Hong Kong approaches 2016 facing most of the same issues that preoccupied it in 2015. There is a looming conjuncture of global and domestic circumstances that suggests 2016 is likely to be as gloomy and ill-tempered as last year, if not more so.

Economic concerns will almost certainly weigh more heavily in 2016 as Hong Kong’s GDP growth declines in the wake of slower demand from mainland China. Housing prices, a major concern for Hong Kong people, remain high following the pernicious effects of quantitative easing. Owning property has long been a form of security to compensate for the inadequacies of the state pension system. But with property prices more than doubling since 2008 the prospect of owning a home has vanished for most people.

Photo: AFP/Kazuhiro Nogi.

The economic backdrop has lent a bitter edge to domestic issues. The government shows no sign of changing its parsimonious policies towards the elderly and the poor while lavishing vast sums on unwanted but politically-motivated infrastructure projects like the HK$85 billion billion high speed railway to Guangzhou and the Hong Kong-Zuhai-Macau bridge, which will cost at least as much. The main problem for Financial Secretary John Tsang when he comes to present his budget at the end of next month will be how to hide Hong Kong’s embarrassment of riches. Accounting firm PwC is forecasting a budget surplus of HK$95.5 billion compared with the government’s initial forecast of HK$36.5 billion.

Artificial Island for HKBCF. Photo: Wikicommons.

But for all its riches, Hong Kong people are disenchanted with its government and in particular with the Chief Executive CY Leung, who is seen as too willing to acquiesce in Beijing’s wishes, resulting in the erosion of Hong Kong’s ‘high degree of autonomy,’ granted under the Sino-British Declaration and its “one country two systems” formula. Rather than acting as a leader, ensuring that Hong Kong’s autonomy is maintained and that mainland authorities don’t interfere unduly in Hong Kong’s affairs, he is seen as someone who is actively facilitating the increasing ‘mainlandisation’ of Hong Kong.

CY Leung puppet at the July 1st march

So when the mainland authorities make speeches and comments that are clearly in breach of the Basic Law, Leung’s response generally is to defend the officials, despite the concern their remarks cause in Hong Kong . The State Council’s notorious ‘white paper” published in June 2014 was greeted with dismay even by pro-Beijing supporters and members of the Hong Kong government. But Leung’s response was that it would “help both local and international communities to better understand the “one country, two systems” policy.” It will be recalled this was the paper which said that judges should be ‘patriots’ and described them as no more than government administrators or officials charged with upholding national security.

A month or so later Zhang Xiaoming, the head of the central government’s liaison office in Hong Kong, talked about the chief executive being ‘above the law’ and said that the idea of the separation of powers didn’t really apply in Hong Kong. Leung said nothing to counter this and it was left to the chief justice Geoffrey Ma to point out that nobody was above the law in Hong Kong. Leung couldn’t even bring himself to support Hong Kong publicly when it played mainland China at football in November last year.

Photo: HKFP/Stand News.

Unsurprisingly this exacerbates the desire on the part of Hong Kong people for universal suffrage so that they can elect a leader whom they feel has their interests at heart, rather than that of the Beijing government. But the present arrangements exclude that possibility and Hong Kong will get another pro-Beijing chief executive in 2017. This could possibly be CY Leung, though the Beijing authorities may take the view that his deep unpopularity is more of a hindrance than a help in administering Hong Kong.

In contrast to the honeymoon years following the handover when Beijing adopted a hands-off approach to Hong Kong, the central government is now regarded with suspicion and seen as a threat to Hong Kong’s way of life. Mainland business concerns have already taken over large swathes of Hong Kong’s business and economic interests by moving in on key sectors such as real estate, finance, power, construction and the stock market. A number of key professional organisations are also now controlled by people sympathetic to Beijing. Clearly one of Beijing’s strategies is to swamp Hong Kong with people from the mainland. Hong Kong’s press has become less vocal and more wary of articles critical of the mainland.

CY Leung has advanced the process of mainlandisation by appointing mainland businessmen to government advisory bodies where previously these positions would have been filled by pro-government Hong Kong businessmen.

