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Opinion

Hong Kong's troubles are deeper than even its own leaders realize

Social scars exposed thanks to Beijing's ongoing economic clampdown

| Hong Kong
The flags of China and Hong Kong against the city's skyline, pictured on June 30: what Xi is doing is simply not in the DNA of a city literally in the business of doing business.   © Getty Images

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades.

Hong Kong's wealthiest 1% are certainly enjoying a euphorically profitable COVID-19 pandemic.

Whether by coincidence or design, two industries most to blame for a record income gap are sailing through 2021 quite lucratively, namely financial services and property markets. But while those at the top of the city's food chain peruse their bank statements with glee, employees in retail, hospitality and tourism are counting losses.

Exhibit A: Home prices have surged to the highest levels since 1993. The combination of ultralow mortgage rates and heady demand are helping erase fallout from past bear markets -- from the 1997 Asian crisis to the early 2000s SARS outbreak.

The income divide partly behind 2019's giant protests, in other words, is now bigger than ever. And the other catalyst -- China's strangling of Hong Kong's autonomy -- is growing worse by the day.

Good luck figuring out what Hong Kong's Beijing overlords are up to. Since November, when plans by Jack Ma's Ant Group for history's biggest initial public offering got trampled by regulators, it has been hard to follow what "Xi Jinping thought" actually is. Now, with the Chinese president indulging in Mao Zedong-like sloganeering -- "common prosperity" and the like -- Hong Kong's existential crisis is only deepening.

Even the recent Tokyo Olympics gave reason to contemplate whether Hong Kong life has meaning, purpose or value against a Communist Party onslaught the city can no longer outrun. Euphoric medal winners found themselves assailed and bullied on mainland social media just for carrying the Hong Kong flag, making you wonder whether Hong Kong will be allowed to send its own team to Paris 2024.

A high-profile visit by Xi allies, ostensibly to discuss specifics on China's latest five-year plan, devolved into a lecture communicating impatience with Hong Kong's failure to China-fy as quickly as Xi would like.

The delegation was led by Huang Liuquan, deputy director of the State Council's Hong Kong and Macao Affairs Office. The gist of his message: The city has squandered valuable time since the 2019 protests to realign policies to the "new political climate" Xi appears to be inventing on the fly in Beijing.

China needs to give Hong Kong a minute here. What Xi is doing is simply not in the DNA of a city literally in the business of doing business. The disappearance of Ma and of Ant's IPO -- half of which was to be listed in Hong Kong -- is intrigue enough. Xi has since clamped down on Didi Global -- just days after its big IPO -- and descended on Alibaba Group Holding, Tencent Holdings, private education companies and myriad other tech giants.

Xi's seemingly anti-capitalist pivot has regulators telegraphing crackdowns on private equity. And, most chillingly, the Cyberspace Administration of China is now policing any speech or internet comments it deems critical of the economy, financial markets or domestic policy.

What does it mean? Xi's censorship-industrial complex will not say. But suffice it to say, if you are an analyst about to downgrade a mainland stock, a credit rating company concerned about default risks, an expat journalist with a story to tell about local corruption or what happened in Wuhan with COVID-19, or a bank economist convinced that China's gross domestic product data are flawed, you are being invited to shut up -- or else.

China is remarkably skilled at economic retribution for anyone who dares ask questions or misspeak. Australia's government, America's National Basketball Association, retailers like H&M and Nike, Hollywood personalities such as John Cena and myriad others are learning this the hard way.

But if you are Hong Kong, and your brand is the kind of feisty, transparent, bottom-line-driven capitalism that Xi seems to suddenly abhor, what do you do? Actually, Hong Kong's troubles are even deeper than Chief Executive Carrie Lam seems to realize. The social tensions that brought the city to a halt in 2019 may be remembered as kinder, gentler economic times.

Protestors gather along a street in the Mong Kok neighborhood in August 2019: the social tensions may be remembered as kinder, gentler economic times.   © AP

Asia's "world city" now trails Brazil and Mozambique when it comes to inequality, a gaping hole in Hong Kong's veneer of hyperprosperity. Beneath the billionaire tycoons, chauffeur-driven bankers and gleaming skylines, many of the city's 7.5 million people are falling further behind -- and perhaps more keen than in 2019 to take to the streets.

Those massive protests heard around the globe were sparked by an extradition bill that Xi's government tried to force on Hong Kong. But the fuel behind it was Charles Dickens-level discontent about surging living costs, stagnant wages and a government too busy catering to Beijing to care.

Of course, now the billionaires, too, might be bracing for what is to come. Xi's Maoist turn is putting trillions of dollars of market capitalization at risk. Soon, Hong Kong's 1% may be clicking on their account statements with more fear than glee.

Once COVID-19 passes, Hong Kong Inc. will likely be more unbalanced than it was before the pandemic hit. An economy that satisfies no one but Xi in Beijing is not one with a vibrant future.

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