[财经英语角区] Hong Kong’s Hollow Leadership [推广有奖]

Hong Kong Chief Executive Leung Chun-ying has been dogged by scandal fromhis first days in office, and his personal integrity is routinely impugned by much of the public. So it is nosurprise that his popularity is plummeting.
Leung has only himself to blame. He seems incapable ofconnecting with ordinary Hong Kong citizens, instead coming across as a shifty politician whooften dodges directquestions, offers vague answers, and evades responsibility for major failingsby apologizing for minor shortcomings.
Leung stakedhis reputation on being able to tame Hong Kong’s absurdly inflated property market, and hasfailed miserably. Indeed, Hong Kong is now the most expensive city on theplanet. It takes at least 13.5 years of mean household income to buy an averageflat, according to onerecent international survey. The comparable figure for London and New Yorkis 7.8 years and 6.2 years, respectively.
Rising property prices are making middle-class flat ownersmultimillionaires, while their children – even with a good university degree –can hardly afford private housing without parental help. Leung has advocatedthat young people leave Hong Kong to work in less expensive countries.
Leung came into his job with a self-destructive attitude.Like his mentor, Tung Chee-hwa, Hong Kong’s first chief executive after itsreturn to China, Leung harborsa deep antipathytoward the British and the professional civil service, a legacy of colonialism. He adheresto the Maoist idea that a country consists of “the people” and “enemies” (nevermind that he was the youngest and first Chinese partner in a Britishproperty-surveyor firm in Hong Kong, and that Tung studied nautical engineering inthe United Kingdom).
But treating the civil service as a potential enemy wasclearly stupid, as only the civilservants know how the government actually works. Neither Tung nor Leunghad any operational government experience, which was most clearly demonstratedin their indifferent attitude toward public appointments. The anti-corruptionpolice arrested Mak Chai-kwong, Leung’s first Secretary of Development, only 12days after he was appointed. His successor, Paul Chan Mo-po, was soonexposed as a one-time owner of slum housing.
The information that undermined both officials had beenburied deep in official documents, and could have surfaced only becausesomeone, or some group, in the civil service with access decided that it wouldbe best to leak it. In Tung’s administration, two cabinet secretaries also hadto quit following damaging disclosures. With a couple of notable exceptions,the mediocrity ofmost of Leung’s appointees elicited sighs even from his political allies.
The same incompetence is at the root of his failure todeflate the property bubble. While he has announced grandiose plans to increase the futuresupply of land for development, and has hiked the stamp duty twice, the market has figured out thathe does not understand that he needs to manage expectations by removingobstacles in the current development pipeline. His measures have increasedprices while shrinking the number of transactions – precisely the opposite ofwhat is needed.
One major roadblock that Leung fails to appreciate is caused by an obscure1981 UK Privy Council ruling, Hang Wah Chong Investment Co. Ltd v. AttorneyGeneral of Hong Kong, which gave the government unlimited authority tobehave as a revenue-maximizing private monopolist. Thus empowered, the civilservice has been behaving without regard to the public interest, as delaysshrink supply while boosting prices. A substantial amount of floor space wouldhave been available already if government authority were exercised responsibly.
Yet the same law could allow the Chief Executive toinstruct the civil service to act to minimize social damage. Maximizing publicrevenue is not always consistent with the goal of social and economicstability. After all, Hong Kong is facing a clear and present danger that theproperty bubble will end in tears for many.
Dissatisfaction with this state of affairs is not confinedto the powerless. Victor Li Tzar-kuoi, the son of Hong Kong’s most powerfulproperty baron, LiKa-shing, astonished the public recently, saying in court testimony that it wasa “painful experience” to deal with the government’s imperious Urban Renewal Authority.
Another roadblock is the Hong Kong dollar’s exchange-ratepeg to the US dollar under the antiquated currency-board arrangement, a colonial relic stillused by Gibraltar, the Falklands Islands, and St. Helena (territories with acombined population of roughly 40,000). Under this system, the Federal Reservein Washington, DC, sets Hong Kong’s interest rates and money supply.
The mantra since the handover to China in 1997 has beenthat this system has served Hong Kong well. But the high rate of assetinflation in Hong Kong is due partly to an undervalued currency, set atHKD7.8:$1 since 1983 (though allowed to trade within a narrow band between 7.75and 7.85 since 2005). Market forces have set the real effective exchange rateby jacking up assetprices.
Hong Kong, a trading economy par excellence, thrives on marketforces. Yet its policymakers remain frozen on the issue of the exchange rate. The betting in HongKong today is that, unless Leung can somehow reboot his administration, he islikely to follow Tung in leaving office before his term expires.