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Real Estate Elite, Economic Development, and Political Conflicts in Postcolonial Hong
Kong
Author(s): Stan Hok-wui Wong
Source: China Review , Spring 2015, Vol. 15, No. 1 (Spring 2015), pp. 1-38
Published by: The Chinese University of Hong Kong Press
Stable URL: https://www.jstor.org/stable/24291927
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The China Review, Vol. 15, No. 1 (Spring 2015), 1-38
Real Estate Elite, Economic Development, and

Political Conflicts in Postcolonial Hong Kong
Stan Hok-wui Wong
Abstract
Business interests have been overrepresented in key political institu

tions of postcolonial Hong Kong. An increasingly popular view holds
that business interests, spearheaded by the real estate elite, have
become politically powerful enough as to capture the government. In
this article, I critically examine this thesis. I find that a number of
high-profile mega projects considered manifestations of the so-called
real estate hegemony actually met resistance from within the real estate
elite, while cases where the real estate elite jointly promoted their
sector interests have yielded distributive benefits to the low-income
class. My findings qualify the "real estate hegemony" thesis by unrav
eling (1) collective action problems confronted by the special interest
group and (2) positive externalities generated from special interest
politics, and their political consequences.
Stan Hok-wui WONG is an assistant professor in the Department of Govern

ment and Public Administration at the Chinese University of Hong Kong. His
research interests include authoritarian politics and democratization. His articles
have appeared in journals such as Electoral Studies and Journal of Contempo
rary Asia.

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Stan Hok-wui Wong
1. Introduction
Soon after the 2012 Hong Kong chief executive election, Li Ka-shing,
considered the richest man in town, was asked to comment on the elec
tion result. With his usual measured composure, he answered, "The
Hong Kong Special Administrative Region (HKSAR) government does
not depend on one individual. ... The core values of Hong Kong lie in
freedom and the rule of law."
To Hong Kong people, Li's remark may have sounded a bit ironic. If
freedom means having the ability to make choices, many in Hong Kong
feel that their freedom is severely constrained. Politically, Hong Kong
people cannot elect their political leaders through universal suffrage. Eco
nomically, a fair number of markets are dominated by big businesses.
Take Li Ka-shing's business empire as an example. It has penetrated num
erous economic sectors, ranging from telecommunications, container
ports, retail, housing, and public utilities to the media.
The economic power of the business elite is further complicated by
its members' political privileges. Since 1997, major Hong Kong business
magnates such as Li Ka-shing have managed to sit on the highly exclu
sive Election Committee, a constitutional body whose sole function is to
elect Hong Kong's chief executive.
When the moneymakers have also become the kingmakers, it is
difficult to convince the public that the government can remain neutral.
In fact, no administration in postcolonial Hong Kong has been able to
successfully dispel the widespread suspicion of "collusion between
government and business" ( guanshang goujie). Many govern
ment policies have been perceived to be heavily skewed in favor of the
business sector, especially the real estate elite such as Li Ka-shing. The
term "real estate hegemony" ( OlMMW. dichan baquan) has been popu
larized by a book with the same Chinese title, which documents the
dominant position of the real estate elite in various markets.1 Meanwhile,
a series of high-profile scandals have broken out,2 reinforcing the public's
impression that the real estate elite has untold, if not also undue, influ
ence over the postcolonial government. Not surprisingly, the real estate
elite has become the target of numerous social and political protests in
recent years.
Given the real estate elite's economic dominance and perceived
political significance, what role it plays in Hong Kong's postcolonial
political economy demands a systematic study. In this article, I critically

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Real Estate Elite, Economic Development, and Political Conflicts
examine the "real estate hegemony" thesis by investigating how members

of the real estate elite achieved their political ascendancy, where their
economic interests lie, how they have benefited from the postcolonial
government's policies, and the economic and political consequences.
Two important observations, which have previously been underempha
sized in studies of Hong Kong's state-business alliance, stand out from
my analysis. The first is the internal strife within the real estate elite; its
members often compete against each other, reducing their cohesiveness
and ability to pursue their collective special interests. The second is the
distributive effects of this special interest politics. Contrary to the
popular account that pits the real estate elite against the rest of the popu
lation, or property owners against the propertyless masses, the economic
dependence on land-related economic activities has actually benefited
asset-poor, low-skilled workers, thanks to the expansion of the service
sector.
There is a wealth of literature in the field of political economy

studies examining the effects of the economic interests of political coali
tions. Rogowski studies how conflicts between different classes or factors
(i.e., land, capital, and labor) structure the direction of a country's trade
policy.3 Gourevitch argues that coalitions of various economic sectors
affect governments' responses to economic crises.4 Hiscox shows that
factor mobility across industries is a strong predictor for the formation of
political coalitions.5 Boix argues that democratization is less likely if
members of the ruling elite are the owners of fixed capital.6 Drawing on
the experience of Malaysia and Indonesia during the Asian Financial
Crisis, Pepinsky contends that authoritarian regimes that base their
support on a fixed-capital ruling coalition are able to exercise resolute
capital controls in times of economic crisis, thereby lowering the risk of
regime collapse.7
To seek political influence, however, business firms do not always
coalesce into a factor- or sector-based coalition. In fact, some argue that
firms may lobby for regulation to deter new market entrants.8 Faccio also
finds that individual firms that run into trouble are more likely to seek
government bailouts. Firm performance also varies with the degree of
political connection.9 Fan, Wong, and Zhang find that the performance
of politically connected firms is worse than that of their unconnected
counterparts.10 On the other hand, Ferguson and Voth show that German
firms connected to the Nazi movement outperformed those without such
connections."

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Stan Hok-wui Wong
The current study engages the extant literature in two important

ways. First, the case of Hong Kong shows that political coalitions based
on similar economic interests are not necessarily cohesive. Sometimes
precisely because coalition members come from the same industrial
sector, internal strife runs deep. Second, while the extant studies pre
dominantly focus on the direct effects of political connections (either on
the connected firms or on immediate government policies), this study
shows that the externalities resulting from state-business relations may
have social and political consequences that are no less important than
the direct effects themselves.
The rest of this article is organized into six sections. In Section II, I
present an overview of the various theoretical accounts of Hong Kong's
economic dependence on the real estate sector. In Section III, I discuss
the political ascendancy of the real estate elite. Section IV is an analysis
of their economic interests, while Section V examines how their eco
nomic interests converged and ran into conflict after 1997. I examine the
political and economic consequences of the growing dependence on
land-related economic activities in Section VI. I discuss the political im
plications of Hong Kong's land-dependent economy in the final section.
2. Facts and Theories of Hong Kong's Political Economy

Hong Kong's economy is developed and globally integrated. As of 2012,
according to World Bank data, its GDP per capita based on purchasing
power parity has reached US$44,770, surpassing countries such as
Germany and Switzerland. Between 1997 and 2012, the economy grew
at 3.57 percent annually on average. Remarkably, trade accounted for
397.9 percent of the city's GDP in 2012. Despite its high trade-to-GDP
ratio, much of the trade involves re-exports. In fact, the manufacturing
sector of Hong Kong is exceptionally small by world standards, as may
be seen from Figure 1.

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Figure 1: Manufacturing as a Share of Metro Outputs by City
Hong Kong ■■■■ 1.8
Washington D.C. mmmm 2.1
London mmmmmmmmmmm s.5
Paris wmmmmmmmmmmmm s.7
Madrid mmmmmmmmmmmmmmmmmm 8.5
Sydney ■■■■■■■■■■■■a 9
Boston 9.2
Los Angeles wmsmmmmmimmmmimmmm

Moscow wmmmmmmmmmmmmmmmmmmmm
Brussels immmmmnmmmmnwmmmmmMM
Toronto ll.S
Berlin ■MHHHHnHMaRMMMMMaaMMaRMMMMMi 11.9
Chicago mmmmmmmmmmmmmmmmmmmmmmmmmm 11.9
San Francisco ■■■■■>■■■■■■■■■■■■■■■■■■■■■■■ 12
Bueno Aires 12.7
Vienna mmmmmmmmmmmmmmmmmmmmmmmmm
Tokyo aaaaaanMnaaMHaanaaMMMMH^MMnMnHai 14.6

Frankfurt mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm 15.3
Zurich aaaaaaaaaaaaaaaaaaaaaaM^ 15.9
Beij.ng mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm 17.2
Barcelona mmmmmmmmmmmmmmMmimmMmmmummmmmmmmmmmmmummmmt 13.1
Seoul mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm
Singapore mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmimmmmm
Source: Emilia Istrate and Carey Anne Nadeau, Globa

