- The city that has already witnessed two major power transfers in the past 50 years is going through its third, as mainland companies become more influential than the local business elite. However the unrest ends, a wave of migration is expected to hit
The protests in Hong Kong against the extradition bill have evolved into an unstoppable anti-government movement. There is no sign that any of the stakeholders " China, Chief Executive Carrie Lam Cheng Yuet-ngor or the protesters " will back down.
Hong Kong is again at a crossroads. Since politics and economics are codependent, when there is political turmoil, we can expect capital to be relocated.
Over the past 50 years, as Hongkongers worked hard to transform their home into an international financial centre, there have been two major power and capital transfers. It seems to many that a third one is happening.
The first transfer took place after the 1967 leftist riots, when enterprising local businessmen rose to power. The traditional tycoon class at the time feared that the Chinese Communist Party would take back the city by force. They lost confidence in Hong Kong's economy and took their capital elsewhere. Some even emigrated.
This gave adventurous local property developers the opportunity to acquire farmland at low prices. It coincided with the colonial government's move away from a laissez-faire strategy to reform housing, education, health care and social welfare. The government's high land price policy provided developers with a golden opportunity to make a fortune, laying the foundation for their multibillion-dollar real estate kingdoms today.
The second power transfer happened when local corporations overtook the British. Amid the uncertainty in the run-up to the handover, the drafting and signing of the Sino-British Joint Declaration signalled the end of an era for major British corporations such as Jardine Matheson, Wheelock Marden, Swire and Hutchison.
In 1979, HSBC, which owned a 22 per cent stake in Hutchison, sold its shares to Li Ka-shing's Cheung Kong. This was a milestone in Li's career. Meanwhile, Pao Yue-kong, whose shipping business was diminishing, first acquired the Hong Kong and Kowloon Wharf and Godown Company, then Wheelock Marden, laying a solid foundation for Peter Woo Kwong-ching's The Wharf today.
Jardines, though still headquartered in Hong Kong, is now a "diversified Asian-based group", according to its website, a conglomerate incorporated in Bermuda with a primary listing in London and secondary listings in Singapore and Bermuda. Swire remains in Hong Kong, but some shares of its main subsidiary Cathay Pacific were sold to Air China. British corporations no longer ruled Hong Kong's business world.
Moreover, during this period, particularly after the Tiananmen Square crackdown in 1989, many of Hong Kong's elites and middle class fled the city.
Today, 22 years after Hong Kong's return to Chinese sovereignty, mainland capital flowing into Hong Kong has made the Communist Party more powerful. "One country" is prioritised over "two systems" and Hong Kong is losing the "high degree of autonomy" it was promised would be unchanged for 50 years.
The truth is that the third power and capital transfer started a few years ago. This time, it is mainland Chinese who are taking over from local corporations. This is reflected in the make-up of the Hang Seng Index, which is dominated by mainland-owned corporations.
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A lot of Hong Kong people see this as the end of the city's economy. Some believe iconic companies such as Cathay Pacific and HSBC will, sooner or later, be controlled by mainland investors. With its 7 per cent stake in HSBC, for instance, Ping An Insurance has already overtaken BlackRock to become the bank's largest shareholder.
Strategic industries like finance, shipping, public services, and media and communications, will be especially vulnerable to mainland acquisition.
Local conglomerates will not only need to collaborate with mainland companies, they must also toe Beijing's line. It was not surprising, for instance, to see local business leaders taking out newspaper ads calling for an end to the current protests.
Another wave of migration has hit Hong Kong. No matter how the current mess ends, the tens of thousands of Hongkongers who hold other passports, including from Britain, the US, Canada, Portugal and even Malaysia, are now looking to leave Hong Kong. Then, the city would be taken over by mainlanders.
Like it or not, this is doomed to happen.
Albert Cheng King-hon is a political commentator. He recently moved back to Vancouver, Canada, where he first emigrated to in the 1960s. taipan@albertcheng.hk
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