Hong Kong: shifting gravity, rattled identity

Arvinder Tiwana  By Arvinder Tiwana, Senior Engagement Manager at GES

The world’s eyes have recently been on the mainly peaceful student protest in Hong Kong, which is now continuing into its third week. Students and supporters have been gathering in the tens of thousands every day and night, bringing major parts of the region to a standstill. I relocated to Hong Kong two years ago, and have been on the streets to follow the demonstrations first-hand.

This so-called Umbrella Revolution has put Hong Kong’s relationship with China on the front pages of the international media. But neither the students, their parents nor their grandparents have ever lived in a real democracy, so why are they protesting now? Could it be that Hong Kong is going through an identity crisis, where its role and position in the world is being questioned?

Hong Kong, a special administrative region of China, was once a crucial gateway for trade, investment, and capital-raising for the mainland. But China’s economy is now less dependent on Hong Kong than ever before. If one would calculate Hong Kong’s GDP as part of China’s GDP it would show that the former’s share of the latter has dropped from around 16 to around 3 per cent in the last 17 years. In the same period, Hong Kong -originated goods’ share of China’s total imports fell from around 51 to 17 per cent, while of Hong Kong’s total exports the proportion which was destined for China grew from around 30 to around 52 per cent. So it would appear that Hong Kong has lost some of its relative economic importance to China while at the same time becoming more dependent on it. The luxury retail business in Hong Kong is a prime example: it used to predominately cater to foreign customers, but now most of the revenue is generated around Chinese national holidays.

One thing that has not yet changed is Hong Kong’s role as the gateway to China. Nearly every foreign company considering its first FDI in the mainland would start out in Hong Kong. The business and legal environment is welcoming to foreign companies, while China can be a legal nightmare. Now, however, China is trying to change this situation by creating the Shanghai free trade zone (FTZ). It opened in 2013 as a pilot project to start liberalising trade, easing rules for investment, streamlining administration and restructuring the Chinese financial system in line with international standards. The project has had a slow start, but the Chinese intentions have nonetheless been noticed in Hong Kong. If or when the Shanghai FTZ becomes a success, it might become a significant competitor to Hong Kong’s position as the gateway to China. The number of expats in Shanghai is around six times higher than in Hong Kong, while the living expenses in the former are 30 per cent lower. It would not be unimaginable that Shanghai would be able to attract FDIs that would normally go to Hong Kong once the FTZ has proven it works.

Every now and then the cultural differences between the citizens in Hong Kong and China blow up. In Hong Kong the Chinese are sometimes seen as the uncivilised and loud cousins, while the Chinese sometimes view the Hong Kongese as their spoiled and ungrateful relatives. The derogative term “locust” is sometimes used on social media in reference to the mainland Chinese people in Hong Kong, and YouTube videos showing Chinese people behaving “inappropriately” in the special administrative region’s public transport or public places periodically flare up tensions. The people of Hong Kong feel that even if the British colonial era had racial and social injustice, at least it was also the source of many of the city’s defining advantages, including common law, a global outlook and media freedom. Now, middle-class Hong Kong people are struggling to keep up with living and rent costs as wealthy Chinese buyers are behind 30 per cent of all property deals in the region. The students could well be wondering what their prospects look like by the time they graduate.

It is difficult to say if there are underlying reasons for these protests other than a simple desire for democracy. But one cannot ignore that the status of Hong Kong has changed significantly in the last 17 years. What’s more, the role that it is going to play in the future is being challenged by China. Maybe the student protest is the first step in the country’s long walk toward independence and the right to determine its own future. An old Chinese proverb says: “May you live in interesting times”. It is indeed interesting times in Hong Kong.

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