‘Mirror image’: Hong Kong’s wealthy are bracing for a dose of Chinese socialism

Buildings are seen above Hong Kong and Chinese flags, as pro-China supporters celebration after China’s parliament passes national security law for Hong Kong, in Hong Kong, China June 30, 2020. Source: REUTERS/Tyrone Siu

Hong Kong’s wealthy are bracing for a dose of Chinese socialism. Beijing is changing the city’s electoral system and side-lining the local business elite. That might clear the way for a new pro-China party to attack economic inequality at tycoons’ expense.

Advocates of the political model in the People’s Republic argue that authoritarianism does a better job producing growth than many democracies, especially in developing economies. That’s partly true. Checks and balances can hamper needed infrastructure investments and slow responses to emergencies.

But Hong Kong is not emerging from poverty; it is a mature financial centre and one of the world’s most unequal societies. Its Gini coefficient – a ratio measuring distribution of wealth where zero is perfect equality and one is perfect inequality – stood at 0.54 in 2017. In 2018 Oxfam calculated that the city’s top 21 richest people held assets more valuable than the government’s HK$1.8 trillion ($230 billion) fiscal reserves. A handful of private conglomerates dominate nearly every aspect of economic life.

To many in mainland China, the roots of the 2019 protest movement across the border lie in the middle classes’ declining standard of living, which has been squeezed by high prices, especially for property. Having crushed the demonstrations and arrested pro-democracy politicians, Beijing now, in theory, has its hands free to implement policies that reallocate wealth; the proposed electoral changes not only exclude its critics, but also dilute the power of the traditional tycoon lobby. Leading that charge might be the new Bauhinia Party, established by mainland immigrants, which highlighted inequality as an issue in its opening statement.

The problem is that the Chinese Communist Party is better at nationalism than redistribution. China’s Gini coefficient, at 0.46, isn’t much better than Hong Kong’s, and almost certainly underestimated. Nor has Beijing found a formula for pulling down property prices. Bauhinia Party founders are finance executives with stints at Credit Suisse and Goldman Sachs.

The world will watch closely to see if Beijing’s top-down approach rights imbalances in the Asian financial hub. If it does not, that will dent its credibility elsewhere.