Brookings Institution, 2012).
Note: The list of global cities is taken from the top twenty
jointly produced by A. T. Kearney and the Chicago Cou
Part of the reason why Hong Kong has a

turing sector is that land prices are high
property values is the price-to-income rati
price of a home relative to the owner's ann
Hong Kong in the third quarter of 2013 was
cities such as Tokyo and Singapore.11 At su
traditional industrial activities are unprofi
facturers have relocated their factories to th
hollowing out the city's manufacturing sector.
Not everyone is hurt by high land prices,
is arguably one of the major beneficiaries,
ultimate owner of all property in Hong Kong
to land developers the temporary right to
leaseholds. Land premiums, which are the i
sales of such rights, have become an impor
revenue since at least the 1980s (see Table 1)

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Stan Hok-wui Wong
Table 1: Land Sales Incomes and Government Budget
Fiscal year Land sales Total Total Budget Land sales incomes/
incomes government government surplus total government
revenue expenditure revenue (%)
1980/1981 107.70 302.90 235.94 66.97 35.56
1981/1982 96.77 343.13 277.78 65.35 28.20
1982/1983 50.48 310.98 345.98 -35.00 16.23
1983/1984 22.67 304.00 333.93 -29.93 7.46
1984/1985 42.67 385.25 398.82 -13.57 11.08
1985/1986 44.81 436.95 434.44 2.51 10.26
1986/1987 30.86 486.02 427.02 59.00 6.35
1987/1988 39.74 608.75 483.75 125.00 6.53
1988/1989 67.58 726.58 537.96 188.62 9.30
1989/1990 76.69 824.29 713.66 110.63 9.30
1990/1991 42.43 895.23 855.56 39.67 4.74
1991/1992 94.86 1,146.99 921.91 225.08 8.27
1992/1993 92.24 1,353.11 1,133.32 219.79 6.82
1993/1994 193.76 1,666.02 1,474.38 191.64 11.63
1994/1995 205.86 1,749.98 1,641.55 108.43 11.76
1995/1996 228.96 1,800.45 1,831.58 -31.13 12.72
1996/1997 295.08 2,083.58 1,826.80 256.78 14.16
1997/1998 659.31 2,812.26 1,943.60 868.66 23.44
1998/1999 256.86 2,161.15 2,393.56 -232.41 11.89
1999/2000 391.11 2,329.95 2,230.43 99.52 16.79
2000/2001 321.83 2,250.60 2,328.93 -78.33 14.30
2001/2002 106.83 1,755.59 2,388.90 -633.31 6.09
2002/2003 121.90 1,774.89 2,391.77 -616.88 6.87
2003/2004 65.49 2,073.38 2,474.66 -401.28 3.16
2004/2005 594.28 2,635.91 2,422.35 213.56 22.55
2005/2006 309.77 2,470.35 2,330.71 139.64 12.54
2006/2007 414.84 2,880.14 2,294.13 586.01 14.40
2007/2008 663.77 3,584.65 2,348.15 1,236.50 18.52
2008/2009 231.55 3,165.62 3,124.12 41.50 7.31
2009/2010 418.77 3,184.42 2,890.25 294.17 13.15
2010/2011 683.42 3,764.81 3,013.60 751.21 18.15
2011/2012 884.66 4,377.23 3,640.37 736.86 20.21
Source: Hong Kong Yearbook, various issues.
Note: "Land sales incomes" include land premiums and other revenues generated from land
transactions. The unit of observation, unless shown otherwise, is HK$100 million.

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Another major beneficiary of high land prices is the real estate elite.
By the term "real estate elite," I refer to a coterie of ethnic Chinese
business magnates who may have business interests in multiple industries
but who have derived their exorbitant wealth mainly in the postwar era
from Hong Kong's real estate, as evidenced by their control of listed
companies specializing in land development. This definition excludes
some successful businessmen such as Shaw Run Run and Tin Ka Ping,
who hold no controlling stake in any land development company. Note
that I define the elite neither by their birthplace nor by nationality, as
some of them, like the majority of the city's population, were originally
from mainland China or elsewhere, and have subsequently acquired a
foreign nationality. For a list of real estate companies listed on the Hong
Kong Stock Exchange, see Appendix A.
Over the past decades, as will be discussed in the following section,
land development has earned these elite businessmen enormous profits,
allowing their business conglomerates to corner different markets
through mergers and acquisitions. Among the richest members of the
business elite in Hong Kong, it is difficult to find one who is not a land
developer. As may be seen from Appendix B, almost all the top ten
Chinese business families in Hong Kong control a listed land develop
ment company. Their companies constituted, in April 1997, more than
40 percent of the total market capitalization of the Hong Kong Stock
Exchange.
Land development also brings business to other economic sectors
such as construction and banking. Take banking as an example. Prop
erty-related lending (including mortgage loans and credit for construction
and property investment) accounts for 46 percent of total domestic
lending.15 The outstanding values of mortgage loans stood at HK$900
billion at the end of 2013, or 40 percent of the city's annual GDP.
In sum, the real estate sector is arguably the most important pillar
of Hong Kong's economy. It facilitates the economic activities of both
the public and private sectors. It supports the livelihoods of countless
families. Even if one is not employed either directly or indirectly in this
sector, one may still spend one's whole life working to pay off one's
home mor-tgage. Not surprisingly, some identify Hong Kong as a"property
state."16
What accounts for Hong Kong's economic dependence on the real

estate sector? One popular view holds that the city has simply followed
the "natural" course of economic development under free market or

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Stan Hok-wui Wong
laissez-faire conditions.17 Economists have long observed that an eco

nomy may undergo structural changes as it develops. A typical develop
ment trajectory is to move from agriculture to manufacturing and then to
services.18 As many services industries are nontradable, their develop
ment drives up the demand for land. This explains why urban land prices
are generally higher than rural ones.
This view, however, is not entirely satisfactory for two reasons. First,
Hong Kong's manufacturing sector is exceptionally small, even by the
standards of world cities. As may be seen from Figure 1, the share of
manufacturing in Hong Kong's GDP is the lowest among the top 25
global cities. Its share is even lower than that of Washington, D.C., where
the per capita GDP is 47 percent higher than that of Hong Kong.19 As all
these cities have vibrant services industries, what makes Hong Kong's
manufacturing sector so dismally insignificant remains puzzling.20
Second, this view is inconsistent with historical facts. Although
Hong Kong has been touted by some, Milton Friedman included, as an
exemplar of a free-market economy, empirical studies show that non
market forces were very much alive in all factor markets, especially the
land market, long before the retrocession,21 deviating from the govern
ment's professed laissez-faire doctrines.22
The postcolonial government also seems not to be a faithful disciple
of laissez-faire. In particular, Tung Chee-hwa, the first chief executive,
was an avid supporter of mega projects, including Cyberport, the West
Kowloon Cultural Development project, and the ambitious plan to build
85,000 housing units per year. These overt attempts to intervene in the
economy are inconsistent with laissez-faire doctrines. In sum, it is prob
lematic to say that Hong Kong's current economic structure is a product
of nothing but the invisible hand of the market.
Another popular account is that the Hong Kong government has its
own vested interests in maintaining a land-dependent economy because
it is also a major beneficiary of a booming real estate sector.23 For
example, in recent years, nearly 20 percent of Hong Kong's total govern
ment revenue has come from land sales (Table 1). With this lucrative
source of income, the argument goes, the government is able to keep
taxes low on other economic activities and to fund various public
services.
This explanation is not without its own problems. First, since the
early 1980s, all land premiums have been put in the Capital Works
Reserve Fund, which is disbursed exclusively for one-off capital projects.

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In other words, major land sales revenues are not used for paying recur
rent operating expenditures, including education and social welfare,
which are funded entirely by other streams of tax revenue. Second, as
may be seen from Table 1, the Hong Kong government has achieved an
enormous budget surplus for most years in the past several decades.
Taking the fiscal year 2010-2011 as an example, the total government
revenue and the total government expenditure stood at HK$376 billion
and HK$301 billion, respectively. Even if the government in that year
had not obtained any land premiums, which amounted to HK$68 billion,
it would still have achieved a balanced budget. This calls into question
whether land sales are vital for the provision of basic government
functions.24
Finally, this explanation fails to articulate the political motives that
lie behind the scenes. It assumes that the Hong Kong government is a
benevolent entity, with an encompassing interest in the overall well-being
of the population. As a result, it aggressively promotes the real estate
sector, with a view to recycling the immense land profits back into
community development.
This benign and apolitical view of the government has been losing
its audience since the retrocession. For one thing, as many point out, the
postcolonial political system is imbued with structural biases in favor of
the business elite.25 Business interests have been overrepresented in the
functional constituencies of the legislature26 and the Election Committee
for the chief executive.27 Wong presents empirical evidence, showing that
firms with directors or major shareholders sitting on the Election
Committee outperformed those without.28 Suffice it to say, fewer and
fewer people in Hong Kong now believe that the government is able to
make policies independently of the influence of the business elite.
Against this background, there have emerged more studies exploring
business influences in Hong Kong's political process. Using network
analyses, Ho and colleagues identify a "power elite," overrepresented by
big business, and dominating various public institutions such as legisla
ture, government agencies, and social organizations.29 Lui and Chiu
argue that the political configuration of business interests in post-1997
Hong Kong has experienced a process of "de-centering," which has led
to a governing crisis.30 Fong points out that the governing coalition of
the HKSAR government is narrowly based in the business sector, and
hence handicaps the government from meeting the rising demands of
society.31 Although these studies do not explicitly use the term "state

