Editorial: HK economy is heading towards dead end | Apple Daily HK

Published (HKT): 2020.10.19 10:34

by Lo Fung

Shenzhen Special Economic Zone has been established for 40 years and the CCP leader Xi Jinping has made a big show for it. From presenting flowers in front of the statue of Deng Xiaoping, the chief designer of reform and open up, to inspecting everywhere and “making small talks” with the local to show how close he is with them; on top of that, he also made a lengthy speech praising how great of an achievement Shenzhen has made under the leadership of the CCP, how Shenzhen will become the engine of Great Bay area development and continue to be the top troops of China’s economy...in short, Xi was using the 40th-anniversary celebration to emphasize Shenzhen’s experience and sculpt Shenzhen as the prime example of Great Bay area. Meanwhile, Hong Kong, the original leader and center of Pearl River Delta, was getting the cold shoulder. Having especially postponed her annual policy address so to make it to the party, Carrie Lam was given the seat at the far side of the stage in fear of COVID-19 infection. She has made all this effort to take part but did not even get to sit near Xi, which was embarrassing but what can I say? She fully deserved it.

Xi’s lifting Shenzhen up and putting Hong Kong down was of course intentional, not just for the 40th-anniversary celebration, but he also wanted to re-write the story of economic development in the past decades to highlight the importance and superiority of CCP leadership.

After WWII, Hong Kong’s economy developed at great speed and within years, it has from one of the entrepôts of the Pacific Coast and become an international business, finance and transport center and was called “Pearl of the Orient” by the international society. A lot of foreign enterprises set up regional or global headquarters in Hong Kong, hundreds of thousands of talent and elite professionals of different nationalities called Hong Kong their home; the amount of funds domestically and abroad had made Hong Kong a cosmopolitan city akin to New York and London. All these were due to the hard works of generations of Hongkongers, supported by the institutional capital established during the British rule: the rule of law, free economic system, free movement of IT talent capital etc. Hong Kong’s success obviously has nothing to do with the CCP. Worse still, it had nearly ruined Hong Kong’s economy when agents of the CCP in Hong Kong instigated the riot during the Cultural Revolution in the 60s of the last century.

On the other hand, Shenzhen was a sample city carefully planned by the CCP. It has from the beginning all the privileges: it got special policies when needed; foreign, Hong Kong and Taiwan investors were allowed to operate and move around in Shenzhen; it has even been constantly expanding and from a small town at the edge of Guangdong province, Shenzhen has now become a super big city with over 10 million population. The CCP has put in a huge effort, funds and human resources to make Shenzhen overtaking traditional big Chinese cities like Guangzhou within dozens of years and has a total GDP higher than Hong Kong to become the number one economy. In other words, the CCP can take credit for Shenzhen’s so-called economic miracle, as it is the result of the no expense spared nurturing from the political core such as Deng Xiaoping and Jiang Zemin.

Xi Jinping is at the moment focusing on showing off how forever mighty and correct he and the CCP is, so of course he would make the most of Shenzhen and play down Hong Kong’s position and importance, so that he could display to the country and the world that the East is winning against the West, and China is surpassing universal values and system.

However, Shenzhen’s “miracle” has not established any institutional advantage. It is still relying on preferential policy with those in power in Beijing making a disproportionately huge investment; it is still relying on taking all the talents and funds from other parts of the country. Shenzhen’s economic development model which relies on putting in excess production factors to “induce birth” is impossible to maintain in the long run, and will quickly fall into the difficulty of capital efficiency and returns dropping lower and lower and even becoming deficit. Moreover, the worsening relations between Beijing and the whole of the western camp is causing the U.S. and Europe to become increasingly defensive towards Chinese innovation and technology companies, and even consider sanctioning. So whether Shenzhen can still attract talents, capital and skill from abroad is the big question. When both internal and external developments reach the bottleneck, Shenzhen’s “miracle” can at any time lose its shine like the tiger cub economies (Thailand, Indonesia) during the 90s of the last century, and even get into a huge crisis.

Unfortunately, the useless government officials under Carrie Lam believe Hong Kong’s future development should follow Shenzhen’s model; they think falling headfirst into China’s economic internal circulation is the way to go. Carrie Lam was trained during the time of British rule but recklessly gave up the free economy that allows different enterprises to spread their wings, and instead actively went to Beijing to beg for preferential policy; she left the page of future development plan blank to be filled in by Beijing Central Committee officials, and even postponed the policy address indefinitely. Her lacking ambition not only causes the officials from the central and local governments looking down on her, thinking Hong Kong, just like the mainland cities, has to rely on policy and not its own competitiveness and abilities, but she also sends out the wrong signal to the local industries and enterprises that everyone should give up working independently but ask the mainland officials for special advantages and policies instead. It won’t be long before the competitiveness, flexibility and independent spirit we gained from years of training within the free economic system quickly disappear, and Hong Kong would become the shameless son who sits and waits for the special treatment.

Furthermore, Lam and her officials have turned into wolf warriors and are hostile towards international enterprises and society, which have always been the lifeline of Hong Kong’s economy. This made Hong Kong turning from the international darling to the “orphan of Asia” and losing its attractiveness. As a result, Hong Kong would face many difficulties when trying to develop a new market or business opportunities. It is hard to predict how Shenzhen’s economy can go from here, but with both external and internal problems, the economic miracle Hong Kong built up since WWII is gradually heading towards a dead end.

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