The Beijing authorities, acting via the Liaison Office in Hong Kong, appear intent on reining in elements they disapprove of. Chief among these is the education sector. In 2012 parents protested against efforts to introduce a ‘national education curriculum,’ on the grounds that it would involve ‘brainwashing’ their children. The unsavoury events at the University of Hong Kong in recent months surrounding the blocking of Johannes Chan’s appointment as pro vice-chancellor, despite being the unanimous choice of the university ’s search committee clearly involved political interference. Together with the appointment of Arthur Li as the chairman of the university governing council, the clear aim is to curb academic freedom. Academics will be under no illusions as to what to expect if they stray too far off-message in their teaching.  Other institutions and aspects of life in Hong Kong have come increasingly under threat.

Photo: StandNews.

People are quick to rebut the blatant attempts by mainland officials to chip away at Hong Kong’s freedoms – at the moment, at least. But a visit from one of the mainland’s national security agencies can have a chilling effect, especially if accompanied by photographic evidence of indiscreet behavior. The case of the missing booksellers who appear to have been illegally taken to the mainland and detained sends a stark warning to others: “Just because you are in Hong Kong does not mean you are protected from extra-judicial activity by the security services.” This is a blatant transgression of the principles of one country two systems and an example of why it was introduced in the first place. During Occupy Reuters uncovered an operation organised by mainland security agencies which involved paying retired Hong Kong policemen to spy on pan-democrat politicians in the hope of digging up dirt on their private lives.

The heightened activity of the mainland security services during the Occupy protest has introduced an insidious element to life in Hong Kong. When people speak out against the mainland or sell books critical of the mainland they now need to consider what the consequences may be for themselves and their families. Clearly if they are in a position to influence youth or visiting mainlanders, or write or say things which the mainland authorities disapprove of they need to be wary of physical attack by hired thugs, as in the case of Ming Pao journalist Kevin Lau. They also need to be careful that there is nothing in their private lives that can be used by security agents to compromise or silence them, particularly extra-marital activity.

Photo: HKFP.

In many ways 2015 was a milestone year when people began to get a sense of what the future under China entails. It is clear that in 2016 China will continue to tighten the screws on Hong Kong. No relatively liberal society takes kindly to being refashioned by an authoritarian state. It’s not unlike trying to push the toothpaste back into the tube.

The question remains how will Hong Kong people respond to this erosion of their way of life and institutions. There is likely to be resistance but over time this will be stifled by a regime that has had years of practice at this.

One key question is: At what point will the changes under way in the city begin to impact on Hong Kong’s appeal as a business hub and financial centre? Hong Kong Inc. currently remains open for business. It is not politically unstable, the rule of law remains in place, there is a high degree of freedom of expression at present and it remains a good place to maintain a regional business headquarters. Hong Kong stands out from all other mainland cities for these characteristics. However Hong Kong’s value to the mainland has diminished. It now accounts for about two per cent of its GDP compared to 18 per cent in 1997. Hong Kong still has its uses. Its capital markets, for example, are important while the mainland maintains capital controls and the mainland can use the city for financial experiments like the Hong Kong Shanghai connect.

Photo: Stand News.

History shows that business, so long as it is able to continue making profits, is unlikely to be unduly perturbed by the prospect of working in a somewhat less liberal environment. The 40,000 or so foreign regional headquarters are unlikely to depart Hong Kong because the mainland illegally bundles a handful of booksellers across the border. But if they start doing it to big business figures or foreign businessmen then the overseas business community may start to feel uneasy. Business was unimpressed when the Big Four accounting firms were pressured into taking out advertisements against the Occupy protest.

Should the going get tough, business and its foreign employees can up and leave for more agreeable places. Let’s be clear: for most of the expatriates, the tycoons and the rich professionals, Hong Kong is a good place to make money and to keep it, given the relatively light taxation regime.

We are unlikely to see a sudden unravelling of the Hong Kong success story, though we may well be witnessing the start of its slow death.

Howard Winn

Howard Winn has been a journalist for more than 25 years working mostly in Asia. He was until recently Lai See columnist for the South China Morning Post, a column that focused on the lighter side of business and more. He was previously Deputy Editor and Business Editor of the Hong Kong Standard. His work has been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. His latest work can be found at