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
10 Stan Hok-wui Wong
capture," they all maintain t

Hong Kong's political proc
A view that has gained i
the "real estate hegemony
interests, spearheaded by
cally and politically power
dominated the governm
government policies hav
interests.
The state-capture thesis

because it brings politics
outcomes to the business in
tions. In particular, it treats
player, or ruling class purs
policies at the expense of t
is problematic in two impo
conflicts within the real e
analysis, on a number of
the real estate elite from
explained in this study, th
ical implications resulting
3. Political Ascendancy
In the 1980s, Hong Kong e
1982, Margaret Thatcher p
Deng Xiaoping the futur
between Beijing and Londo
ment agreed, although rel
1997.33 Hong Kong people
negotiation process. Gripp
many used what was perh
vidual political and econom
British Joint Declaration se
The number of emigrants
Beijing's brutal crackdown
ment. Presumably, those wh
passport also tended to be
house warned that the bra

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
Real Estate Elite, Economic Development, and Political Conflicts 11
emi-gration, would ultimately cut Hong Kong's growth rate by 45 percent

prior to 1997.34
The negative developments in Hong Kong deeply worried Beijing.
With the traumatic experience of the June Fourth Incident engraved in
the city's collective memory, Beijing found itself in a precarious political
position. It desperately needed a political partner, acceptable to Hong
Kong society at large and to serve as a bridge to the chasm between
Beijing and the Hong Kong people.
Against this complicated historical background arose the real estate
elite of Hong Kong. There are multiple reasons why Beijing chose these
Chinese magnates as its co-optation target. First, as Hong Kong residents
(though not necessarily Hong Kong-born), they were more likely to be
accepted by Hong Kong society, rather than someone sent from mainland
China. Second, these business tycoons were easier for Beijing to control
because of their growing economic dependence on the mainland. Third,
because their business was the central pillar of the city's economy, their
political support for Beijing yielded the best "demonstration effect" for
other runaway capitalists.35
Finally, big business shared with Beijing a common enemy: Hong
Kong's rising prodemocracy force.36 This force developed quickly after
the June Fourth Incident, as Hong Kong people found it important to
build democratic institutions against the impending imposition of a
Chinese authoritarian state after 1997. From the business tycoons'
perspective, democratization ran against their interests, because it would
lead to stronger labor unions and more taxation.37
These factors forged an "unholy alliance" between Hong Kong's real
estate elite and Communist Beijing. In 1990, while the PRC government
still suffered from international isolation because of the June Fourth
Incident, various Hong Kong magnates such as Li Ka-shing and Kwok
Tak-seng openly stated their confidence about Hong Kong's future and
pledged to continue to invest in the city's economy.38
To reward its political supporters, Beijing appointed members of the
real estate elite to key political positions such as those in the Chinese
People's Political Consultative Conference. In addition, almost all real
estate magnates were invited to sit on the Preparatory Committee for the
HKSAR, which was responsible for establishing the 400-member Selec
tion Committee for the first government of the HKSAR. Not surpris
ingly, these members ended up nominating themselves into the Selection
Committee, which empowered them to hand-pick Hong Kong's first chief

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executive.39 The one who

also a business tycoon.
4. Economic Interests of the Real Estate Elite
Most members of the real estate elite earned their initial wealth prior to
the 1970s in industries other than real estate. For instance, Hysan Lee,
founder of the Hysan Development Company, first made his fortune in
the opium trade back in the early twentieth century. Chen Din Hwa,
head of the Nan Fung Group, was a leading textile manufacturer in the
1950s. Lim Por-yen established the Lai Sun Group, a giant in the
garment industry. The business empire of Li Ka-shing began with a
small factory producing plastic flowers back in the 1950s.
Despite their diverse industrial backgrounds, these businesspeople
were able to turn themselves into present-day tycoons by making the
same investment move—land acquisition—albeit at different points in
time. Quite notably, Hong Kong experienced two waves of massive
retreat of British investment in the postwar era.40 The first occurred in
the late 1960s, when the Cultural Revolution stimulated anticolonial
insurgencies in Hong Kong. The second occurred around the time of the
Sino-British negotiation over Hong Kong's sovereignty, as detailed in the
foregoing discussion. In each market downturn, the Chinese economic
elite managed to expand their business empires by acquiring assets sold
by runaway British or local capitalists at a reduced price.
Real estate owners make a profit by selling and leasing land to other
people who use it for their economic production or consumption.
Presumably, real estate owners are able to charge more from those who
have an inelastic demand for land. For example, compared with manu
facturing, the retail sector depends significantly more on location-specific
advantages. For this reason, the latter has a much weaker bargaining
power vis-à-vis the land owners. This explains the observed business
patterns of the real estate elite in Hong Kong. They have heavily engaged
in the development of commercial buildings, shopping arcades, and
private residential housing estates, as the consumption of these proper
ties exhibits low price elasticity.
5. Conflicts and Cooperation among the Real Estate Elite

Despite or because of their similar economic interests, the members of
the real estate elite are at times in competition with each other when

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Real Estate Elite, Economic Development, Political Conflicts 13
pursuing their individual interests. One salient point of cleavage within

the real estate elite is firm size. It is said that land administration policies
are biased in favor of large land developers. Here I consider two
examples.
A. Conflicts between Large and Small Land Developers
a. Leasehold System
When the government sells the leasehold of an estate to a buyer, the sale
consists of two parts: (1) the land premium that the buyer has to pay up
front and (2) the ground rent paid each year until the lease expires. The
law stipulates that a lessee only needs to pay three percent of the adjust
able rateable value of the property as annual ground rent, which implies
that 97 percent of the property value goes to the land premium.41 This"high
premiums, low rents" leasehold system favors large developers, who are
able to afford the exorbitant land premiums.
b. Application List System
Prior to 1999, scheduled land sales through public auctions were one of
the major land sale mechanisms.42 Between 1999 and 2013, the govern
ment introduced a new system known as the "application list system,"
under which the government published a list of sites available for sale
each year. Land developers could make a private offer to the govern
ment once they identified a desired site. If the private offer met the
government's undisclosed reserve price for the site, a public auction of
the site would be arranged on condition that the applicant paid a deposit
at a certain fraction of the government's undisclosed reserve price. This
system, therefore, allowed land developers to take the initiative in
controlling the supply of land.43
The application list system turned out to disadvantage small land
developers. Because large developers had a significant land bank, they
were not eager to trigger more land sales through this system, as land
shortages permitted them to mark up the prices of their existing proper
ties.44 Small land developers, who had an incentive to acquire more land
through the system, had to bear a high transaction cost, as the system
required them to pay a sizable deposit up front. More importantly, even
when they were able to trigger a public auction of a desired site, there
was no guarantee that they would eventually win the site. In fact, the act
of triggering the public auction revealed their private valuation of the

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site to large developers w

this system has raised th
land.
Under the application list

successfully sold.45 Aware
government has gradually
sales, reclaiming the initia
2013, it abolished the appli
Table 2: Land Sales Arrangement
Year Tender Auction Application list
1998/1999 11 2 N/A
1999/2000 7 11 6
2000/2001 9 12 1
2001/2002 0 10 4
2002/2003 0 6 2
2003/2004 10 0 0
2004/2005 5 0 6
2005/2006 6 0 3
2006/2007 1 0 9
2007/2008 10 0 8
2008/2009 2 0 1
2009/2010 6 0 4
2010/2011 6 4 7
2011/2012 25 9 5
2012/2013 26 0 2
2013/2014 29 0 N/A
Sources: Lands Department and the Development Bureau.

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B. Conflicts between Large Developers
The conflicts among the real estate elite are not confined only to that
which exists between large and small developers. In what follows, I will
discuss several examples in which government policies or political
developments actually brought major land developers into conflict. In
particular, some examples are the mega projects widely perceived to be
manifestations of the undue influence of the real estate elite on govern
ment policies.46
a. The Cyberport Project
In 1999, at the height of the dot-com bubble, the government took the
idea from Richard Li, son of Li Ka-shing, to develop Cyberport, which
was intended to become the Hong Kong version of Silicon Valley.47
Richard Li's company was later chosen as the developer of Cyberport
without going through a process of competitive tendering. This move
was heavily criticized by the general public as an example of "collusion
between government and business."48 These criticisms intensified after
the media discovered that Richard Li could potentially pocket a
$35-billion profit from building residential properties in Cyberport, rein
forcing the public impression that the technology park was a real estate
project in disguise.49 The government responded to critics by empha
sizing that, as an IT project,50 Cyberport needed to bypass time
consuming competitive tendering.51 In addition, the government argued
that Richard Li was chosen because of his ability to attract multinational
IT firms.52
The government's response not only failed to suppress public

outcries, but also infuriated other real estate entrepreneurs. In an unprec
edented move, nine major real estate developers issued a joint letter to
the government, criticizing the government for setting a bad precedent.53
To allay their anger, the government pledged to invite interested devel
opers to participate in other residential developments. This pledge,
however, was interpreted as a "secret deal" signed between the govern
ment and developers.54
As the dot-com bubble burst, the technological aspects of the project
evaporated, leaving the site converted into yet another luxurious apart
ment complex.

