracted waiting times for access to residential care (which Chapter 5 will describe). Yet, there were no mass protests against the government’s retreat from the social responsibilities which it had previously accepted.

This passivity was not due to ignorance or apathy. The community understood very well the consequences of the government’s new policies. In 2006, the Hong Kong Transition Project uncovered extensive evidence of the gap between government policies and community priorities. The public strongly disapproved of increased charges for social services (medical care, for example). Opposition to privatisation of government services was considerable. There was overwhelming support for increased government spending on medical services and (p.71) education (especially at the primary and secondary levels). The community strongly favoured minimum wage legislation, shorter working hours and mandatory health insurance.61 The public’s views were not heeded, yet Hong Kong’s governability remained in no danger.

Public Protests Surge, Social Harmony Improves

Chief Executives and their teams, nevertheless, lived in trepidation about the threat to ‘social harmony’ which they expected to emerge with the growing burdens imposed on the public by their misguided policies. Tsang Yam-kuen produced an explicit list in 2005 of the public’s causes for complaint:

. . . employment difficulties for workers with low academic qualifications and skills; declining real pay levels in certain jobs; the polarisation of the middle class; a widening income gap; an ageing population . . .62

By 2010, Tsang was warning that ‘social division and confrontation’ had intensified, aggravated by political controversies and the wealth gap.63 But the anticipated breakdown of social order never happened. Public protests did not become more dramatic in this century by comparison with the 1980s, for example.

  • In 1986, a popular campaign collected 230,000 signatures in favour of the early introduction of direct elections.

  • In 1987, some 700,000 signatures were obtained for a petition to halt the Daya Bay nuclear power station planned for neighbouring Guangdong Province because of public fears about its safety.64

  • In 1989, over a million people marched in Hong Kong to demonstrate support for the pro-democracy movement in the Chinese capital.

There were only two comparable incidents in this century.

  • In 2003, 500,000 people marched in protest against Article 23 legislation and in defence of Hong Kong’s values (to quote Tsang Yam-kuen).65

  • In 2012, a campaign against the proposed National Education syllabus was supported by 100,000 signatures as well as hunger strikes and repeated mass protests around the Central Government Offices.

The community was prepared to take to the streets far more frequently in this century. But Hong Kong’s ‘polite politics’ remained the norm.

  • (p.72) Between 1975 and 1995, there were on average 182 public protests, processions or demonstrations a year.

    Less than 1.5 per cent led to even minor violence.66

  • From 2002 to 2012, the total number of public protests, processions and demonstrations each year increased from 2,303 to 7,529. The number of participants prosecuted was trivial: 29 in 2002 and 31 in 2012.67

Other indicators of social conflict showed no deterioration in this century (see Table 2.1). The overall crime rate actually dropped. Industrial disputes remained rare and were only occasionally large in scale, regardless of stagnant wages and the level of unemployment. The dispute which has attracted the most public attention so far in this century was a 40-day stoppage by 450 workers at a container terminal in 2013. The rest of the port was unaffected, and the overall economic costs were marginal.68 Polite politics and social discipline were very much in evidence, and a striking feature of the dispute was that much of the battle was conducted in the courts over the right of strikers and their supporters to picket the business premises of the terminal’s ultimate owner.

Table 2.1 Social harmony indicators

Year

2001

2006

2011

Average monthly earnings

HK$10,000

HK$10,000

HK$11,300

Unemployment rate (per cent)

5.1

4.8

3.4

Industrial disputes (total days lost)

780

54

590

Crime rate (reported crime per 100,000)

1,087

1,183

1,084

The people of Hong Kong continued to display exemplary political maturity and social discipline. Personal dissatisfaction at fl awed government policies which caused a shortage of modern social services and their increased costs to the public noted earlier in this chapter did not turn into collective disorder in retaliation against the ruling elite or its property. The traditional political ‘conservatism’ was conspicuous even among the younger age groups, a government-commissioned research project found in 2010, despite government and media concern about the rise of political activism and social protest among the so-called ‘80s generation’. Its members were, if anything, less resentful of the infl uence of big business and more optimistic than older groups with whom, overall, they shared common political attitudes. This research project (p.73) also noted that the younger generation ‘have not developed distinctive attitudes towards social justice or opportunities’ nor did they identify themselves as supporters of either ‘the pan-democratic camp or the government’.69

Nevertheless, nothing, it seemed, could convince the government-business nexus that Hong Kong was not about to become ungovernable. A member of the government’s prestigious Commission for Strategic Development claimed in 2010, for example, that an ‘outright “uprising” and “liberation”’ was being planned by ‘dissidents’ and that ‘some of our offi cials still insist they are obliged by law to fund and assist these seditious acts’.70

Badge of Shame

Surprisingly, it was the unequal distribution of incomes rather than poverty itself which caused the most serious political embarrassment for the government-business nexus. The publication every fi ve years of the latest Gini Coeffi cients and the related census data showing how incomes had grown still more unequal was not easily shrugged off (see Table 2.2). The statistics became a badge of shame as Hong Kong was found to rank ‘worst among developed nations’ for income inequality.71

Table 2.2 Gini Coefficients: Household income disparity, Hong Kong and Mainland 1971–201172

Year

1971

1981

1991

2001

2006

2011

Hong Kong Gini Coefficients

0.430

0.451

0.476

0.525

0.533

0.537

Mainland Gini Coefficients

N.A.

