January 22, 2012
Commentary: Mainlandism hits a nerve in Hong Kong
HONG KONG (MarketWatch) ˇX We had Arab Spring uprisings in the Middle East, anti-austerity protests in Europe and Occupy Wall Street in the U.S.
Now, Hong Kong has a new take on rebellion: the great Dolce & Gabbana protest.
Earlier this month the Italian designer brand drew hundreds of protesters after its staff and security guards prevented Hong Kong residents from taking photographs outside its shop, while allowing wealthy mainland Chinese shoppers to do so.
Protests escalated to social-networking sites demanding an apology, which eventually was forthcoming ˇX but not before the issue had been debated by legislators and newspaper editorials.
It would be easy to dismiss this all as a trifling storm at a fashion boutique. There must be bigger issues to worry about than a slight by an exclusive clothes shop?
The level of anger has taken many by surprise: What's really grating Hong Kong?
The source of the anger is unlikely to be local envy of the spending of newly wealthy mainlanders, as conspicuous displays of wealth are nothing new in Hong Kong.
More likely D&G's behavior hit a nerve as it represents another example of favoritism shown to visitors from across the border. This has even been given a new label ˇX mainlandism. With a neighbor the size of mainland China, perhaps it's understandable if a sensitivity toward being overrun, sidelined or marginalized exists.
Arguably, it is not just luxury brands that have been bending over backward to accommodate mainland shoppers in Hong Kong ˇX it has become de facto government policy in recent years
This can be traced back to 2003, when Hong Kong was struggling in a post-SARS slump and sought and received economic favors from Beijing. The launch of the individual-traveler visa led to the arrival of millions of mainland tourists, filling hotels and shop tills.
But where exactly will this policy end?
Increasingly, it appears Hong Kong exists largely to supply mainlanders with apartments, duty-free shopping and ˇX a recent sore subject ˇX hospital beds for pregnant mothers preparing to give birth.
There is now a realization that as welcome as this business is, there is a trade-off of cons as well as pros.
Mainland shopping does not now just include watches, jewelry and high fashion but also milk powder and apartments. In fact, local developers now target new projects toward wealthy mainlanders, who until recently could also get Hong Kong residency thrown in by buying a modest apartment.
The sting in the tail of this shopping boom has been high inflation and a property bubble that has sent living costs and rents to painful levels for the local population.
In the third quarter of 2011, mainlanders accounted for more than 50% of new property sales by value, according to agency data.
Further fanning this shopping frenzy and associated inflation is Hong Kongˇ¦s currency, which is pegged to the U.S. dollar. This has had the effect of making everything cheaper for mainland tourists, with the yuan appreciating about 22% in recent years against the dollar.
The official line is there can be no change in this currency arrangement, as Beijing is not ready to make the yuan convertible. So Hong Kong has to grin and bear it, despite the discomfort.
Meanwhile, new infrastructure projects championed by the government look set to further ramp up the visitor shopping boom.
Mainland tourists arriving in Hong Kong in 2010 reached 22.7 million, accounting for 60% of all tourists ˇX and triple Hong Kongˇ¦s population.
New mega-infrastructure in the works includes a 50-kilometer (31-mile) bridge to Macau, a new high-speed rail link, and a third runway extension at the airport.
The value of these projects to taxpayers has been widely questioned, especially when pollution is one of the publicˇ¦s biggest gripes. The Macau bridge, which will carry vehicles rather than trains, looks particularly questionable from an environmental standpoint, when roadside pollution is already off the scales.
Meanwhile, despite Hong Kong Chief Executive Donald Tsangˇ¦s running on a ˇ§blue skiesˇ¨ platform in 2007, air quality has only gotten worse. Last week, new air-quality standards were announced, but they are unlikely to be in place until 2014.
The suspected reason for the foot dragging on emissions standards is that these infrastructure projects ˇX already blessed by mainland Chinese authorities ˇX would lead to a further deterioration in air quality and could be blocked or challenged by Hong Kongˇ¦s courts.
Meanwhile, Hong Kong people can complain but do little else. Fifteen years after the territoryˇ¦s handover to Chinese rule, little if any progress toward widening voting rights has been made.
So far, much of the local anger is directed at a ˇ§property hegemonyˇ¨ accused of controlling property prices and government policy. These same interest groups are likely to support these new infrastructure projects that bring ever more mainland shoppers.
Some conspiracy theories even exist that there is an unseen political dimension to discreetly populate Hong Kong with mainlanders. By the time universal suffrage arrives, the local population will already be diluted beyond recognition.
This does seem farfetched, but the government needs to show in issues like property, transport and the environment that it is governing in the interest of Hong Kong residents, and not just an alliance of mainland and developer/commercial interests. Otherwise more protests like the D&G uprising look inevitable.