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b. The West Kowloort Cu
The core concept of this

Hong Kong's image as the
taining and sporting even
opers to take a leading role
partnership, under which
the construction and ope
right to build residential a
the government allowed
floor space of this cultur
project aroused a public o
purpose.
Ironically, the project was also severely criticized by land devel
opers. This is because the government adopted a single-consortium
development mode, in which the development of the entire site would be
contracted out to a single developer. Stanley Ho, a business tycoon who
chaired the Real Estate Developers Association of Hong Kong, openly
urged the government to change the West Kowloon Cultural Develop
ment Project plan, so that more real estate tycoons could get on the
gravy train.57
Several months later, the government announced the abandonment
of the single-consortium development mode. Moreover, it would allow
the successful bidder to develop only half of the residential and commer
cial area (35 percent of the total floor space), while the rest was further
allocated by competitive tendering.58 This move was perceived as a way
to avoid accusations of "collusion between government and business."
However, the new requirement significantly reduced the profits of the
successful bidder.59 After two developers who had expressed initial
interest withdrew their bids, the government announced in 2006 indefi
nite suspension of the project.
c. The Hong Kong-Zhuhai-Macau Bridge Project
Since the early 1980s, Gordon Wu, the chairman of Hopewell Holdings,
had actively promoted the idea of constructing a mega bridge (the Hong
Kong-Zhuhai-Macau Bridge) linking Hong Kong with the west banks
of the Pearl River.60 The bridge was intended to further embed Hong
Kong in the economic system of the Pearl River Delta. While the

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Chinese authorities showed enthusiasm, the former colonial government

remained uninterested.
After the retrocession, the project continued to meet resistance from,

ironically, within the real estate elite. Canning Fok, the managing
director of Hutchison Whampoa, a business conglomerate spanning a
variety of sectors such as retail, energy, properties, and ports, openly
stated that, while he welcomed the project, he opposed the fact that the
government had subsidized the project by granting Wu a nearby site for
developing a new container terminal at zero land premium.61 Fok also
argued that a new container terminal was unnecessary, as the existing
terminals owned by his own company would not be saturated until 2016.
He counterproposed an alternative railway system to link its container
terminals to the mainland.62
Despite Hutchison Whampoa's opposition, Wu saw his lobbying
effort pay off in 2002, as then Chinese premier Zhu Rongji signaled his
support for the bridge project.63
d. 2012 Chief Executive Election
The most dramatic power struggle within the economic elite in postcolo
nial Hong Kong manifested in the 2012 chief executive election. Henry
Tang Ying-yen was considered the preferred candidate of major land
developers, as he received nominations from Li Ka-shing, Thomas and
Raymond Kwok of Sun Hung Kai Properties, Lee Shau-kee of
Henderson Land Development, Robert Ng of Sino Group, and Gordon
Wu. However, Tang was eventually defeated by Leung Chun-ying, a
candidate perceived as hostile to these developers' interests.64 It is
important to note that Leung was also backed by some less prominent
members of the real estate elite, including Ronnie Chan of Hang Lung
Group and Vincent Lo of Shui On Group.65 As a result, some observers
contend that the 2012 chief executive election marked a showdown
between first- and second-tier land developers.66
C. Cooperation among the Real Estate Elite
Admittedly, there have been times when the interests of various factions
within the real estate elite converged. When their sector is in peril, they
have been able to make a concerted effort to articulate their special
group interests. I supply two examples below to illustrate their collective
actions to influence the postcolonial government's housing policies.

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a. Decreasing Supply of R
Soon after the retrocessio

cial Crisis, which punct
previous two years. As ho
their apartments worth le
equities"). Bank foreclosur
shrank. As unemploymen
spiral. The newly establis
a way out of these troubles.
Immediately after the
government announced th
to build 85,000 housing u
ownership rate within 10
time for public rental h
programs, which benefite
housing supply, were unif
the economic crisis worse
these programs for fear t
devastate the ailing housin
of the housing doldrums,
termination of an important subsidized housing scheme (the Home
Ownership Scheme). The upshot of this policy change was that hundreds
of thousands of eligible owners of these public flats were pushed into the
private housing market.
The government also replaced the traditional method of selling land
by auction with the aforementioned application list system. As discussed
in the previous section, this system empowered the real estate elite to
control land supply, leading to a continuous decline in the housing
supply. Figure 2 presents the statistics of annual flat production, showing
a clear downward trend after 1997.69
b. Increasing Demand for Real Estate
In October 2001, members of the real estate elite attempted to issue a

joint letter to the chief executive, urging him to accelerate Hong Kong's
integration with the mainland as a way to revive the economy.70 It is
worth noting that the real estate elite had originally opposed such inte
gration, for fear that Hong Kong residents would be encouraged to invest

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
Figure 2: Annual Flat Production in Hong Kong
40000 -
NUmb6r 20000
[ , , ,
1995 2000 2005 2010
Total Public Housing
Sources: Hong Kong Annual Digest of Statistics, HKSAR Rating and Evalua
Hong Kong Housing Authority.
Note: The figure for private housing is the area between the dashed and solid
in mainland property markets.71 But as Hong Kong's eco

their preference changed; closer integration might actually b
investment from the mainland. Their suggestion received
some Chinese officials.77
While the actual political effects of their attempt rem
able,73 what we do observe is that, fifteen months later,
tive announced in his Annual Policy Address a long-term
for the economy: deep integration with the mainland e
months later, the Hong Kong government further announ
of the Closer Economic Participation Arrangement
mainland China. CEPA, which is essentially a preferenti
ment, has been heralded time and again by the real estat
from the central government to the city.74 It has confer
tages on Hong Kong companies with respect to trade
services, and investment in the mainland.75

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Figure 3: Manufacturing, Servic
—, 1 1 1—
2002 2004 2006 2008
Manufacturing (% of GDP) Share of Service Exports to Mainland
Share of Mainland Visitors
In practice, the benefits of CEPA to manufacturing and service

exports to the mainland have remained doubtful. As may be seen from
Figure 3, the share of manufacturing outputs has continued to fall since
2003. By 2011, it accounted for merely 1.7 percent of Hong Kong's GDP.
Service exports to the mainland also saw no dramatic change, despite
CEPA. In fact, the share of service exports to the mainland dropped
slightly after CEPA.
One major policy component of CEPA is to relax the travel restric
tions of mainlanders, which was a policy suggested in the real estate
elite's proposed joint letter to the chief executive. Prior to CEPA,
mainland residents needed to join group tours when visiting Hong Kong.
The Individual Visit Scheme of CEPA permits residents of certain
mainland cities to visit Hong Kong on an individual basis. Since 2003,
the scheme has been made available to more and more mainland cities.
As may be seen from Figure 3, the number of mainland visitors as a

share of the total visitors to Hong Kong has skyrocketed, reaching 71
percent in 2012.
The major beneficiaries of the influx of mainland Chinese include
the retail sector, the real estate sector, and nontradable services

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industries. For the retail sector, it is easy to understand how they benefit
from the scheme because their sales are directly proportional to the
number of shoppers.76 For the other two sectors, the benefits are less
obvious, but no less substantial. Take health care services as an example.
Many mainland visitors avail themselves of Hong Kong's hospital
services because they find them more reliable than those in the
mainland. Also, tens of thousands of pregnant women from the mainland
have tried to give birth in Hong Kong, in an attempt to gain the benefits
associated with Hong Kong residency status, including the absence of
the one-child policy.77
The ease of traveling has attracted mainlanders to invest in Hong
Kong's property markets. Some buy flats as vacation properties, while
others do so for speculation purposes. According to one source,78 main
landers accounted, in the third quarter of 2011, for 22.7 percent of capital
and 12.55 percent of home buyers in Hong Kong. Land developers have
also changed their business strategies in response to the influx of
mainland investors. More luxurious apartment buildings have been built.
The effect of this changing composition of residential properties and the
intensified competition is reflected in housing prices.79 Many Hong Kong
residents lament the decreasing affordability of private housing. Ironi
cally, in merely one decade, the most vexing social problem confronting
Hong Kong people has changed from having too many "negative
equities" to having too few affordable flats.
6. Broader Economic and Political Consequences

The policies discussed in the previous section have led to a steady
increase in the aggregate demand for land since 2003. As may be seen
from Figure 4, housing prices have been on a rising trend in recent
years. Most notably, the prices of residential properties doubled between
2003 and 2010.
An important effect of these rising land prices is an increase in the
production cost of economic activities that require land as an input. This
provides a partial explanation for the continuous decline of the city's
manufacturing outputs, as shown in Figure 3.80 This also highlights
potential conflicts among the different economic benefits promised by
CEPA. Flong Kong's small economy cannot keep luring mainland capital
to asset markets, while boosting its manufacturing sector.