0.288

0.282

0.412

0.487

0.477

N.A.: not available

Hong Kong government economists argued that the very high levels of income disparity were an unavoidable consequence of changes in the population structure and of the shift from manufacturing to services.73 Their professional analysis did not placate a society which was highly sensitive to its international reputation. A 2008 United Nations study rated income distribution in Hong Kong as the most unequal among Asian cities and ‘relatively high’ by world standards.74 The embarrassment to the ruling elite was all the greater since comparisons with Korea, Singapore and Taiwan and their Gini Coefficients indicated that a highly unequal distribution of incomes was not an inevitable feature of Asian capitalism or of ‘Confucian’ societies.75

The government sought to discredit the arithmetic of inequality by disputing the relevance of the Gini Coeffi cient to Hong Kong’s (p.74) circumstances.76 Officials got considerable support from the business community. A prominent business member of the legislature, for example, argued that it was misleading ‘to include the wealth generated by the city at the international level in the computation of its Gini Coefficient’.77 With great reluctance, a Commission on Poverty was established in 2005 headed by the Financial Secretary who was personally very doubtful about whether poverty could be measured.78 The Commission’s endeavours seem to have brought little improvement to the lives of the most deprived and disadvantaged.

Tsang Yam-kuen appealed for the public to realise that the gap between rich and poor was one of the ‘inevitable phenomena’ of capitalist societies, something that cannot be avoided except ‘in a socialist state in which everyone receives the same wages’.79 Ironically, the Mainland’s experience indicated that a return to ‘socialism’ was not the only way to reduce the Gini Coefficient. The Chinese nation had experienced a very sharp rise in income inequality during the break-neck growth after the adoption of Deng Xiaoping’s 1978 economic reforms. In response, the Mainland authorities in this century had described a Gini Coefficient of 0.45 as the ‘international alert line for wealth gap’, and they tried to adjust policies when this danger point was reached.80 Nevertheless, the Mainland Gini Coefficient rose from 0.479 in 2003 to a peak of 0.491 in 2008. Meanwhile, the process of dismantling the remaining state controls and reducing the state-owned sector continued uninterrupted, and the Gini Coefficient had fallen back to 0.474 by 2012. This level was still too high for comfort as far as the nation’s leaders were concerned, and they continued to tackle the income gap by making urgent efforts to raise the earnings of low income groups.81

By contrast, Table 2.2 shows, Hong Kong’s Gini Coefficient had been well above 0.5 from the start of this century. But pious hope was literally all that the second Chief Executive had to offer when challenged about income inequality and the rise in poverty. ‘We hope that people who are living at the grass-roots level this year will be able to enjoy better lives in five years,’ he stated in 2007. In addition, he declared, education to prevent intergenerational poverty is of ‘paramount importance’.82 His remedies failed. Life for the less well-off had not been materially improved by 2012, the ‘Introduction’ pointed out. As for education, Chapter 5 will show that the quality of schooling that a child could enjoy had come to depend on family income more than ever before in this century. The gap between rich and poor actually widened dramatically in terms of access to university education between 1991 and 2011.83

The Gini Coefficient continued to trouble Hong Kong’s rulers. It seemed so unlikely that the community could continue to tolerate passively the economic and political arrangements that allowed the rich to (p.75) take an increasing share of Hong Kong’s wealth while the government enforced queues and rationing on the users of essential social programmes. The third Chief Executive made the revival of a Commission on Poverty a high priority although its agenda did not suggest that its deliberations would reduce poverty and cure its causes any more successfully than its 2005 predecessor.

Political Risk Crowds out Class Conflict

Why, it must be asked, have Hong Kong politics remained so polite and social hardships been so patiently endured? The conventional explanation has long been that, in the last resort, the Chinese community was uninterested in conventional politics and concerned solely with its financial wellbeing.84 In reality, the community has been obsessed with political risk since the 1980s: the fear that Hong Kong’s very special way of life could be brought to an abrupt end. Society knew that its separate identity depended on the tolerance of China’s leaders and their confidence that Hong Kong was contributing substantially to the national interest.

The dividing line in local politics was not class conflict or inequality but the stand that individual politicians and parties took on the implementation of ‘one country, two systems’ and Hong Kong’s ‘high degree of autonomy’.85 The statistics quoted earlier in this chapter on major public demonstrations indicate how dominant has been the Mainland factor in the political consciousness of Hong Kong. Little room has been left for lobbying on behalf of the deprived, the disabled and the destitute in the last three decades, as Chapter 7 will discuss.

