Finding the Culprit behind Sino-Hong Kong Clashes
Class or Nationalist Conflicts?
In recent years, Chinese investment in Hong Kong has become a hot topic in the financial news. From McDonald's Corp. selling its controlling stake in its Hong Kong operations to CITIC Group, to China Telecom obtaining a MVNO (Mobile Virtual Network Operator) license in Hong Kong, all indicate that Chinese capital is taking up a sizeable share of the market in Hong Kong. According to Census and Statistics Department’s report released in December 2016, near half of Hong Kong’s foreign direct investment (FDI) in 2015 came from the British Virgin Islands, the Cayman Islands and Bermuda, the three major hot spots of offshore companies; FDI from China amounted to only 27%. It is believed that a large amount of Chinese FDI entered the Hong Kong market via offshore companies, to avoid being identified. The case of “the 88 Queensway Group” in 2015 illustrates how Chinese capital invests in foreign countries through offshore companies, its intertwined relationship between Chinese Government, state-owned enterprises and alleged corruptions.
Reported by Initium Media, Hong Kong businessman Sam Pa controlled 29 companies, which were known as “the 88 Queensway Group”, served as a middleman to arrange African crude oil trade to China and Chinese investment in African infrastructure. Among these 29 companies, 19 of them are partly or wholly owned by offshore companies registered in the British Virgin Islands. Offshore companies are not required to disclose its shareowners and directors, which attract politicians and business owners to transfer their capital overseas for unlawful deals or tax evasion. If the sources of FDI from offshore companies is considered, Chinese FDI in Hong Kong would be far beyond the statistics have shown.
In fact, Chinese capital has penetrated all sectors in Hong Kong, from large-scale infrastructure, building and engineering, retailing, catering, telecom and many other businesses, are openly or secretly operating by Chinese capital. For example, MINISO, a home product enterprise which has grown rapidly in Hong Kong, is a subsidiary of Guangdong Aiyaya Company, high-end retailers such as Suning Appliance Group and Zhou Liu Fu Jewellery are the successful examples of Chinese companies’ expansion to Hong Kong. In the telecom sector, as early as 1997, China Resources Co. Ltd. owned mobile phone services provider Peoples. It was later acquired by China Mobile. Its rival China Unicom is also active in Hong Kong. Apart from expanding their business to Hong Kong, some Chinese companies enter the Hong Kong market by means of acquisitions. Traditional newspapers such as Ming Pao Daily and South China Morning Post have been bought by companies with Chinese background. New media such as Initium Media and HK01 are also known to be mainly invested by Chinese capital. In catering, Pacific Coffee has been acquired by CR Enterprise (known as CR Beer now) in 2010, Epicurean & Co. Ltd. and Pokka HK have been bought by Chinese capital and now McDonald’s operations in Hong Kong would be sold to CITIC Group. Chinese capital has become a significant presence in the service sector in Hong Kong and is likely to have an impact on people’s everyday life. Yet, its most significant impact so far is on the real estate market.
Instead of teaming up with Hong Kong proprietors in joint-development projects, there is a trend in recent years that Chinese developers are now participating in government land auctions as sole proprietor or collaborate with other Chinese enterprises. For example, a consortium of Chinese developers won the bid of Wong Chuk Hang Station (Phase 1) project. According to Jones Lang LaSalle, Inc.’s “Hong Kong Residential Sales Market”, issued in February 2017, the seven major Hong Kong developers bid 45% of residential land on auctions in 2012. However by 2016, the figure dropped to 22%. On the contrary, Chinese developers tend to have a higher purchasing power and motivation than local developers. During the financial year of 2016/2017, the seven major local developers paid an average bidding price of HKD5,827 per square foot, small / medium-scale developers paid HKD8,602 and Chinese developers paid HKD13,382 at land auctions. This illustrates that Chinese developers are willing to pay astronomical price for “premium estate”. Thus, transaction price is far beyond market value in government land auctions recent years. For example, HNA Group, which has a close relationship with the Chinese Government, bid for 4 pieces of land in Kai Tat. With their “special” background. Chinese developers could afford a price higher than the market value and surpass the affordability of local developers.
According to the statistics of Santander Bank, FDI in Hong Kong in 2015 was mainly placed in non-productive economic sectors, known as "hot money", such as stocks and real estate. The influx of Chinese funds into the housing market is perceived to be one of the reasons for the ongoing hikes in property prices, despite various policies, such as the Double Stamp Duty, were implemented to “cool down” the market. Yet, as Chinese Government continues to combat property market speculation in the mainland, coupling with the risk of RMB devaluation, Chinese capital continues to flee the domestic market as the property market in Hong Kong is deemed to be one of the best hedge investments for Chinese capital. Midlands Holdings’ statistics show that in the second quarter of 2016, first-hand and second-hand residential properties sold to Chinese buyers have been increased by 236% and 85% quarter on quarter respectively, and they increased by 35% and 18% respectively in the third quarter of the year as well. It shows that although the Chinese Government attempted to restrict capital outflow, it could not stop the trend. Previously, Chinese capital preferred investing in commercial properties, but now it extends its grasp on residential properties that instigates the housing price to peak. This does not only cause housing problems, but also inflation in other consumer goods in Hong Kong. In a way, it is becoming a new form of “real estate hegemony”.
Livelihood issues have always been the cause of conflicts between Hong Kong people and Chinese people. Children born in Hong Kong by non-local parents, shortage of baby milk powder in Hong Kong caused by Chinese shoppers, grey goods traders, to housing problems, it is very often that livelihood issues cause political conflicts between Hong Kong and China. However, many of us fail to see that these conflicts are triggered by Chinese capitalists exploiting common people in both China and Hong Kong. To resolve Hong Kong people’s livelihood problems, to join force with China’s working class in resisting the cross-border exploitation by Chinese capital, is indeed the resolution Hong Kong people should look into.