February 1, 2016    6 minute read

Hong Kong’s Political Struggle Against China

   February 1, 2016    6 minute read

Hong Kong’s Political Struggle Against China

The recent activities in Hong Kong; in an effort to strike for democracy (such as the umbrella movement) and discrimination against Mainland Chinese have been pushed by some students and politicians who have little or no interest in Hong Kong’s long-term well-being. As the recent activities have demonstrated a lack of respect for the law and hatred towards Mainland Chinese tourists (also any person who possesses a pro-China point of view). The aim of this article is to explain why these activities are fatal to Hong Kong and why Hong Kong needs a stable and open-minded environment to survive.

The Hong Kong economy is highly dependent on trade, both physical and financial goods. Hong Kong’s four key industries include financial services, tourism, trading and logistics, and professional and producer services, which account for 47.3% of the employed working force in Hong Kong. However, in the four key industries, Hong Kong is particularly dependent on financial services and the trading and logistics services industry.

In 2013, the financial services industry contributed $346 billion to the economy, (16.5% of GDP), and the trading and logistics services industry is the largest among the Four Key Industries, in terms of both value added and employment. It generated a value add of $500.5 billion in 2013 (or 23.9% of GDP). However, Hong Kong does not produce most of its products by itself, Hong Kong’s main income from the trading and logistics services industry is re-export of goods which is worth 311.6 billion HKD, whereas domestic product export is only worth 3,7 billion HKD. Most of Hong Kong’s re-export is from and into China, where 53.7% of re-export is into China.

“Re-exports, the mainstay of overall merchandise exports and accounting for 98.7% of total exports by value, fell by 3.6% year-on-year in real terms in the third quarter of 2015, following the 2.8% decline in the preceding quarter. Domestic exports, constituting the remaining 1.3% of total exports, plunged by 15.7% year-on-year in real terms in the third quarter of 2015, further to a notable decline of 13.8% in the second quarter.

Hong Kong Government Economic Reports

The reason why Hong Kong could maintain such a high proportion of re-export income is due to the CEPA agreement between Hong Kong and China. This agreement is such that all products of Hong Kong origin, except for a few prohibited articles, can be imported into the mainland tariff free under CEPA. Hong Kong service suppliers enjoy preferential treatment in entering into the mainland market in various service areas. There are also agreements or arrangements on mutual recognition of professional qualifications.

Hong Kong’s financial sector also requires mainland companies and Western investors to come and invest in Hong Kong. Hong Kong is an open market economy with a low taxation rate and world-renowned legal system; these are the competitive advantage of Hong Kong over mainland China. As people have little faith in mainland’s legal system and corruption, Hong Kong has its unique advantage of being close to the mainland, being culturally similar and understanding, but also using a completely different but superior legal system which is passed on from the colonial age. However, if Hong Kong keeps on undermining its own legal system and when people lose faith in the law, corruption will follow and soon Hong Kong’s financial sector will perish as the moving of the financial sector from one location to another is low cost in comparison to other sectors. The main asset of a company in the financial sector is its employees, everything else is easily replaceable. I think Hong Kong’s elites in the financial sector would gladly move to Shanghai and work there rather than being unemployed.

If hostility between Hong Kong and mainland kept on mounting, I am very sure that Hong Kong will bring its own downfall as no company will be investing in an area which is hostile to it and the law does not protect the safety of its employees. Mainland will then encourage Western companies to invest in Shenzhen or Shanghai by offering and various benefits. Companies in Hong Kong in many ways are depended on mainland investment or business with mainland companies, if they fail, the people in the financial sector will fail and no capital flows into Hong Kong, people in the import sector will fail as consumption falls and this multiplier effect continues on and will lead to the fall of Hong Kong.

Hong Kong is a very small city, it imports over 90% of its food supplies and it is impossible for Hong Kong to feed its own people without a strong economy that can export service. If Hong Kong’s four main sectors fail and no new sector arise, Hong Kong will be doomed as the food, water, energy, clothing, building material etc are all imported from around the world, there is no way Hong Kong can support the need of 7 million with just democracy.

Hong Kong needs to stabilize the political atmosphere and focus the resource into economic growth, when land supply is limited the way out is technological progress and I believe Hong Kong people are talented and hardworking, supported by numbers of world renowned institutes, Hong Kong is fully capable of exploring a new sector that uses high technology and cannot be easily copied or replaced, hence maintaining Hong Kong’s importance in the global economy.

At last, loving a place is not all about praising it, a real patriot will always criticise their own country, I believe that democracy is nothing but a tool to achieve a higher living standard, I am not willing to give up a free, stable and prosperous environment for the ability to vote. People may say that democracy is what guaranteed the free, stable and prosperous environment, but I think it is not the case and change should only happen in the time where change is needed. In this very moment, Hong Kong needs an economic reform more than a political reform. Hong Kong could have act as an example for the mainland, guiding a path for progress by demonstrating the benefits of a more democratic and liberal environment. However, what Hong Kong is currently demonstrating is what unlimited political struggle can do to the society and hindering the economic progress. Hong Kong should give the mainland reasons to learn from Hong Kong, rather than reasons not to learn.

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