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Figure 4: Some Important Socioec

The government
The Cyberport demoniished the Afult-pagead
project was historic Queen's appeared in a
announced p,#r clashing newspaper
S? n>»
»cli»!ls approved the KMtM
" : IM.IM. * (undtng for She Chioe.eto
rpturncdto PRC ; liwlsfimtu - rroirv™ locusts
on Jjly 1 : suspension
of Home Ownership
Tung announced ; Scheme was
his goals for : announced
housing (e.g.
85.000 target)
20)3
500.000 peopta
too* to the street
»n protest of Tung CY Leung hinted
on July f. 2003 lha{ cWWren of
mainland parents
CEFA was signed will not gain <
between HK and permanent
mainland
The government
imposed restrictions
on transporting
infant milk formula
by individual travellers
Note: Housing price index 1999 =100. The housing price index comes from the HKSAR Ra
and Valuation Department.
In addition, the housing boom has also raised aggregate economic

risk. If the liquidity in housing markets continues unabated, anothe
housing bubble will likely emerge. Aware of the heightened risk, th
government has since 2010 levied various duties on real estate trans
tions to curb speculation.81
Overdependence on services industries, especially those geare
toward mainland consumers, has other problems, too. First, remuneration
to employees in consumer services is lower than that in producer se
vices.82 Second, the supply of mainland consumers cannot keep increas
indefinitely. Third, as economists have long observed, it is difficult
raise productivity in service industries.83 Therefore, it remains uncl
how to sustain economic growth when the number of mainland touri
eventually levels off.
The rise of a land-dependent economy has significant redistributi
consequences. Thanks to the inflow of mainland capital and the expa
sion of the service sector, landowners see the rent and value of their
properties constantly on the rise. Meanwhile, booming services

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industries, especially those related to consumer services, have increased

the relative demand for low-skilled workers vis-à-vis high-skilled workers.
This helps explain recent developments in Hong Kong's labor market.
The first is that the unemployment rate remains low, despite the enact
ment of a statutory minimum wage in 2011. Figure 5 shows the number
of low-skilled workers (i.e., without college degree) in different income
groups. From 2006 to 2011, there was a drastic decrease in the number
of those who earn less than HK$6,000. Despite rising labor costs,
employment in consumer services such as the retail, accommodation,
and food service sectors kept expanding, resulting in a slight decline in
the city's unemployment rate.84 In contrast, fresh college graduates'
wages in 2012 were on a par with those in 2008. In fact, if one takes a
longer view, their wages in 2012 were not even able to surpass the 1997
level (see Figure 6 on Page 24).
Figure 5: Number of Low-Skilled Workers in Different Monthly Salary Groups
200000
<6K 6K-10K 10K-20K 20K-30K >30K <6K 6K-10K 10K-20K 20K-30K
Primary and below Secondary
Sources: 2006 Bi-Census and 2011 Census, Census and Stat

Government.
Note: The data exclude foreign domestic helpers. "Primary and below" refers to workers who
have attained no more than primary education, while "secondary" refers to those who have
attained no more than secondary education.

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Figure 6: Average Annual Salarie
400
300
Thousand
HK$
200
, | | i | | | | | | | 1 1 1 1—
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Graduation Year
Medicine, Dentistry, and Health — Sciences
Engineering and Technology Business and Management
Social Sciences — • — Arts and Humanities
Education
Source: University Grants Committee of the HKSAR Government, 2013.
The redistribution consequences help us understand political con

flicts in post-1997 Hong Kong. The real estate elite, who are the major
beneficiaries of the aforementioned economic developments, have
become the target of public resentment and protests. It must be noted,
however, that the benefits of the housing boom are not confined to the
real estate elite. Ordinary citizens who own only personal-use properties
can benefit from rising home prices, as they can refinance their mort
gages to enjoy additional cash flow.
The only people who cannot enjoy the direct benefits of the housing
boom are those without any property. But if they happen to be low
skilled workers, they stand to benefit from the expansion of the service
sector. In addition, many of these low-skilled workers would have stayed
in the same public rental housing anyway, had there been no housing
boom. As a result, the decreasing affordability of private properties may
not concern them.
A relatively less fortunate social group is that of young college grad

uates. On the one hand, most of them are not wealthy enough to afford
the down payment to become a property owner, thereby failing to take

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advantage of the rising tide of the property market. On the other hand,
their wage level disqualifies them from public rental housing. Their
plight is compounded by the fact that their skill set is less valued in a
labor market swamped by low-skilled service jobs. Perhaps this explains
why many social movements in post-1997 Hong Kong have been led by
the so-called post-80s generation (people who were born after 1980).
The massive influx of mainland visitors has created another political
fault line. As discussed before, the ease of travel has attracted not only
mainland sightseers, but also mainland consumers. The latter group
competes with locals over public services and facilities, such as health
care services, as well as for consumer commodities ranging from
housing to baby formula. In particular, food safety scandals in China
have undermined the mainlanders' confidence in domestic food products.
Those who live near Hong Kong are willing to go all the way to Hong
Kong to shop for daily food products, which they believe to be safer.85
The resilient demand for Hong Kong-made products has spawned a new
business: smuggling. Thanks to the Individual Visit Scheme, many main
landers are hired as "foot soldiers" to carry products across the border,
box by box, to avoid customs duties.86
Many Hong Kong people are upset by the unprecedented competi
tion brought on by mainland consumers. An antimainlanders sentiment
has escalated. Online forums have been littered with hate-mongering
terms such as "locusts" and "shina" to insult mainlanders. More people,
especially the younger generations, identify themselves as Hong Kongers,
rather than Chinese.87 In recent street protests, some participants even
displayed Hong Kongs colonial flag to express their nostalgia for the "good
old days," if not also to embarrass Beijing.88
7. Discussion and Conclusion
Li Ka-shing is probably right in stating that the HKSAR government

does not depend on any one individual. Although the chief executive is
not democratically elected, his political power is constrained by various
social and political forces. In this article, I have examined one seemingly
powerful special interest group—the real estate elite.
The concentration of economic power and political privilege in the
hands of the real estate elite has fueled strong public resentment in post
colonial Hong Kong. Many mass mobilizations taking place in postcolo
nial Hong Kong have been directed against the real estate elite. The

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emergence of the "real es

larity in public discourse
members of the elite, wh
political office and inform
ties to advance their speci
Kong public.
However, as illustrated in this article, while there have been collec
tive attempts by the real estate elite to influence government policies (e.g.,
pertaining to changes in the demand and supply of land), government
policies at times have pitted members of the real estate elite against each
other (e.g., the leasehold system and application list system). In addition,
internal strife among the real estate elite has run deep, which has con
strained their ability to advance their special group interests. This has
contributed to delays (e.g., in the Hong Kong-Zhuhai-Macau Bridge
project) or suspension (e.g., of the West Kowloon Cultural Development
Project) of mega projects that would bring aggregate benefits to the real
estate sector.
In addition, the "real estate hegemony" thesis focuses primarily

how the real estate elite reaps benefits from government poli
ignoring the spillover effects of such policies. As this article dem
strates, the dependence on land-related economic activities has led to
expansion of services industries, increasing the aggregate demand
low-skilled workers who can also share the fruits of the land-depen
economy.
An important implication of the foregoing analysis is that political
conflicts in postcolonial Hong Kong do not necessarily arise from the
cleavage between the real estate elite and the rest of the population, as
the "real estate hegemony" thesis presumes. Because low-skilled workers
also benefit from the expansion of the service sector, their dissatisfaction
with the political status quo, which is biased in favor of the real estate
elite, should be relatively low. In contrast, young and high-skilled
workers are squeezed between rising asset prices and decreasing returns
to education in the land-dependent economy, together with their lack of
access to housing welfare. The distributive effects of the land-dependent
economy have structured political alignment in postcolonial Hong Kong.
On the one hand, we observe that younger people have become increas
ingly restive and receptive to political radicalism. On the other hand,
pro-establishment parties have witnessed increasingly strong showings in
recent elections, thanks to their rising popularity among the low-income
class.