As a result, the community took a pragmatic view of the superior benefits attainable under the present political arrangements and which would be in danger if the current system were abolished. In this sophisticated society, it was the efficiency of the system that counted. But the public was also very aware of the areas of government in which personal incompetence was dangerous. Most conspicuously, economic and financial management. The community grasped at once how perilous were the economic decisions being made by the Tung Chee Hwa administration in response to the downturn in 1997. Public trust in the government collapsed, as Chapter 1 explained, and so did consumer and investor confidence. But the underlying resilience of the economy and the robustness of the financial system gradually offset the despondency preached by Tung and his team. Confidence had revived by the end of 1999, when it reached the point of ‘general bullishness’ (except for jobs), according to the official polls.86

Shortly before 1997, the Hong Kong Transition Project had found a general acceptance of the existing system of public finances, with its (p.76) principles of low taxation and small government. A decade later, attitudes were much the same. There was no indication that calls for political reforms were linked to ambitions ‘to open up the treasury to buy favor with the populace’. Indeed, a striking feature of the results of the Transition Project’s research was how little support existed for improving CSSA benefits. The public was sceptical about the provision of more generous welfare payments for the most vulnerable and disadvantaged groups in society. (Chapter 6 will show how much of this scepticism had been generated by government misinformation.) Less than 30 per cent of those surveyed were in favour of increasing CSSA payments, while a quarter of the respondents thought that benefits should be cut.87

Tolerating the Tycoons

A Hong Kong Transition Project survey in 2010 showed that distrust of the ruling elite had not become universal and that the poorest members of society were not the most resentful of the pro-business bias of decision-makers. Of those with monthly family incomes below HK$5,000, 36 per cent felt that official policies were fair (compared with an average of only 27 per cent for all income groups). On the issue of political reforms, the richest members of society were the most optimistic that more democracy would lead to more equitable policies. Among those with monthly family incomes of HK$60,000 and above, some 60 per cent believed that political reforms would lead to fairer policies (compared with an average of only 50 per cent for all income groups).88

A 2011 Chinese University survey showed that Hong Kong was still not an envious society. The report’s authors pointed out that hostility to the rich was much less widespread than was generally assumed, and the community remained far from radical in its views on the growing gap between rich and poor. Indeed, the public’s attitudes towards unequal incomes, social spending and ‘welfare’ generally would be classified as ‘conservative’ in Western democracies and closer to ‘Republican’ in the United States and ‘Thatcherite’ in the United Kingdom than to ‘socialism’. More than half those surveyed believed that income distribution was unfair, and 59 per cent believed that the interests of the rich were the priority concern of the government. But less than half believed that the unequal distribution of wealth was harmful. In addition, considerable scepticism had developed by 2011 about the statutory minimum wage as a measure to relieve poverty.89

‘Local big business leaders’ had been regarded in 2002 as having ‘too much’ influence, but 49 per cent of those polled described that influence as either ‘reasonable’ or ‘small’.90 Resentments were rising, however, and according to a 2010 survey by the Hong Kong Transition Project, (p.77) well over 60 per cent of the community believed that the government was guilty of favouritism and generally made policies ‘unfairly’.91 The property conglomerates had long been identified by the community as the biggest beneficiaries of government generosity. A Chinese University survey the following year reported that 66 per cent of those questioned believed that developers exercised ‘hegemony’ over the government. An almost identical number felt that developers pursued profits regardless of any social responsibilities.92

In general, nevertheless, dissatisfaction with the rich and their privileged position in the political system had risen relatively slowly despite the widening wealth gap, the decline in the government’s performance, the deterioration in the economic prospects of the young in particular and the increased costs to ordinary families of housing and key social services. Which helps to explain why social conflict has not been a feature of Hong Kong life.

Conclusions: The Masses are the Real Masters

The irony of Hong Kong’s political situation was that the community remained the ultimate judge of whether its rulers should survive. The Basic Law allocated power and influence in greatest measure to the rich and left little room for either political change or social reform. Power within the administration was centralised in the hands of the Chief Executive. Formal accountability to the people of Hong Kong was limited. Nevertheless, the rulers who lost the community’s trust suffered an ignominious fate.

When Tung Chee Hwa was making his final bid to avoid leaving office in 2005, he publicly confessed that his government had ignored the public’s needs. He acknowledged that ‘shortcomings and inadequacies have undermined the credibility of our policymaking capability and our ability to govern’.

In formulating policies, we fell short of ‘thinking what people think’ and ‘addressing people’s pressing needs’. Second, we were not sufficiently mindful of the impact of some policies on the community’s capacity to bear and the potentially controversial nature of these policies. We introduced too many reform measures too hastily, putting heavy burdens on our people. We also lacked a sense of crisis, political sensitivity as well as the necessary experience and capability to cope with political and economic changes. We were indecisive when dealing with emergencies.93

Tsang Yam-kuen replaced him as Chief Executive with a promise to avoid Tung’s mistakes. ‘It is very important to know what citizens are concerned about the most and what their needs are,’ Tsang told the (p.78) People’s Daily shortly after taking office, ‘[o]nly people-first governance can win extensive support from citizens.’94 By 2008, he was making his own self-criticism after he realised that public trust was ebbing.

People have doubts about certain issues: Have the core values of the HKSAR Government changed? Is the Government trustworthy? Is the Government fair and impartial? Is it less capable than before? Does the Government still adhere to the principle of meritocracy? Does it take into account public opinion in formulating policies?95

His term ended with him standing shamefaced before the Legislative Council acknowledging his intimate links with the wealthy and his remoteness from the standards of behaviour demanded by the people of Hong Kong.

