ECONOMICS Bloomberg Businessweek August 26, 201928
PHOTOGRAPHS: TGP/GETTY IMAGES. JUSTIN CHIN/BLOOMBERG; DATA: GERMAN FEDERAL STATISTICS OFFICE, EUROSTATleased from the government, an arrangement
that guaranteed a steady flow of revenue into state
coffers. The system, which endured after the han-
dover to China in 1997, constrained the supply of res-
idential and commercial real estate, enriching a few
well-connected local families such as the Lis.
Hong Kong’s tycoons leveraged their money and
connections to expand into such sectors as tele-
communications, hotels, logistics, and retailing.
They invested in projects across the border, win-
ning the trust of leaders in Beijing and gaining perks
such as seats on government bodies including the
1,194-member election committee that selected Lam
to lead the Hong Kong government in 2017.
Consensus is building across the political spec-
trum that the cozy relationship between property
developers and Hong Kong’s rulers constitutes a
threat to stability. Ever-rising real estate prices
have widened the divide between the haves and
have-nots, supplying additional fuel for the unrest,
says David Dodwell, executive director of the Hong
Kong-APEC Trade Policy Study Group, a local think
tank. “The pressure is on the property barons,”
he says. “Because housing is such a critical social
issue now and emotionally distills the crisis, they
are going to be in the firing line in a way that other
sectors are not.”
For Lam, shifting attention from her failed
extradition bill toward economic reforms is an
attractive option, according to one of her advis-
ers. Her administration is working on proposals
to address basic problems that previous govern-
ments have long neglected, says the adviser, who
asked to remain anonymous because the discus-
sions are confidential.
Some developers have amassed large property
holdings that they’ve yet to develop, exacerbating
the housing crunch. Henderson Land Development
Co. controls more than 45 million square feet of agri-
cultural land, an area slightly larger than New York
City’s Central Park, while Sun Hung Kai has an addi-
tional 31 million square feet. All this acreage could
support tens of thousands of new homes, helping to
bring down prices across much of the city.
To spur construction of apartments, politicians
say Lam should resort to a rarely used resumption
law (akin to eminent domain) that allows the govern-
ment to take back land and put it to public use. “The
government has to explore every means to increase
land supply,” says Starry Lee, chairwoman of the
Democratic Alliance for the Betterment and Progress
of Hong Kong, the city’s largest pro-Beijing party.
“If they cannot engage in a healthy dialogue with
the tycoons, then the government should resume
the land.”THE BOTTOM LINE To ease Hong Kong’s housing crunch, the
government could take back land from property tycoons to build
more apartments, but it risks alienating a loyal constituency.Local property developers aren’t the only
companies that could be affected. Hong Kong
Disneyland, a venture between Walt Disney Co.
and the local government, has an option for an addi-
tional 6.5 million square feet near the theme park,
whose attendance projections have fallen short since
doors opened in 2005. The lot set aside for an expan-
sion of the park has been sitting vacant for years. It’s
time for the government to take it back and develop
it for public housing, Lee says.
Many of Hong Kong’s conglomerates are bet-
ter positioned than in the past to withstand chal-
lenges at home. CK Hutchison last year got 15%
of its revenue and just 2% of its net income from
Hong Kong, down from 21% of revenue and about
5% of profit in 2015. More than half of the group’s
revenue and earnings comes from Europe, where
its business units operate trains, telecommunica-
tions networks, and utilities. On Aug. 19, CK Asset
Holdings agreed to pay £2.7 billion ($3.3 billion) for
British pub, restaurant, and hotel operator Greene
King Plc.
Hong Kong’s superwealthy also have practice
navigating policy turbulence. After years of debate,
the city finally enacted a competition law in 2015, but
opposition from business led lawmakers to water
down the legislation before approving it, says Sandra
Marco Colino, an associate professor at the law
school of the Chinese University of Hong Kong. In
the almost four years the statute has been in effect,
the government has initiated only four cases.
The scope for meaningful change may be limited
by the political reality that Lam can’t afford to alien-
ate a powerful constituency when millions of Hong
Kong residents are calling for her resignation. “I still
think the government is pretty conservative when it
comes to policymaking,” says Tommy Wu, a senior
economist in Hong Kong with Oxford Economics,
who discounts the likelihood of major reform from
Lam’s administration. “To me, it looks like they are
tinkering on the margins.”
On the other hand, Lam’s taking on the tycoons
may ensure that she retains the support of China’s
top leadership, which views rising income inequal-
ity as potentially destabilizing not only to Hong Kong
but also to the mainland. “President Xi Jinping has
said houses are for living in, not for speculation,”
says Andrew Wan, a member of the legislature from
the Democratic Party, which has called on Lam to
step down. “Tackling Hong Kong developers would
be in line with his views.” —Bruce Einhorn, Shawna
Kwan, and Shirley Zhao○ Li, net worth:
$28.2b○ Woo, net worth:
$23.8b