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Appendix A: Listed Hong Kong-Based Real Estate Companies
Company name Listing code Date of incorporation Market value
(US$ millions)
Sun Hung Kai Properties HK16 1992 293,241.40
Cheung Kong Holdings HK1 1971 217,372.00
Hang Lung Properties HK101 1908 134,756.90
Wharf Holdings HK4 1886 117,038.90
Henderson Ld. Dev. HK12 1976 104,694.80
Sino Land HK83 1971 72,044.50
Hang Lung Group HK10 1960 61,067.79
Kerry Properties HK683 1996 56,164.55

New World Dev. HK17 1970 54,381.65
Wheelock and Co. HK20 1918 49,170.71
Tsim Sha Tsui Props. HK247 1972 33,944.82
Chinese Estates Hdg. HK127 1989 27,324.83
Hysan Development HK14 1970 25,404.27
Kowloon Development HK34 1961 9,792.29
Polytec Asset Hdg. HK208 1998 6,392.11
Associated Intl. Hotels HK105 1983 5,904.00
Emperor Intl. Hdg. HK163 1991 5,521.05
Midland Holdings HK1200 1993 5,294.13
Silver Grant Intl. Inds. HK171 1960 4,959.61
HKR International HK480 1989 4,469.41

Far East Consort. Intl. HK35 1990 4,318.24
Pacific Cen. Prum. Devs. HK432 1998 3,394.52
Tai Cheung Holdings HK88 1989 3,174.11
Vanke Property (Os.) HK1036 1996 3,085.06
Wing Tai Properties HK369 1952 3,069.07
Tian Teck Land HK266 1969 3,038.28
China Motor Bus HK26 1933 2,826.87
Sea Holdings HK251 1989 2,680.57
Hong Kong Ferry Hdg. HK50 1923 2,476.10
International Entm. HK1009 2000 2,405.48
Lai Sun Dev. HK488 1959 2,166.79
Melbourne Ents. HK158 1967 2.000.00
Richfield Group Holdings HK183 1993 1,786.38
Asia Standard Intl. Group HK129 1992 1,666.90
Soundwill Holdings HK878 1994 1,423.37
Hong Kong Chinese HK655 1992 1,416.99

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Company name
Listing code Date of incorporation Market value
(US$ millions)
Hycomm Wireless HK499 1997 1,397.97
YT Realty Group HK75 1990 1,079.40
ITC Properties Group HK199 1994 1,045.10
Lai Sun Garment (Intl.) HK191 1987 1,002.80
Hopefluent Group Hdg. HK733 2002 962.54
Tern Properties HK277 1968 961.76
Asia Orient Hdg. HK214 1991 956.75
Dan Form Holdings HK271 1973 947.95
Rivera (Holdings) HK281 1964 912.99
Tai Sang Land Dev. HK89 1968 894.65
Cheuk Nang (Holdings) HK131 1963 877.07
Landsea Green Properties HK106 1990 858.64
Pokfulam Dev. HK225 1970 754.73
Yugang International HK613 1993 697.90
Safety Godown HK237 1960 648.00
Wang On Group HK1222 1993 597.03
Nanyang Holdings HK212 1947 588.35
Pioneer Global Group HK224 1989 492.39
Winfoong International HK63 1996 447.38
Midland IC & I HK459 2001 398.40
Henry Group Holdings HK859 1999 356.37
Wah Ha Realty HK278 1961 344.74
Hanny Holdings HK275 1991 291.95
Applied Development Hdg. HK519 1988 218.11
21 Holdings HK1003 1994 187.07
Winfair Investment HK287 1971 175.20
Paladin HK495 1988 136.97
Century Legend Holdings HK79 1993 113.11
Fortune Sun (China) Hdg. HK352 83.19
Wing Lee Property Invs. HK864 2012
Swire Properties HK1972 1972
Lifestyle Props. Dev. HK2183
Capitamalls Asia (HKG) HK6183
Kong Shum Property Man.(Hldg.)HK8181

Source: Datastream.
Notes: Real estate firms not based in Hong Kong are excluded. Market values are based on data
as of July 31, 2010. For Wharf Holdings, Hang Lung Properties, Swire Properties, and
Richfield Group Holdings, their foundation dates are reported.

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Appendix B: Top Ten Chinese Business Families in Hong Kong in 1997
Name Market value % of Hong Selection Chinese

(HK$ millions) Kong stock committee p
market political
capitalization consultative
conference
Li Ka-shing family 2 0
Cheung Kong Holdings 152,787.40
Hutchison Whampoa 206,215.80
Hong Kong Electric 54,549.01
Cheung Kong Infrastructure
Holdings
Total 463,821.02 16.01
Lee ShauKee family 2 0

Henderson Land 111,729.40
Development Limited
Henderson Investment Limited 21,975.14
Hong Kong and China Gas 45,245.36

Hong Kong Ferry Holdings 4,791.88
Miramar Hotel and Investment 8,196.68
Total 191,938.46 6.63
Kwok Tak-seng family 1 0
Sun Hung Kai Properties 182,799.80

Kowloon Motor Bus 999.69
Smartone Telecommunication 7,751.99

Holdings
Total 191,551.48 6.61
Woo Kwong-ching
Kwong-ching family
family 1
I 0
Wheelock and Company 33,009.10
Wharf Holdings 68,906.06
New Asia Realty 10,176.57
Harbour Centre Development 3,307.50
Cross-Harbour Holdings 3,209.93
Beauforte Investors Corporation 386.52
Limited
Total 118,995.68 4.11

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Name Market value % of Hong Selection Chinese

(HK$ millions) Kong stock committee pe
market political
capitalization consultative
conference
Yung Chi-kin family 0 1

CITIC Pacific 82,980.88
Total 82,980.88 2.86
Cheng Yu-tung family 1 1

New World Development 74,258.06
Total 74,258.06 2.56
Ng Teng Fong family 1 0

TsimShaTsui Properties 34,934.14
SinoLand 21,549.04
Sino Hotels Holdings 2,765.81

Total 59,248.99 2.05
Kuok Hock Nien family 0 0

Kerry Properties 18,185.82
Shangri-La Asia 14,779.38
SCMP Group 11,684.24
Total 44,649.44 1.54
Chan Chi-chung family 0 0

Hang Lung Group 18,874.03
Hang Lung Properties 21,807.08
Total 40,681.11 1.4
Li Kwok-po family 2 0
Bank of East Asia 34,706.24
Total 34,706.24 1.2
Sources: Datastream, Wong (2012).

Note: Data on market value are based on a

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
Notes
As of the end of 2013, three years after the first publication of its Chinese
version, the book was in its twelfth edition. No other popular social science
title has been able to achieve the same level of popularity within such a
short period of time in recent years.
These scandals include the former chief executive's acceptance of gifts and
services offered by some major land developers, the involvement of the
former chief secretary for administration in a corruption case with a major
land developer, and the appointment of the former permanent secretary for
housing, planning and lands to a high-ranking position in a land develop
ment company shortly after his retirement.
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Hong Kong Monetary Authority Quarterly Bulletin (2013), pp. 1-5.
Ashvin Ahuja, Lillian Cheung, Gaofeng Han, Nathan Porter, and Wenlang
Zhang, "Are House Prices Rising Too Fast in China?," IMF Working Paper
(2010), p. 274.
Article 7 of the Basic Law, the mini-constitution for the city, stipulates that
"[t]he land and natural resources within the Hong Kong Special Adminis
trative Region shall be State property."

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
15. Hong Kong Monetary A

Stability Report" (2012).
16. Anne Haila, "Real Estat
Property States," Urban St
17. Eliza W. Y. Lee, "The R
Economic Globalisation, S
Journal of Social Policy, V
18. Jean Imbs and Romain W
Economic Review, Vol. 93,
19. As of 2012, the per ca
while that of Hong Kong w
Metro Monitor" (2013), http
global-metro-monitor-3.
20. This is not to suggest th
insignificant manufacturin
labor costs, also have contri
21. A. J. Youngson, Hong K
Oxford University Press,
Yeh, "Hong Kong," in Ho
Seong-kyu Ha (London: Cro
Policy and Economic Grow
tional Journal of Urban an
180-196. For instance, by th
lation lived in heavily subsi
22. Leo F. Goodstadt, A Fragi
ment of Hong Kong's Eco
Hong Kong Institute for
laissez-faire is merely a eup
ness bias and lack of a long-
23. Manuel Castells, Lee Go
Syndrome—Economic Deve
Singapore (London: Pion,
Growth."
24. Like many local governments in China, the Hong Kong government faces a
hard budget constraint. But unlike its mainland counterparts, the Hong
Kong government does not need to hand over any tax revenue to the central
government, a special arrangement provided by the Basic Law. Nor can the
central government levy taxes in the special administrative region. These
constitutional provisions should put the Hong Kong government in a better
position to maintain a balanced budget than most local Chinese govern
ments, which may need to rely on land sales to cover their expenditures.
See Tianyong Zhou, "Maidi caizheng de weihai jigai cuoshi" (The Hazards