The mass media have recently disclosed that I accepted my friends’ hospitality involving travels on private yachts and private jets, and that I have rented a private property in Shenzhen with the intention of using it as my residence after retirement. Such media reports have led the public to question my integrity and conduct as Chief Executive . . . my 45 years of experience in public service . . . has created ‘blind spots’ that make me overlook the fact that as times change, public expectations have also changed and people have turned more demanding towards public officers.96

The third Chief Executive was always going to face a serious challenge to his political credibility. He had been a member of the Executive Council, the Special Administrative Region’s highest policy-making body, since 1997 and, as Convenor, the Council’s most senior member since 1998. It was not that he never expressed dissatisfaction with the performance of the previous Tung and Tsang administrations. His occasional public criticism could be biting although always discreetly presented.97 But Leung’s role as Convenor obliged him to publicly praise the contents of the annual Policy Addresses and Budget Speeches, year after year. He was left thoroughly identified with official policies. Not until the eve of his election campaign for Chief Executive did he manage to distance himself significantly from Tsang Yam-kuen through an attack on the government’s defective housing and anti-poverty measures.98

Leung’s bid to win the public’s trust was further handicapped from the very start of his term of office when confronted with a wave of allegations which grew increasingly serious. They began with media reports of illegal or unauthorised building works at his luxury residences in the exclusive Peak area. Allegations mushroomed in spite of his explanations.99 Then came sensational reporting about the role of business contacts in mobilising support for his successful election campaign and their expectations of prestigious appointments, locally and nationally.100 (p.79) Leung’s standing was further shaken as Executive Councillors and ministers were forced to step down to deal with personal and business embarrassments within months of their appointment.

When a political system is as dominated by business interests as it is in Hong Kong and where, as a matter of official policy, social expenditure is not permitted to hinder the pursuit of profits, the credibility of both the policy-makers and their decisions must always be in danger. This chapter has shown that the community possessed considerable reserves of patience in the face of unsympathetic treatment by the government-business nexus. The public’s preference for polite and tolerant politics had its limits, nevertheless, and, even in the absence of universal suffrage, the people of Hong Kong were well able to hold political leaders to account when they forfeited public trust.

The most striking conclusion of this chapter is that the community does not judge the government and its merits by the social benefits which it provides. Income inequality does not provoke unrest, and the affluent do not arouse envy, however unfairly the workforce is rewarded for its sustained high productivity and its resilience. Incompetence is criticised but is not politically fatal. The real test for Chief Executives and their ministers turns out to be mostly about their ethics. As Tsang Yam-kuen confessed to the legislature, a lengthy period in high office can unfortunately blunt one’s sensitivity to the rules that society assumes apply to all. On this analysis, the real threat to the governability of Hong Kong starts with misconduct by those in power.

Notes:

(1) . Lu Ping, Hong Kong and Macao Office Director, New China News Agency, press release, 30 May 1996.

(2) . Yash Ghai, Hong Kong’s New Constitutional Order: The Resumption of Chinese Sovereignty and the Basic Law (Hong Kong: Hong Kong University Press, 1997), especially pp. 139, 270, 406–10, 465 and 468.

(3) . The Mainland’s pre-1997 view of ‘capitalist’ Hong Kong was recorded in the two-volume study, Hong Kong’s Economy, in the official Chinese research series on ‘The Return of Hong Kong’. The second volume is simply a directory of 109 of Hong Kong’s leading tycoons. Chen Duo and Cai Chimeng, Xianggang de Jingji Yi and Yin Chongjing and Cao Huanguang (eds.), Xianggang de Jingji Er (Beijing: Xinhua chubanshe, 1996). On the role of business in the pre-1997 political system, see Ambrose Yeo-chi King, ‘Administrative Absorption of Politics in Hong Kong: Emphasis on the Grass Roots Level’, in Ambrose Y. C. King and Rance P. L. Lee (eds.), Social Life and Development in Hong Kong (Hong Kong: Chinese University Press, 1981), pp. 129–30.

(p.80) (4) . The strength of these suspicions was illustrated by a national figure quoted as accusing the colonial administration of clandestine activities to disrupt Hong Kong’s political environment, to despoil its economy and to impoverish to public finances. Bao Xin, ‘Letter from Hong Kong’, Liaowang, 28 March 1994. See also Joseph Y. S. Cheng, ‘Towards the Establishment of a New Order’, in Beatrice Leung and Joseph Cheng (eds.), Hong Kong SAR: In Pursuit of Domestic and International Order (Hong Kong: Chinese University Press, 1997), pp. 293–4.

(5) . For example, Wen Wei Po, 4 March 1993; New China News Agency, 8 March 1994; Sammy W. S. Chiu, ‘Social Welfare’, in Nyaw Mee-kau and Li Si-ming (eds.), The Other Hong Kong Report 1996 (Hong Kong: Chinese University Press, 1996), p. 431.

(6) . Zhou Nan, New China News Agency Hong Kong Branch Director, speech at the Hong Kong Management Association annual fellowship dinner, Zhongguo Xinwen She, 16 November 1994.

