The EconomistDecember 7th 2019 Special reportAsian tigers 92
1in revenues since the sarsepidemic in 2003.
If the protests subside, the physical wreckage can be quickly re-
paired: Hong Kong clears barricades even more efficiently than its
protesters erect them. But the harm to sentiment could linger.
Mainlanders, who represent over three-quarters of Hong Kong’s
tourists, could remain reluctant to spend freely in a city that has
made them feel unwelcome. Hong Kong should nonetheless retain
its standing as a financial hub. The city’s stockmarket, bond mar-
ket and banking system dwarf its gdpand remain semi-detached
from the local economy. Mainland firms account for 70% of bonds
issued and 55% of its Hang Seng stockmarket index.
The city’s role as a financial conduit between China and the
world depends on a distinct legal and regulatory infrastructure
that cannot be vandalised or barricaded. Even as the protests
raged, Alibaba, China’s e-commerce giant, raised over $11bn on
Hong Kong’s stockmarket, the largest haul since 2010. The Hang
Seng stockmarket index showed more sensitivity to the Sino-
American trade war than to local unrest. And, judging by a 280%
spike in stamp-duty payments in October, foreigners can still be
convinced to snap up Hong Kong properties by modest dips in
price. They perhaps remember the example set by Li Ka-shing, one
of Asia’s richest men, who made a fortune buying Hong Kong prop-
erty during the city’s violent leftist disturbances in the 1960s.
To some footloose multinationals, Singapore’s stability now
looks appealing, compared with the threat of unpredictable com-
mutes and closed schools in Hong Kong. But as financial hubs the
two cities are less similar than they appear. In Hong Kong, “we go
into China and compete,” says one Singaporean broker who moved
to the city years ago. In Singapore, he adds, “they wait for China to
come to them,” confident that they can be its gateway to South-
East Asia. He likens Singaporean financial professionals to shep-
herds guarding a flock, whereas Hong Kong
professionals are more like hunters prowl-
ing for deals.
The protesters have tried to exploit
Hong Kong’s special status for their own
ends. By generating international clamour,
they have prompted America’s Congress to
pass a bill requiring the State Department
to assess each year whether Hong Kong re-
mains autonomous enough to justify its
separate treatment under American cus-
toms, tax and commercial laws. Opposite
the cuhkbarricades hung the portrait of an
unlikely hero: Mitch McConnell, the Re-
publican leader of America’s Senate.
The irony is that, in many ways, Hong
Kong seems ever more distant from the
mainland. Many in China cannot under-
stand how the city can be so dissatisfied
with so many more privileges than main-
landers enjoy.
But Hong Kong’s political ambitions are
a natural by-product of its prosperity. Al-
though it still enjoys far more freedom
than the rest of China, it has fewer political
rights than a society of its wealth and so-
phistication would normally expect. Only
oil-rich Gulf states combine both a higher
income per person and a lower score on the
Democracy Index published by The Econo-
mist Intelligence Unit (eiu), a sister com-
pany of The Economist. Although Hong
Kong’s protests now pose a threat to its pro-
gress, they are also a consequence of it. 7T
he taiwan straitis often described as a possible flashpoint.
Across this narrow body of water, China points thousands of
missiles at the country it regards as a rogue province. But for those
working on Formosa 1, an offshore wind farm, the strait is some-
thing else. “It’s the best wind in the world,” said one engineer re-
cently, looking out at a cluster of turbines on the turquoise water.
When up and running later this year, it will be Asia’s first com-
mercial offshore wind farm outside China, and the first of many
planned in the strait. Taiwan’s embrace of wind has come along-
side a decision to phase out nuclear power. Many businesses fear
this will leave the island low on electricity, imperilling its econ-
omy. The debate has been unruly at times: legislators have brawled
in parliament. In 2017 a massive blackout enveloped the north of
Taiwan. But President Tsai is sticking to her plan to create a “nuc-
lear-free homeland” by 2025. For critics, it is a stark example of a
political system easily swayed by vocal campaigners, be they envi-
ronmentalists or anti-free-traders. It also highlights a perennial
question: is democracy bad for prosperity?
This view is, conveniently, often heard in China. “What does
Taiwan have to show for 20 years of democracy? Above all, a preci-
pitous decline in its economy,” Zhang Weiwei, a Chinese academ-
ic, wrote in an essay. But similar opinions are voiced in some of the
tigers themselves. Among the older generation in South Korea and
Taiwan, there is nostalgia for Park Chung-hee and Chiang Ching-
kuo, the strongmen who led them in their boom years. “You can-
not eat democracy,” quipped Terry Gou, the founder of Taiwan’s
Foxconn. (Nor could democracy stomach him: he eventually de-
cided not to run in Taiwan’s presidential election after it became
clear that he had no chance of winning).
The freer politics of South Korea and Taiwan have not always
covered themselves in glory. Of South Korea’s seven elected presi-
dents since 1987, three were indicted for corruption and one com-
mitted suicide to escape a scandal. Of Taiwan’s four presidents
since 1996, three have been charged with corruption, one of whom
ended up being sentenced to 19 years in prison. All political lives
end in failure, as Enoch Powell, a controversial British politician,
once said. Few, though, end as badly as in South Korea and Taiwan.
Hong Kong’s leaders since its handover to China in 1997 are,
however, no advert for undemocratic rule either. The first chief ex-
ecutive stepped down early, the second ended up in jail and the
third was too unpopular to serve a second term. Meanwhile the
current chief executive is so widely disliked that she transformed
recent local elections, normally low-key affairs, into a devastating
de facto referendum on her rule. Singapore has, for years, hewed
more closely to meritocratic ideals, but a feud among the children
of Lee Kuan Yew, the country’s founding father, has revealed an ug-
lier side to its elite politics.
When the four tigers earned that nickname, none of them had
ever seen a competitive election. Two of them have since become
vibrant democracies; two have not. The quartet therefore provides
the kind of variation social scientists want when testing the im-
pact of different variables. The hurly-burly politics of Taiwan and
South Korea can be compared with Singapore’s “managed democ-
racy” and Hong Kong’s unrepresentative system, as well as with
their own undemocratic past. What do such comparisons reveal?The new Asian values
Does democracy hurt or help growth?Political economies