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
of Land Sale Finance and Its Remedies), Dangdai sheke shiye (Modern
Social Science View), Vol. 3 (2008), p. 54; Chong-fu Li, "Guanyu jiejue
dachengshi fangjiagao de jibensilu" (On How to Curb the Exorbitant
Housing Prices in Some Big Cities), Zhongguo liutong jingji (China
Business and Market), Vol. 4 (2011), pp. 4-7.
Stan Hok-wui Wong, "Political Connections and Firm Performance: The
Case of Hong Kong," Journal of East Asian Studies, Vol. 10, No. 2 (2010),
pp. 275-313; Ma Ngok, "Eclectic Corporatism and State Interventions in
Post-colonial Hong Kong," in Repositioning the Hong Kong Government:
Social Foundations and Political Challenges, edited by Stephen Wing-kai
Chiu and Siu-lin Wong (Hong Kong: Hong Kong University Press, 2012).
Joseph Y. S. Cheng, "Hong Kong's Democrats Stumble," Journal of
Democracy, Vol. 16, No. 1 (2005), p. 143; Ian Scott, "Legitimacy, Gover
nance and Public Policy in Post-Handover Hong Kong," Asia Pacific
Journal of Public Administration, Vol. 29, No. 1 (2007), p. 33.
Ma, "Eclectic Corporatism and State Interventions," pp. 71.
Wong, "Political Connections and Firm Performance."
Wing-chung Ho, Lung-wan Lee, Chun-man Chan, Yat-nam Ng, and
Yee-hung Choy, "Hong Kong's Elite Structure, Legislature and Bleak
Future of Democracy under Chinese Sovereignty," Journal of Contempo
rary Asia, Vol. 40, No. 3 (2010), pp. 466-486.
Tai-lok Lui and Stephen Wing-kai Chiu, "Governance Crisis in Post-1997
Hong Kong: A Political Economy Perspective," China Review, Vol. 7, No.
2 (2007), pp. 1-34.
Brian C. H. Fong, "State-Society Conflicts under Hong Kong's Hybrid
Regime: Governing Coalition Building and Civil Society Challenges,"
Asian Survey, Vol. 53, No. 5 (2013), pp. 854-882.
Alice Poon, Land and the Ruling Class in Hong Kong (Singapore: Enrich
Professional Publishing, 2011). In one public opinion survey conducted by
the Chinese University of Hong Kong, 85 percent of respondents had heard
of the "real estate hegemony" thesis, and 66 percent believed the "hegemony"
existed in Hong Kong. See The Chinese University of Hong Kong, "Survey
on Public Opinion about 'Real Estate Hegemony'" (2011), http://www.
cuhk.edu.hk/hkiaps/tellab/pdf/telepress/1 l/Press_Release20110810.pdf.
Steve Tsang, A Modern History of Hong Kong (Lanham, MD: Rowman &
Littlefield, 2004), pp. 218-225; John M. Carroll, A Concise History of Hong
Kong (Lanham, MD: Rowman & Littlefield, 2007), pp. 167-189.
Ronald Skeldon, Population Mobility in Developing Countries: A Reinter
pretation (London: Belhaven Press, 1990), p. 501.
Stan Hok-wui Wong, "Authoritarian Co-optation in the Age of Globalisa
tion: Evidence from Hong Kong," Journal of Contemporary Asia, Vol. 42,
No. 2 (2012), pp. 182-209.

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
Alvin Y. So, "Hong Kong's

Dependence or Business He
(2000), pp. 359-381; Ming S
ment: The Anomalous Case
3 (1996), pp. 343-359.
So, "Hong Kong's Problema
Bangyan Feng, Xianggang
Consortiums) (Hong Kong: J
In addition to political po
Kong's landed elite with si
firms connected to the Sel
over politically unconnecte
Firm Performance."
Feng, Xianggang huazi caituan.

Roger Nissim, Land Administration and Practice in Hong Kong (Hong
Kong: Hong Kong University Press, 2012).
The other major mechanism was public tenders.
"Ji Xianggang dichanshang yige jinghao" (A Warning to Hong Kong
Property Developers), Hong Kong Daily News, June 9, 2013.
"Guanshang goudi fenqi honggou rengkuo" (Huge Differences between
Government and Businessmen on the Application List), Hong Kong
Economic Times, March 1, 2006.
During the entire lifetime of the application list system, only 58 sites were
successfully sold (see Table 2), which implies, on average, four sites sold
annually.
I do not claim that these examples are necessarily representative of the
competition of the real estate elite. But these high-profile cases are econom
ically significant and iconic examples of the perceived "collusion between
government and business." Using them to illustrate internal strife among
the real estate elite is instructive.
Bob Jessop and Ngai-ling Sum, "An Entrepreneurial City in Action: Hong
Kong's Emerging Strategies in and for (Inter)urban Competition," Urban
Studies, Vol. 27, No. 12 (2000), pp. 2287-2313.
"Yingke wuzui mingyi youli" (PCCW Is Not Guilty, Collusion Is Reason
able), Hong Kong Daily News, March 17, 1999; "Guanshang goujie guafen
Xianggang" (Government-Business Collusion Partitions Hong Kong), Ming
Pao News, September 20, 1999.
"Shumagang zhuzhaiwurebufen mogongkai jingtou gangfu beizhi mingyi
yingli 35yi" (Government Does Not Disclose Real Estate Development in
the Cyberport Project), Apple Daily, March 16, 1999; "Shumagang dichan
fazhan guimodai 'mijian' zhizheng fuke yiyinman" (Censored Document
States Government Concealed Large-Scale Real Estate Development in
Cyberport), Ming Pao News, March 16, 1999.

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
50. "Shumagang ni banniannei qianyue kuangqizhi cheng weiyou piantan

yingke ganmingnian donggong buzhaobiao" (Cyberport Contract Will Be
Signed within Six Months, Kwong Said No Favoritism to PCCW, Construc
tion Work Will Begin Next Year without Tendering), Hong Kong Commer
cial Daily, March 17, 1999.
51. "Government Does Not Disclose Real Estate Development," Apple Daily,
March 16, 1999.
52. "Shumagang qi ronglu xiaoying" (Cyberport Creates Furnace Effect), Sing
Tao Daily, December 30, 1999.
53. Ibid.
54. Juanito Concepcion and Michelle Lee, "Government Wins Anti-Cyberport
Developers over with Pledge," Standard, May 6, 1999.
55. Chee-hwa Tung, The 1998 Policy Address (Hong Kong: Printing Depart
ment, 1998).
56. Tai-lok Lui, "City-Branding without Content: Hong Kong's Aborted West
Kowloon Mega-Project, 1998-2006," International Development Planning
Review, Vol. 30, No. 3 (2008), pp. 215-226.
57. "He Hongshen: gengduo shangren canyu xijiu" (Stanley Ho: More Busi
nessmen Participate in the West Kowloon Project), Apple Daily, July 21,
2005.
58. "Xijiu fazhan che danyi moshi" (Single-Consortium Development Mode of

West Kowloon Development Is Dropped), Oriental Daily News, October 5,
2005.
59. "Zeng Yinquan wei lelianren tuidao xijiu" (David Tsang Suspended West
Kowloon Development to Boost Re-election), Apple Daily, February 22,
2006.
60. Rosemary Sayer, The Man Who Turned the Lights On: Gordon Wu (Hong
Kong: Chameleon Press, 2006), pp. 186-196.
61. "Huohuang fandui jianqiao huobutie" (Hutchison Whampoa Opposes Subsi
dizing Bridge Construction), Sing Pao Daily News, August 28, 2002.
62. "Huoliu buzu wuxu jianqiao fandui zhengfu tigong butie huohuang yujian
neidi-kuiyongmatou tielu" (Hutchison Whampoa Argues Bridge Construc
tion Is Not Necessary Due to Insufficient Cargo Flow, Urges to Build
Railway between Kwai Tsing Container Terminals and the Mainland),
Hong Kong Commercial Daily, August 30, 2002.
63. "Gangzhuao daqiao qiang jinkuai xingjian Zhuzong mingling lishun guanka
jise jijianli gengjinmi jingmao guanxi" (Premier Zhu Pressed for the
Construction of Hong Kong-Zhuhai-Macao Bridge to Build Closer
Economic Relations), Wen Wei Po, November 22, 2002.
64. "Lizeju kaiqiang: xuanteshou buneng zhikan shuyue shoufu jiazu tingtang
lichang weibian" (Victor Li States Choosing New Leaders Should Not Be
Shortsighted. The Richest Family Continues to Support Tang), Apple Daily,

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
March 5, 2012; "Tang duo

Receive Nomination from
February 22, 2012; "Dicha
(Most Real Estate Entrepr
Some Support), Hong Kong
"Kongke xuanwei shouwo h
Electors Are Blackmailed, a
Economic Journal, March 7
Joseph Lian Yi-zheng, "T
weiguanjing nahan taijiao
Struggles), Hong Kong Econ
K. Y. Lau, "The State-Man
Housing and the New Welfa
and Christopher
(A Watson
Ibid.; "Guobingjiang: loushi
Real Estate Market Will Be
Wei Po, May 26, 1998; "Lijiacheng youguan loushi di yanlun" (Li
Ka-shing's Comments on the Real Estate Market), Sun, May 25, 2001.
Owing to the unavailability of data, the total figures after 2002 exclude
village houses, which make up a small portion of total flat production. For
instance, about three thousand village houses were built in 2006.
"Qianglianming zhihan teshou jiakuai beishuinanliu Wuda Shanghui cu
ershisixiaoshi tongguan" (Five Business Associations Urged the Chief
Executive to Promote Integration and Extend Border-Crossing to 24 Hours),
Sing Tao Daily, October 23, 2001.
"Quanri tongguan jindu xu jizao yanjiu" (24-Hour Customs Clearance
Research Should Begin as Soon as Possible), Ming Pao News, October 25,
2001.
"Zhongyang zhichi gang tuokun" (The Central Government Supports Hong