(7) . The initial challenges which the national pension initiatives encountered were reported in Renmin Ribao, 14 June and 14 August 2000. On the leadership’s commitment to pension reforms, see Labour and Social Security Minister, Zhang Zuoji, Renmin Ribao, 22 June 2000, and former Prime Minister, Li Peng, New China News Agency, 25 August 2000.

(8) . Benny Tai Yiu-ting, ‘The Development of Constitutionalism in Hong Kong’, in Raymond Wacks (ed.), The New Legal Order in Hong Kong (Hong Kong: Hong Kong University Press, 1999), p. 73.

(9) . These ‘arrivals’ were ‘working in the Liaison Office . . . the Office of the Commissioner of the Ministry of Foreign Affairs . . . Chinese enterprises . . . set up in Hong Kong with the approval of the Mainland authorities’. Excluded were members of the People’s Liberation Army. Raymond Tam Chi-yuen, Secretary for Constitutional and Mainland Affairs, Hong Kong Hansard (HH hereafter), 18 January 2012, p. 4689.

(10) . See the complaints by Donald Tsang Yam-kuen, Chief Secretary, reported in Hong Kong Economic Journal, 13 November 2003.

(11) . Tung Chee Hwa was far more relaxed addressing business audiences than in discussing social issues. Compare, for example, his speeches recorded at GIS, 8 April 2000 and 1 June 2001 with those of 4 May and 4 August 2000 and 29 March 2001.

(12) . Lau Siu-kai, ‘Government and Political Change in the Hong Kong Special Administrative Region’, in James C. Hsiung (ed.), Hong Kong the Super Paradox: Life after Return to China (London: Macmillan, 2000), pp. 49–51.

(13) . His friendships were explained in Donald Tsang, Chief Executive, HH, 1 March 2012, pp. 6926, 6942, 6950, 6052.

(14) . Details of the controversy were recorded in Ming Pao Daily, 18 and 21 January 2013 and Hong Kong Economic Journal, 21 January 2013.

(15) . The government-business nexus, its origins and its operations, are discussed at length in Uneasy Partners: The Conflict Between Public Interest and Private Profit in Hong Kong (Hong Kong: Hong Kong University Press, 2009), second edition.

(p.81) (16) . An excellent analysis of the relationships is Tai-lok Lui, ‘How a Fragmented Business-Government Alliance Has Helped Change Hong Kong’s Political Order’, Hong Kong Journal, No. 10 (April 2008), pp. 1–9.

(17) . Over 100 had been appointed to statutory bodies and advisory committees regardless of experience or qualifications according to an editorial in Ming Pao Daily, 9 August 2010.

(18) . Data were published by Gary Cheung, South China Morning Post, 12 April 2010.

(19) . Tung, HH, 8 October 1998.

(20) . Dubravko Mihaljek et al., People’s Republic of China — Hong Kong Special Administrative Region: Recent Economic Developments (Washington: International Monetary Fund, 1998), pp. 60, 67.

(21) . GIS, 17 May and 3 August 2000.

(22) . GIS, 29 April 1999.

(23) . Editorial, Ming Pao Daily, 27 January 2005; John Tsang Chun-wah, Secretary for Commerce, Industry and Technology, GIS, 12 January 2006.

(24) . Trade and Industry Bureau, Government Response to Consumer Council’s Report Entitled “Competition Policy: The Key to Hong Kong’s Future Economic Success” (November 1997) and Economic Services Bureau, Legislative Council Panel on Economic Services. Development and Competitiveness of the Hong Kong Container Port (November 1998).

(25) . Gregory So Kam-leung, Secretary for Commerce and Economic Development, GIS, 10 December 2012.

(26) . A history of the protracted campaign to delay the competition legislation and the unconvincing case made by its opponents can be found in Leo F. Goodstadt, ‘Hong Kong — Business Friendly but Not Competitive’, Hong Kong Economic Journal (October 2011), pp. 72–6.

(27) . Communications and Technology Branch, Public Consultation Paper on 2004 Digital 21 Strategy (Hong Kong: CITB, 2003), pp. 1–4; OFTA, Report on the Effectiveness of Competition in Hong Kong’s Telecommunications Market: An International Comparison June 2003 (Hong Kong: Spectrum Strategy Consultants, 2003).

(28) . GIS, 25 October 2009; Norman T. L. Chan, Hong Kong Monetary Authority Chief Executive, Hong Kong Monetary Authority, 14 December 2009.

(29) . Professor Anthony Cheung Bing-leung, Secretary for Transport and Housing, GIS, 28 October 2012.

(30) . The developers’ grievances were well aired in the media. See, for example, Hong Kong Economic Times, 7 and 24 November 2012; Ming Pao Daily, 7 December 2012; Hong Kong Economic Daily, 19 November 2012.

(31) . Security Bureau, ‘Proposals to Implement Article 23 of the Basic Law. Consultation Document’ (Hong Kong, September 2002), p. 4.

(32) . Premier Wen Jiabao reported in Renmin Ribao, 30 June 2003.

