Did Hong Kong people care only about making money?
What the 2019 resistance movement really tells the world about Hong Kong
“Hong Kong people changed the world showing that: (1) CCP couldn’t be trusted; (2) you care about more than just making money.” It is a fair comment, isn’t it?
We never trusted the CCP. The wishful thinking was that CCP would leave us alone as long as we acquiesced. We were wrong.
Did Hong Kong people care only about making money?
“I can’t understand. Why don’t you Hong Kong people focus on economic development?” a young lady asked.
It was the summer of 2019. The young lady was an EMBA student from mainland China visiting Hong Kong. I was a guest lecturer at the University of Hong Kong. In the good old days, we could debate about anything on campus.
“There are two different ways looking at economic development.” while she could understand why Hong Kong people resisted, I knew where she was coming from.
Some people see the economy as a super factory. Perhaps you saw it from Paul Samuelson’s textbook. This conception of the economy values efficiency. And efficiency means producing more at lower costs. I guess this is the kind of economic development you are referring to.
But there is another way to understand the market economy. In a market, everyone is free to choose. It means when someone gives you a low-ball offer. You can always say no and walk away. Everyone is at the same time competing and cooperating with each other. Economic development in a market economy means not only efficiency but the emerging complexity of relationships. Although no one knows the full picture, we can, and have to, trust each other, so our lives go on.
If you see the market economy as a network of competing and cooperating relationships, you will understand why defending Hong Kong’s institutions is the only way to ascertain economic development.
How can people trust each other? No, they can’t. But the transaction cost will be much lower if there is an independent judiciary, the rule of law, and a commercial culture based on respect for the spirit of the contract.
How can people compete freely? Companies and individuals know the competition is fair when the government is not picking the winners and everyone is equal before the law.
So when Hong Kong people march on the street to defend the rule of law, the freedom of expression, and the right to say no, we are fighting for the institution that enabled Hong Kong’s economic miracle.
Yes, we do care about making money. Who doesn’t care about making money?
“Our portfolio out-performed by excluding China.” What do you think if someone tells you this?
China has been suffering from one of the most prolonged stock market depressions and has underperformed since 2015. The crash of China A-share in 2015 was massive.
If you track the Hong Kong benchmark Hang Seng Index, you will notice that since 2018, there has been a divergence between Hong Kong and the US stock market. On the other hand, the movement of the Hong Kong stock market became more resembling the China market.
It is not a coincidence, isn’t it?
The stock market indices might not be appropriate indicators of the economic well-being of the people. However, a growing monetary base coupled with a depressed stock market is a sign that people do not have a risk appetite. In a word, people do not want to invest.
Where does the money go? Real estate. In Hong Kong and China, real estate is generally a defensive asset class. It is the most convenient and readily available non-monetary asset people have access to.
Therefore, when the People’s Bank of China attempted to reinflate China’s financial system after the 2015 A-share crash, it ended up with a real estate bubble. Although the Chinese government warned that real estate shouldn’t be speculative assets, it is not clear to whom the warning was addressed. Was it a warning to the individuals? Or was it a warning to the real estate developers? Or was it a warning to the local governments?
In China, local governments rely heavily on real estate developments both as sources of income and the driver of growth. In some provinces and cities, real estate developments account for almost 30% of the GDP growth.
GDP growth is one of the key performance indices of local officials. Since the 1990s, the CCP has had an implicit social contract with Chinese, “as long as the nation keeps growing, people would willingly give up a certain freedom, hoping one day material prosperity will compensate for the lost of dignity.”
The city-dwelling middle-class in China might have enjoyed a decade or so of unprecedented prosperity. This is also the privilege few the CCP wants to be the face of new China. However, as the Premier of the State Council, Li Keqiang, disclosed in the 2021 National People’s Congress, 600 million Chinese make less than USD$140 a month.
The People’s Republic is less wealthy and not as equal as most people imagine.
At the end of the day, the meddling is becoming less effective and brings about more side effects.
When Hong Kong people fought for freedom, we may not have consciously thought about the market economy.
Hong Kong has always been an economic powerhouse, not only for China but also for the rest of the world. As the institutions are obliviated under broad daylight, the impact is first and foremost felt by people living in China.
Before we go any further, let’s ponder for a moment: what is economic development?
Is it simply about making more things at low costs? China might be the world’s most efficient production base, but some of its people don’t have access to the prosperity as presented by the CCP. Even those who might have the opportunity to make some money from the export trade, not all of them have the freedom to spend their money on things they want.
Some economists boast of China for having an exceptionally high saving rate as if it is something normal. However, if one takes into account the foreign exchange control, it is a totally different picture.
People in China are forced to buy overpriced, low-quality products not intended for export. Only the very few who had the privilege to go overseas can really feel like every penny is worth spending. Otherwise, for those who are forced to save, their options are limited. They can choose to keep cash, but their hard-earned money will be eaten away by inflation. Or they can pick from A-shares, residential properties, or financial products with absurdly high risk.
Investors who are scammed have no way to seek justice. And scams are rampant in China. When deleveraging takes place, more scammers are exposed, and the victims go to the street.
I am not sure if the young lady I met in the EMBA guest lecture can see this essay. Will she be surprised to find the CCP cracks down on technology companies and real estate developers? How does she feel if she was lockdown by the hygiene police in Shanghai?
“CCP cares about people’s lives more than economics.” Maybe it is how she rationalizes everything happening now.
CCP wants you to believe that making money or saving your life is its business. But in reality, it doesn’t care if you make money or you live a good life.
“But why does it makes people miserable? Why does it hurt the economy?” some may ask.
To err is human.
When you have a good institution, mistakes will not only be rectified but also expected. Errors will not take down the whole society.
But when the institution is misaligned, mistakes will be concealed and denied. Even the most minor mistakes will eventually add up into unmendable catastrophes.
Economic development is about good institutions; it is what we were defending, not only for the people of Hong Kong but also for those who are living in mainland China.
Economic development is also more than just the production side of the equation; it means nothing if you do not have the freedom to spend or save the money your earn.
Although Hong Kong is often seen as an economic city, and its people appear to care only about making money, the reality is very different. Hong Kong is a bastion of all sorts of freedom, and Hong Kong people’s love for freedom goes much deeper.
It was why Hong Kong has been prosperous, not the other way round. So the logic goes, if you do not fight for freedom, you will never be truly free.
Well said. That’s why Hong Kong people belong to the civilized world.
Learning a lot from reading your articles! Thank you!