Kong to Recover from Economic Recession), Takungpao, December 5,
2001.
What may have hindered the effectiveness of their attempt was again a lack
of consensus. Major developers failed to agree on an important detail of
mainland-Hong Kong integration; twenty-four-hour border control points.
In particular, Stanley Ho opposed this idea. See "Dichanshanghui dui
tongguan cun feiqi" (Real Estate Developers Association of Hong Kong Is
Divided over Extending Border-Crossing to 24 Hours), Sing Tao Daily,
November 1, 2001.
"Zhongyang songlishi huadiao" (Chinese Gifts Are Yellow Wines), Hong
Kong Economic Times, August 8, 2003; "Zhongyang zaisong daili jinghu
zhen geren xiangangyou" (Chinese Government Sends Gift Again. Indi
vidual Visit Scheme Expands to Beijing and Shanghai), Ming Pao News,

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
July 26, 2003; "Zhongyang songdaili gonggu jinrong zhongxin diwei

gangyinhang keyouxian jingying renminbi" (Chinese Government Further
Stabilizes Hong Kong as Financial Center by Allowing Hong Kong Banks
to Operate Renminbi Services), Sing Tao Daily, July 26, 2003.
75. Peter Y. W. Chiu, "CEPA: A Milestone in the Economic Integration
between Hong Kong and Mainland China," Journal of Contemporary
China, Vol. 15, No. 47 (2006), pp. 275-295.
76. Only two months after the implementation of the Individual Visit Scheme,
Peter Woo, the chairman of Wheelock and Company, announced that his
shopping arcades saw a 20 to 30 percent increase in traffic. See "Jiucang:
shangchang renliu sheng puzu liaoshangtiao Wuguangzheng kanhao ziyou
hang touzi wuye ni zhudichanjijin"(The Wharf: Increasing Visitor Numbers
in Shopping Malls. Peter Woo Is Optimistic about Mainland Visitors
Buying Apartments in Hong Kong, and Intends to Inject More Money into
the Real Estate Fund), Takungpao, August 22, 2003.
77. The influx of mainland pregnant women had exhausted the obstetric
services provided by many Hong Kong hospitals, fueling resentment among
local residents. In 2012, the Hong Kong government bowed to public
pressure and announced that children born in Hong Kong cannot obtain
permanent residency if their parents are not Hong Kong residents.
78. Centaline Research Department of Hong Kong, "Graph Illustration of the
Trend of Mainland Buyers and Sellers of Hong Kong Properties" (2013).
79. As of June 2013, the average price of residential properties has surpassed
even the peak of 1997 by 40 percent. See "Loujiegao 97 sicheng lazhao
buche" (Property Price Is 40 Percent Higher Than 1997: Tough Measures
Will Not Be Abandoned), Takungpao, August 17, 2013.
80. Yu and Thun provide a more detailed discussion of the relationship between
land prices and production costs in the context of Hong Kong. See Tony
Fu-lai Yu, Entrepreneurship and Economic Development in Hong Kong
(London: Routledge, 1997), p. 141; Eric Thun, "Manufacturing for a Post
Manufacturing City," in Innovation Policy and the Limits of Laissez-faire:
Hong Kong's Policy in Comparative Perspective, edited by Douglas B.
Fuller (Basingstoke: Palgrave Macmillan, 2010), pp. 198-220.
81. Nevertheless, from the perspective of the capital-rich real estate elite, the
heightened risk is not necessarily a bad thing because, as previously men
tioned, many of them have benefited from the boom-bust cycles of the real
estate sector. Ronnie Chan, chairman of Hang Lung Properties, even indi
cated that he loves a housing downturn, as it is the best time to accumulate
land at a low cost. See "Chen Qizong: wuyi jianjia maihuoyi" (Ronnie
Chan: No Plan to Cut Prices to Sell Remaining Flats), Wen Wei Po, August
1, 2013.
82. I thank an anonymous reviewer for pointing this out.

168.176.5.118 on Wed, 17 Mar 2021 02:40:09 UTC
83. William J. Baumol, "Macroeconomics of Unbalanced Growth: The

Anatomy of Urban Crisis," American Economic Review, Vol. 57, No. 3
(1967), pp. 415^126.
84. The unemployment rate of 2011 was 3.4 percent, while that of 2012 was
only 3.3 percent.
85. The appreciation of renminbi has also increased mainland consumers'
purchasing power in Hong Kong, the currency of which is pegged to the U.S.
dollar.
86. Ramy Inocencio, "Daily Stampede of Chinese 'Grey Traders' Angers Hong
Kong," CNN, September 8, 2012; "Daji shuihuoke yuedi qiangshengji yiri
sanhang rujinglianghongdeng" (Anti-smuggler Campaign Will Heighten at
the End of the Month: Red Lights Will Be Shown if Anyone Passes the
Border Three Times a Day), Apple Daily, July 15, 2013. According to one
local newspaper citing data from the Chinese government, 95 percent of
tourists with multiple-entry permits are smugglers, while only 5 percent of
tourists with single-entry permits are. See "Anti-Smuggler Campaign,"
Apple Daily, July 15, 2013.
87. Public Opinion Programme, University of Hong Kong, "Graph Illustration:
The Trend of Categorical Ethnic Identity (Per Poll)" (June 13, 2013).
88- "Zhongyang buman gangyingqi piaoyang" (Chinese Central Government Is
Unhappy about the Display of Hong Kong Colonial Flag), Sharp Daily,
January 15, 2013; "Chen Yongqi: wulongshiqi bumingzhi" (Chen Yongqi:
It Is Unwise to Wave the Lion Flag), Sing Tao Daily, March 8, 2013.

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Real Estate Elite, Economic Development, and Political Conflicts in Postcolonial Hong

Stable URL: https://www.jstor.org/stable/24291927

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Real Estate Elite, Economic Development, and

Stan Hok-wui Wong

Business interests have been overrepresented in key political institu

Stan Hok-wui WONG is an assistant professor in the Department of Govern

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examine the "real estate hegemony" thesis by investigating how members

There is a wealth of literature in the field of political economy

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The current study engages the extant literature in two important

2. Facts and Theories of Hong Kong's Political Economy

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Figure 1: Manufacturing as a Share of Metro Outputs by City

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Table 1: Land Sales Incomes and Government Budget

1981/1982 96.77 343.13 277.78 65.35 28.20

1982/1983 50.48 310.98 345.98 -35.00 16.23

1983/1984 22.67 304.00 333.93 -29.93 7.46

1984/1985 42.67 385.25 398.82 -13.57 11.08

1985/1986 44.81 436.95 434.44 2.51 10.26

1986/1987 30.86 486.02 427.02 59.00 6.35

1987/1988 39.74 608.75 483.75 125.00 6.53

1988/1989 67.58 726.58 537.96 188.62 9.30

1989/1990 76.69 824.29 713.66 110.63 9.30

1990/1991 42.43 895.23 855.56 39.67 4.74

1991/1992 94.86 1,146.99 921.91 225.08 8.27

1992/1993 92.24 1,353.11 1,133.32 219.79 6.82

1993/1994 193.76 1,666.02 1,474.38 191.64 11.63

1994/1995 205.86 1,749.98 1,641.55 108.43 11.76

1995/1996 228.96 1,800.45 1,831.58 -31.13 12.72

1996/1997 295.08 2,083.58 1,826.80 256.78 14.16

1997/1998 659.31 2,812.26 1,943.60 868.66 23.44

1998/1999 256.86 2,161.15 2,393.56 -232.41 11.89

1999/2000 391.11 2,329.95 2,230.43 99.52 16.79

2000/2001 321.83 2,250.60 2,328.93 -78.33 14.30

2001/2002 106.83 1,755.59 2,388.90 -633.31 6.09

2002/2003 121.90 1,774.89 2,391.77 -616.88 6.87

2003/2004 65.49 2,073.38 2,474.66 -401.28 3.16

2004/2005 594.28 2,635.91 2,422.35 213.56 22.55

2005/2006 309.77 2,470.35 2,330.71 139.64 12.54

2006/2007 414.84 2,880.14 2,294.13 586.01 14.40

2007/2008 663.77 3,584.65 2,348.15 1,236.50 18.52

2008/2009 231.55 3,165.62 3,124.12 41.50 7.31

2009/2010 418.77 3,184.42 2,890.25 294.17 13.15