(33) . The unhesitating business support was all the more striking because some prominent members of the professional elite argued that Hong Kong officials were to blame as they had mishandled the whole affair. See, for example, the comments of Yang Ti-lang, former Chief Justice and member (p.82) of Tung Chee Hwa’s first Executive Council, interviewed in Ming Pao Daily, 9 September 2003.

(34) . For examples of the financial support, see Vice-Premier Wen Jiabao, New China News Agency, 17 November 2000; Vice-President Zeng Qinghong quoted in Tony Chan, China Daily, 7 June 2004; Financial Times 21 May 2004; editorial, Ming Pao Daily, 12 May 2006.

(35) . Frederick Ma Si-hang, Secretary for Commerce and Economic Development, HH, 28 November 2007, p. 2219.

(36) . Some indirect assistance was made available through financial support and other schemes to assist mainly small and medium-sized enterprises, as the previous chapter explained.

(37) . Donald Tsang, Chief Executive, GIS, 12 November 2008.

(38) . Hong Kong Annual Report 1951 (Hong Kong: Government of Hong Kong, 1952), pp. 7, 9; Wenguang Shao, China, Britain and Businessmen: Political and Commercial Relations, 1949–57 (Basingstoke: Macmillan, 1991), p. 106; Frank M. Cain, ‘Exporting the Cold War: British Responses to the USA’s Establishment of COCOM, 1947–51’, Journal of Contemporary History, Vol. 29, No. 3 (July 1994), p. 515.

(39) . Sir Lesley Robinson (Board of Trade) quoted in (12) Appendix C, draft minutes of a meeting by the Financial Secretary (J. J. Cowperthwaite) and Board members with the Board of Trade in London on 16 August 1961. HKRS270–5-56 ‘Cotton Advisory Board. Minutes of Meeting’.

(40) . See, for example, Carrie Lam Cheng Yuet-ngor, Chief Secretary, GIS, 14 November 2012; John Tsang, Financial Secretary, GIS, 7 and 26 November 2012.

(41) . See Chris King-chi Chan, ‘Labour Policies under Hu-Wen’s Regime: Transformation and Challenges’ and Alvin Y. So, ‘New Labour Law and Its Implication for the Human Rights Regime in China’, in Joseph Y. S. Cheng (ed.), China: A New Stage of Development for an Emerging Superpower (Hong Kong: City University of Hong Kong Press, 2012).

(42) . Leung Chun-ying, Chief Executive, GIS, 29 November 2012.

(43) . This total was equivalent to RMB 10.72 trillion. ‘China’s local government debts exceed 10t yuan’, New China News Agency, 27 June 2011. The continuing scale of this daunting breakdown in central control at the lower levels of state administration can be judged from ‘China to further check local government financing’, New China News Agency, 31 December 2012.

(44) . Raymond Kwok, vice chairman of Sun Hung Kai Properties interviewed by Bruce Gilley, ‘Smooth Operator’, Far Eastern Economic Review, 25 May 2000.

(45) . On business opposition to political reform, see Sonny Shiu-Hing Lo, The Dynamics of Beijing-Hong Kong Relations: A Model for Taiwan? (Hong Kong: Hong Kong University Press, 2008), pp. 15, 75.

(46) . Tung, HH, 12 January 2005, p. 3262.

(48) . Academics grasped the significance of these issues at an early stage. For example, Byron S. J. Weng, ‘The Hong Kong Model of “One Country, Two Systems”: Promises and Problems’, in Peter Wesley-Smith and Albert Chen (eds.), The Basic Law and Hong Kong’s Future (Hong Kong: Butterworths, 1988), p. 81 (p.83) ; Lau Siu-kai, ‘Political Reform and Political Development in Hong Kong: Dilemmas and Choices’, in Y. C. Jao et al. (eds.), Hong Kong and 1997: Strategies for the Future (Hong Kong: Centre of Asian Studies, University of Hong Kong, 1985), pp. 30–1.

(49) . Regina Ip Lau Suk-yee, Secretary for Security, GIS, 23 August 2000.

(50) . Mrs Fan enjoyed the confidence of China’s leaders and had a long record of service at the highest levels of Hong Kong’s political system both before and after 1997. Wikileaks, ‘Former Legco President Discusses Hong Kong’s Political Challenges’, 8 December 2008. URL: cable/2008/12/08HONGKONG2213.html

(51) . The data are from ‘2011–12 Policy Address and 2012–13 Budget consultation sessions already conducted’, 30 August 2011. URL: www.policyad-dress.gov.hk/consultation/eng/sessions.html. See also, Leo F. Goodstadt, ‘Government and the People: Friends or Foes?’, Hong Kong Economic Journal Monthly, 10 December, 2011, pp. 50–3.

(52) . Jasper Tsang Yok-sing, Legislative Council President, ‘Can the LegCo-ExCo Relationship Be Improved?’, speech to Hong Kong Democratic Foundation, 5 February 2010. URL: www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=263

(53) . Stephen Lam Sui-lung, Chief Secretary, GIS, 3 October 2011.

(54) . The implications of this label in the context of Chinese Communist Party history were set out by Frank Ching, South China Morning Post, 30 January 2013.

