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Widening Income Gap Encourages Hong Kong Independence Movement

The combination of high real estate prices and low wages is ushering in more Occupy Central–style popular discontent.

Hong Kong’s government will be rolling out the red carpet for Zhang Dejiang, the chairman of China’s National People’s Congress, during his upcoming visit. Others in the Special Administrative Region might not greet the politician with such a warm welcome.

Zhang, who oversees Hong Kong as part of his duties as head of the congress, will be the first senior Chinese leader to visit since 2012 when he comes to town from May 17 to 19. He will likely want to assess potential candidates for the 2017 chief executive election, all of whom will have to be vetted by Beijing. He will also give a speech at an investment summit and meet Hong Kong politicians and the local glitterati: tycoons, their wives, their mistresses and movie stars.

Likely also on his agenda — however unofficial — is that he and his team might be on a fact-finding mission about Hong Kongers’ degree of unhappiness. Discontent is still simmering following the pro-democracy Occupy Central protests that throttled the city in late 2014.

Aside from four lawmakers from several democratic parties who have been invited to a cocktail reception — where they might get the chance to brush shoulders with the chairman — he certainly will not be meeting with the newest members of Hong Kong’s political landscape. That group is the pro-independence Hong Kong National Party.

China’s leaders seldom hold discourse with members outside the pro-Beijing political camp. Chinese officials last met with representatives from so-called pan-democratic parties — which espouse Western-style political reforms — a year ago.

Recently formed, the HKNP has stated that it would not recognize the Basic Law, the miniconstitution that has guided the city since it reverted to Chinese control in 1997. Led by activists who gained prominence in the Occupy protests, the group has begun to field candidates in upcoming local district elections. Party leader Chan Ho-tin has gone on the record to state that the party will use “whatever effective means” available to push for independence from Beijing.

Though Chan says the party so far has been funded entirely by donations from its 50-plus members, most of them university students and young activists from the Occupy protests, there is every indication that the party may gain support among some of Hong Kong’s 7.4 million people. Disaffection with Beijing is at an all-time high in Hong Kong. In the working-class neighborhood of Mong Kok, thousands have participated in periodic protests that often disintegrate into riots, leading to mass arrests. Public approval of Chief Executive Leung Chun-ying, whom many see as a stooge for Beijing, is at an all-time low.

Despite having supposedly one of the highest standards of living in the world, more than 40 percent of the city’s population lives in public or subsidized housing; 1 in 5 earns no more than HK$3,275 a month ($422), just one tenth of the monthly average in the city. Meanwhile, the city’s real estate is the least affordable in the world, with average apartments costing 19 times gross annual median income, according to a survey conducted by Demographia. It was the sixth straight year that the city had ranked as the most unaffordable of the 367 cities surveyed by the Illinois–based consultancy.

“Sky-high property prices are the root cause of the ongoing social instability in Hong Kong,” says Andy Xie, a Shanghai-based independent economist who once lived in Hong Kong and worked for Morgan Stanley as its chief Asia economist. “When the average household would have to put aside all their salary for ten years to afford to buy the space for a bed — never mind eating or drinking — or that incomes have grown by only 10 percent in a decade, where is the hope for ordinary people, especially the young?”

In calling for independence, the HKNP is at the extreme end of the political opposition. By comparison, a new party being set up by former leaders of student protest group Scholarism has stopped short of advocating for independence and instead is opting for less interference from Beijing in Hong Kong’s affairs and more “self-determination by Hong Kong people.” Still, the formation of the pro-independence party serves as a warning to leaders in Beijing that they had better cater their policies toward Hong Kong’s lower-income classes or risk a repeat of the Occupy protests, which disrupted much of Central (the central business district) from August to December 2014, with some protests bringing more than 500,000 people into the streets.

The HKNP joins a variety of opposition parties that advocate Western-style democratic reforms. This bloc, collectively known as the “pan-democrats,” controls 24 seats of the legislature. The Legislative Council has 70 members, with 35 chosen by geographical constituencies through direct elections and 35 members appointed by industry groups in so-called functional constituencies.

“China has been ruling Hong Kong by catering their policies to the superwealthy,” says an investment banker who requested to be identified only by his surname, Wong, to avoid retaliation by his employer or Chinese authorities. “Hong Kong’s real estate tycoons, and their sons — they’re the ones who can get easy access to the halls of power in China.” By contrast, he adds, “the average Hong Kongers, the little people — their voices are never heard.”

In a twist of irony, China’s Communist Party, which came to power in 1949 by overthrowing the pro-capitalist ruling Kuomintang, has itself become a bastion of capitalism. Since economic reforms began in the early 1990s, the party has not only adopted a market-oriented economic strategy but has also begun to admit entrepreneurs into its ranks. Since taking back Hong Kong in 1997, Beijing has relied on a circle of the city’s top politicians and wealthiest as advisers. The concentration of wealth among real estate tycoons has also meant that Beijing more or less looked the other way as the city’s policymakers continued to keep permits and construction tightly controlled and real estate prices high.

The policies have also fed a yawning income gap. According to information compiled by nonprofit group Feeding Hong Kong, Hong Kong has the widest income gap of any developed economy in the world. More than 100,000 people live in coffins, “cage homes” and rooftops in the city, while more than 1,000 people are homeless, living in McDonald’s and other restaurants open 24 hours a day.

Another investment banker, who asked not to be identified by name for fear of offending his employer, a major European investment bank, said it would be in China’s interest to broaden its pool beyond the current pro-Beijing advisers and legislators to include Hong Kong’s middle and lower classes. “Zhang should listen more to Hong Kong’s middle class,” he said. “Even the middle class is becoming angry with how the system is rigged in favor of the real estate tycoons.”

Hong Kong pro-independence forces, notes the banker, “will for sure get stronger by the day if the Beijing leadership doesn’t listen.” He continues, “China can avoid bloodshed on the streets simply by listening more to the people. By doing so, the leadership just might nip the nascent independence movement in the bud.”

Follow Allen Cheng on Twitter at @acheng87.

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