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The economic roots of Hong Kong’s fight with China The economic roots of Hong Kong’s fight with China
(34 minutes later)
Hong Kong's struggle for the democratic rights that China promised it has erupted into the streets in recent days. But although this is a political battle, part of the reason Hong Kong is fighting so hard for its freedom is that it's already seen what being subsumed by the mainland means economically. And it's had enough of that.Hong Kong's struggle for the democratic rights that China promised it has erupted into the streets in recent days. But although this is a political battle, part of the reason Hong Kong is fighting so hard for its freedom is that it's already seen what being subsumed by the mainland means economically. And it's had enough of that.
China's rise hasn't just lifted hundreds of millions of people out of poverty. It's also transformed the economic balance of power with Hong Kong. Hong Kong's economy is just 3 percent the size of China's today, compared to 18 percent back when Britain handed it over in 1997. All this growth in China has created a new class of mainlanders who want, and can afford, the very best that Hong Kong has to offer.China's rise hasn't just lifted hundreds of millions of people out of poverty. It's also transformed the economic balance of power with Hong Kong. Hong Kong's economy is just 3 percent the size of China's today, compared to 18 percent back when Britain handed it over in 1997. All this growth in China has created a new class of mainlanders who want, and can afford, the very best that Hong Kong has to offer.
That means apartments, luxury goods, and, of course, baby milk formula. It's all about status, prices, and trust. There is no better way for mainlanders to show that they've really made it than to buy up property in Hong Kong. The real estate appetite of wealthy mainlanders happy to pay in cash has contributed to a doubling of Hong Kong property prices since 2009. As point of comparison, prices had, in total, only increased 26 percent the 16 years before that.That means apartments, luxury goods, and, of course, baby milk formula. It's all about status, prices, and trust. There is no better way for mainlanders to show that they've really made it than to buy up property in Hong Kong. The real estate appetite of wealthy mainlanders happy to pay in cash has contributed to a doubling of Hong Kong property prices since 2009. As point of comparison, prices had, in total, only increased 26 percent the 16 years before that.
So it's no surprise that more and more Hong Kongers have found themselves priced out of the city. Nor is it a surprise that the Hong Kong Monetary Authority has tried to stop mainlanders from buying up quite so much by making them put an extra 10 percent down. (Though that doesn't do much when wealthy Chinese are paying all cash).So it's no surprise that more and more Hong Kongers have found themselves priced out of the city. Nor is it a surprise that the Hong Kong Monetary Authority has tried to stop mainlanders from buying up quite so much by making them put an extra 10 percent down. (Though that doesn't do much when wealthy Chinese are paying all cash).
It's been the same story with designer goods. China, you see, has high taxes on high-end goods to try to discourage at least a little of the conspicuous consumption that has come with its economic miracle. Hong Kong, though, is exempt from this tax, so mainlanders flock there—to be exact, 50 million did last year—to get relative bargains on Louis Vuitton and all the rest.It's been the same story with designer goods. China, you see, has high taxes on high-end goods to try to discourage at least a little of the conspicuous consumption that has come with its economic miracle. Hong Kong, though, is exempt from this tax, so mainlanders flock there—to be exact, 50 million did last year—to get relative bargains on Louis Vuitton and all the rest.
But maybe the most in-demand luxury good isn't one at all: it's baby milk formula.But maybe the most in-demand luxury good isn't one at all: it's baby milk formula.
Ever since China's tainted supplies were blamed for the death of at least half a dozen infants in 2008, mainland parents have gone as far as Germany to buy foreign brands they trust. The easiest, and most economical, trip, though, isn't across the world; it's just across from Shenzhen, to Hong Kong. It also has the non-Chinese brands that Chinese parents covet -- or at least it did until mainlanders bought out the supply. That sparked one of the most unusual export bans you'll ever see. The Hong Kong government started limiting people to taking just two cans of baby milk with them if they left the city, and then tried to crack down on the smugglers. Yes, there are baby milk formula smugglers.Ever since China's tainted supplies were blamed for the death of at least half a dozen infants in 2008, mainland parents have gone as far as Germany to buy foreign brands they trust. The easiest, and most economical, trip, though, isn't across the world; it's just across from Shenzhen, to Hong Kong. It also has the non-Chinese brands that Chinese parents covet -- or at least it did until mainlanders bought out the supply. That sparked one of the most unusual export bans you'll ever see. The Hong Kong government started limiting people to taking just two cans of baby milk with them if they left the city, and then tried to crack down on the smugglers. Yes, there are baby milk formula smugglers.
It's true that China's growth has been good for Hong Kong's—especially their retailers—but it hasn't been as good for their relative standard of living. Not only have the richest mainlanders caught, or even surpassed, them, but now those Chinese are pushing up their cost-of-living and snatching up everything from their stores. That's why Hong Kongers say the mainlanders are "locusts" who come in, take everything, and then leave—and with bad manners, too. Indeed, it set off a social media firestorm this year when a mainland parent was caught letting their two year-old urinate in one of Hong Kong's streets. In other words, it's the same old story of old money versus the nouveau riche.It's true that China's growth has been good for Hong Kong's—especially their retailers—but it hasn't been as good for their relative standard of living. Not only have the richest mainlanders caught, or even surpassed, them, but now those Chinese are pushing up their cost-of-living and snatching up everything from their stores. That's why Hong Kongers say the mainlanders are "locusts" who come in, take everything, and then leave—and with bad manners, too. Indeed, it set off a social media firestorm this year when a mainland parent was caught letting their two year-old urinate in one of Hong Kong's streets. In other words, it's the same old story of old money versus the nouveau riche.
Hong Kong has already seen what being just another part of China is like economically. The last thing it wants is to see that politically, too.Hong Kong has already seen what being just another part of China is like economically. The last thing it wants is to see that politically, too.
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