(55) . Education Bureau, ‘Legislative Council Panel on Education. Monitoring of Direct Subsidy Scheme (DSS) Schools’ (CB(2)2073/08–09(01), June 2009), pp. 1–6.

(56) . Audit Commission, Report No. 55, ‘Chapter 1 Education Bureau: Administration of the Direct Subsidy Scheme’ (25 October 2010), pp. 16–20, 26–7, 33–6, 41–4, 48.

(57) . Dr York Chow Yat-Ngok, Secretary for Food and Health, HH, 27 January 2010, pp. 4706–8; 9 November 2011, pp. 1692–7.

(58) . Audit Commission, Report No. 59, ‘Chapter 3: Food and Health Bureau, Department of Health. Regulatory control of private hospitals’, (26 October 2012), pp. v, vi, 44–8; ‘Chapter 4: Food and Health Bureau, Department of Health, Lands Department. Land grants for private hospital development’, pp. v, vi, 5–7.

(59) . Eliza W. Y. Lee, ‘The Renegotiation of the Social Pact in Hong Kong: Economic Globalisation, Socio-economic Change, and Local Politics’, Journal of Social Policy, Vol. 34, Part 2 (April 2005), pp. 302–3.

(60) . These officials also supported greater importation of Mainland workers in direct conflict with their ally, the Federation of Trade Union, which was struggling to maintain credibility among the labour force. John P. Burns, ‘Civil Service Systems in Transition: Hong Kong, China and 1997’, in Ming K. Chan (ed.), The Challenge of Hong Kong’s Reintegration With China (Hong Kong: Hong Kong University Press, 1997), p. 40. In the event, the Federation faithfully followed the official line.

(p.84) (61) . Hong Kong Transition Project, ‘Parties, Policies and Political Reform in Hong Kong’ (Hong Kong Transition Project and National Democratic Institute for International Affairs, May 2006), pp. 46–7.

(62) . Donald Tsang, Chief Executive, HH, 12 October 2005, p. 24.

(63) . Donald Tsang, HH, 13 October 2010, p. 47. His predecessor also expressed concerns about social harmony though less colourfully.

(64) . Charles F. Emmons, Hong Kong Prepares for 1997: Politics and Emigration in 1997 (Hong Kong: Centre of Asian Studies, University of Hong Kong, 1988), pp. 12, 103.

(65) . Donald Tsang, Chief Secretary, GIS, 19 September 2003.

(66) . The data and conclusions presented here are based on the statistics and analysis presented in Anthony Bing-leung Cheung and Kin-sheun Louie, ‘Social Conflicts in Hong Kong: 1975–1986’, and Lau Siu-kai and Wan Po-san, ‘Social Conflicts in Hong Kong: 1987–1995’, in Lau Siu-kai (ed.), Social Development and Political Change in Hong Kong (Hong Kong: Chinese University Press, 2000).

(67) . Lai Tung-kwo, Secretary for Security, HH, 19 December 2012, ‘Annex’, p. 3861; 27 March 2013, ‘Annex: Figures on Arrest and Prosecution during Public Order Events from 2004 to the first two months of 2013’, pp. 7999–8002.

(68) . See the initial estimate of the strike’s costs to the work force and its impact on the port’s operations given by Matthew Cheung Kin-chung, Secretary for Labour and Welfare, HH, 8 May 2013.

(69) . Wu Xiaogang, ‘Hong Kong’s Post 80s Generation: Profiles and Predicaments. A CPU Commissioned Report’, Centre for Applied Social and Economic Research, Hong Kong University of Science and Technology (Central Policy Unit, May 2010), pp. 35–8.

(70) . This individual’s name was not disclosed by the official Mainland publication. ‘Full-scale Showdown’, China Daily, 2 February 2010.

(71) . Zhao Xiaobin et al., ‘Income Inequalities under Economic Restructuring in Hong Kong’, Asian Survey, Vol. 44, No. 3 (May–June, 2004), p. 443. For a careful analysis of the earlier data, see Hon-Kwong Lui, Income Inequality and Economic Development (Hong Kong: City University of Hong Kong Press, 1997), pp. 1–2, 6–7 and Chapter 3.

(72) . Economic Analysis Division, Half-Yearly Economic Report 2012 (Hong Kong: SAR Government, 2012), ‘Chart 1: Household income disparity of Hong Kong widened most appreciably during 1980s–90s’, p. 86; Renmin Ribao, 19 June 2003 and 20 July 2006; New China News Agency, 18 January 2013.

(73) . Economic Analysis Division, Half-Yearly Economic Report 2012, ‘Box 5.2: The Gini coefficient of Hong Kong: trends and interpretations’.

(74) . UN-Habitat, State of the World’s Cities 2008/2009 Harmonious Cities (London: Earthscan, 2008), p. 24.

(75) . Kui-Wai Li, The Hong Kong Economy: Recovery and Restructuring (Singapore: McGraw-Hill Education (Asia), 2006), ‘Table 1.4: The Gini Coefficients of Four Asian Economies’, p. 14.

(76) . See, for example, Henry Tang Ying-yen, Financial Secretary, HH, 8 February 2006, p. 4198.

(p.85) (77) . Sophie Leung Lau Yau-fun, HH, 29 October 2009, pp. 964–7.

(78) . Henry Tang, Financial Secretary, HH, 15 February 2006, p. 4498.

(79) . Donald Tsang, Chief Executive, HH, 12 January 2006, pp. 3880–1.

(80) . On the Mainland’s policy responses to growing inequality, see Renmin Ribao, 19 December 2005. A report of a ‘keynote speech’ by President Hu Jintao appeared to set 0.40 as the danger zone. New China News Agency, 15 October 2007.

(81) . New China News Agency, 18 January 2013.

(82) . Donald Tsang, Chief Executive, HH, 5 July 2007, p. 10167.

(83) . ‘The university degree enrolment rate of young people (aged 19 and 20) living in the top 10% richest families (48.2%) is now 3.7 times that of those living in poverty (13%), a much wider gap than 20 years ago (1.2 times)’. Professor Chou Kee-lee, ‘HKIEd Study: Disparity in Higher Education Attainment Is Widening between Rich and Poor’, Hong Kong Institute of Education (31 January 2013). URL: www.ied.edu.hk/media/news.php?id=20130131

(84) . Michael E. DeGolyer and Janet Lee Scott, ‘The Myth of Political Apathy in Hong Kong’, Annals, Volume 547 (September 1996), p. 69.

(85) . This feature of the political landscape was already very visible in the early 1990s. Leung Sai-wing, ‘The “China Factor” in the 1991 Legislative Council Election: The June 4th Incident and Anti-Communist China Syndrome’, in Lau Siu-kai and Louie Kin-sheun (eds.), Hong Kong Tried Democracy. The 1991 Elections in Hong Kong (Hong Kong: Hong Kong Institute of Asia-Pacific Studies, Chinese University of Hong Kong, 1993), p. 192.

(86) . GIS, 6 December 1999.

(87) . Hong Kong Transition Project, ‘Parties, Policies and Political Reform in Hong Kong’, ‘Table 58: Would you support or oppose the SAR Government to adopt the following policies? FEB Ranked by combined support level’, p. 47; ‘Table 59: Which of these areas of government expenditure would you cut or increase spending on? FEB Ranked by Combined Increase’, pp. 48–9.

(88) . Hong Kong Transition Project, ‘Calm after the Storm? Hong Kong People Respond to Reform’, ‘Chart/Table 19 Does government make policies fairly by income?’, p. 24; ‘Will reforms make government policies fairer by income?’, p. 25.

(89) . Hong Kong Institute of Asia-Pacific Studies in cooperation with the Hong Kong Professionals and Senior Executives Association, ‘Disparity of Wealth Research Project Findings’, 1 December 2011.

(90) . Hong Kong Transition Project, Winter of Despair. Confidence and Legitimacy in Crisis in the Hong Kong SAR (December 2001) (Hong Kong: Hong Kong Baptist University, 2002), pp. 19, 26, 27.

(91) . Hong Kong Transition Project, ‘Calm after the Storm? Hong Kong People Respond to Reform’, ‘Chart/Table 1 Do you think government currently makes policies in general fairly, helping or hurting all parties equally, or unfairly, favoring the interests of some over others?’, p. 14.

(92) . Hong Kong Institute of Asia-Pacific Studies, ‘Summary of survey of Hong Kong people’s views on “real estate hegemony”’, 10 August 2011.

(93) . Tung, HH, 12 January 2005, p. 3263.

(p.86) (94) . Donald Tsang, Chief Executive, ‘Hong Kong Dream’ interview, Renmin Ribao, 1 July 2005.

(95) . Donald Tsang, Chief Executive, HH, 15 October 2008, p. 56.

(96) . Donald Tsang, Chief Executive, HH, 1 March 2012, pp. 6926–7, 6929.

(97) . A notable example was a formal speech on the declining fortunes of the lower-income groups since 1997. The prepared text pointed no fingers at members of the government. But when Leung departed from his prepared script, he denounced the failure under the first two Chief Executives to match the performance of the last decade of colonial rule. He left it to the media representatives present to report his biting observations. Leung Chun-ying, ‘The Real Hong Kong and the Real Politics’, speech to the Hong Kong Democratic Foundation (24 September 2009). URL: www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=238; ‘Exco Chief Says City’s Development Has Slowed’, South China Morning Post, 25 September 2009.

(98) . Tsang dismissed Leung’s criticism as an attempt to curry favour with the community. Donald Tsang, Chief Executive, HH, 15 July 2011, pp. 14689–90.

(99) . Leung Chun-ying, Chief Executive, GIS, 23, 24 and 26 November 2012.

(100) . The original allegations were published in 劉夢雄的反梁“反向揭露 (‘Lew Mon-hung’s anti-Leung “reverse exposé”’), (湘潭縣益盛事務 周刊) (iSun Affairs Weekly), 24 January, 2013, 26–35. Reactions and implications were summarised in Ming Pao Daily, 25 January 2013. For the Chief Executive’s threat of legal action in response to these allegations, see Hong Kong Economic Journal, 8 February 2013.