Steve Quayle News Alerts

October 17, 2002
By Alkman Granitsas/HONG KONG

Once it embodied Asia's spirit of can-do capitalism. Now Hong Kong is mired in economic and social gloom. Many in the middle class now believe the only way is out

DAVID NG is bailing out. He's selling his apartment, quitting his job and moving with his wife and baby daughter to Canada. The boom years that lured the 32-year-old computer consultant back to his home town of Hong Kong are gone. Now he sees no future in the city he calls home.

He's not alone. Many of his friends are leaving too--one to Malaysia to start a business, another to Vietnam to explore some business opportunities. They all have something in common: They're educated, middle class and--like 250,000 other Hong Kong people--hold passports from someplace else. They came in the mid-1990s for the opportunities that Hong Kong offered, but as this city of 7 million struggles with an uncertain economic future, they are pulling up stakes and moving away.

"We can't see a future here," says Ng, who grew up in Hong Kong but moved as a teenager to Toronto with his family in the mid-1980s. "Sometimes my friends and I get together and this is all we can talk about. It's so depressing."

There's a deep sense of malaise in Hong Kong. The city that for decades embodied Asia's spirit of can-do capitalism now feels adrift--its economic future cloudy, its political leaders scorned. A recent survey by Mastercard International found people in Hong Kong are gloomier about the future than anywhere else in Asia.

As a result, many in Hong Kong's middle class are voting with their feet, moving to places like Canada, Singapore and, increasingly, China. That's hollowing out the city's educated, white-collar workers and widening the gap between rich and poor. Some argue that there may be long-term benefits. Just as it did in the past, Hong Kong is once again reinventing itself, this time as a city that's economically competitive with its mainland rivals. How long the process will take, though, is anyone's guess. In the meantime there's a lot of pain to be got through.

In some senses, Hong Kong has been here before: This is a city that was built by immigrants seeking temporary refuge. Hong Kong has twice before witnessed large flows of people fleeing political uncertainty: In 1949-50, they flocked here from the mainland in the wake of Mao's communist revolution; between 1987 and 1997, they left Hong Kong ahead of the handover from British to Chinese rule.

Now, on a smaller scale, Hong Kongers are on the move again. But this time it's economics, not politics, that's the driving force. Although Hong Kong has just technically come out of recession, a whole host of indicators continue to paint a gloomy picture. Unemployment is at 7.6%, down from a record high, but expected to rise again. Welfare payments are also at record highs. Consumer confidence is close to record lows. Retail sales and property prices continue to fall and the city is now in its 46th consecutive month of deflation. An estimated 150,000 Hong Kongers are facing unrealized losses on their property investments. A recent poll shows approval ratings for Chief Executive Tung Chee-hwa, who heads Hong Kong's government, are hitting new lows.

Yet such figures can't capture the deep pessimism that has gripped the city. A better indicator are the other statistics that speak to the climate of despair. Suicide rates have never been higher while personal bankruptcies almost tripled to 12,407 in the first seven months of the year--also a record high (see box on page 56). Crime is up, too: Robberies in the seven months to July were up 16.5% from a year ago. Divorce and domestic violence are also both on the rise, say social scientists.

"People are giving up and leaving," says academic Michael DeGolyer of the Hong Kong Transition Project, a long-term project that's monitoring the territory. "They are buying property outside the territory, they are killing themselves. The only way you can characterize it is that Hong Kong people are in despair at their own government."

Ellen Chai is leaving. The native-born Hong Konger lost her job in May and is moving back to her adopted home in Canada. Like David Ng (neither Ng nor Chai, who both still have close family ties to Hong Kong, wished to give their real names for this article), the 50-ish executive secretary first emigrated to Toronto in the mid-1980s but was lured back to Hong Kong a few years later by the giddy boomtown atmosphere of the time. "In the 1980s it was an exodus. Everybody was leaving Hong Kong then," says Chai. "It's funny, all of a sudden in the early '90s the flood came back but now its starting to flow the other way again."

Like other emigrants, Chai is leaving for several reasons. Job prospects are one factor, family is another--both her sons live in North America. Quality of life is also a concern--Hong Kong's worsening air pollution has taken a toll on her health. "My major reason for leaving is that my children are not here. Another thing is the pollution, and my health is not good," says Chai. "I still like the accessibility of everything in Hong Kong but more and more I'm really looking forward to the quality of life in Toronto."

To be sure, the emigration now taking place does not begin to rival the numbers that left Hong Kong in the late 1980s and early 1990s. Nor is the city depopulating: Foreign companies continue to set up their regional headquarters here and 150 mainland Chinese settle in the city each and every day.

But one thing is clear: Those who are moving belong overwhelmingly to the city's skilled middle class. More than three-quarters of Hong Kongers working in China, for example, are either managers or professionals and 88% have a secondary education or higher.

According to Hong Kong's Census and Statistics Department, 190,800 Hong Kongers now live and work in China, mostly just across the border in Guangdong province--a 20% increase from three years earlier. Another 41,300 have taken up residence in Guangdong and commute into the city. Hong Kongers now also collectively own or rent some 218,000 residences in China--double the number five years ago.

But those figures may be too low. The statistics are over a year old and only measure Hong Kongers who still keep a residence in the city. Aware that that number may be far higher and growing fast, the city plans a separate census in Guangdong later this year. More recently, the Beijing Youth Daily estimated that up to 500,000 Hong Kongers now live and work in China.

Part of the reason for the exodus is that many of the city's middle-class, white-collar jobs are leaving, just as manufacturing jobs did in the 1980s and 1990s. As a result, Hong Kong is becoming increasingly divided between rich and poor.

"In Asia, Hong Kong is among the worst in terms of income distribution," says Fernando Cheung, a lecturer at Hong Kong Polytechnic University's department of applied social sciences. "It's comparable to the averages in places like Latin America or Africa. Certainly a Third World income distribution."

Based on government data, social workers estimate that one in five Hong Kong families lives in relative poverty (the government has no official definition of poverty). Cheung estimates that only 20% to 30% of the city's households can be counted as middle class, earning between HK$25,000 and HK$60,000 ($3,205 and $7,692) a month. Although that proportion has grown, it remains low by standards in developed countries. And, like the rest of the population, most in the middle class have seen their relative share of the city's wealth shrink. Over the past decade, only the wealthiest 10% of people in Hong Kong have seen their share of the city's wealth rise.

"In the future I think there will only be two kinds of people in Hong Kong: the very rich and the very poor," says Wai Wah Chan, a 42-year-old businessman with two factories in China. He too has lost confidence in his native city. "Hong Kong is finished!" he declares. "In 1997 when Hong Kong was handed over to China, I was not scared. During the Asian financial crisis, I was not scared. But now I am scared."

In July, Chan, who also holds Canadian citizenship, moved his wife and two children to Singapore. It will be the second move for the family in less than a decade--first from Canada to Hong Kong in the mid-1990s and now to Singapore. It was not an easy decision. "I was born here and I studied here. I grew up in Hong Kong. But I've been thinking about this a very long time and I realized that I have no choice," he says. "My wife and I are not young. We want to settle down in one place. But how can we settle down in Hong Kong? We just don't know what the future here will be like."

One likely aspect of the future is that Hong Kong will have to restore some of its lost competitiveness, particularly with the mainland. "Quite clearly, cross-border flows of people have very much increased in intensity," says Hong Kong government economist K.Y. Tang. "It is not what is usually defined as emigration, but rather can be understood as closer economic integration."

Whatever it's called, in Hong Kong it's likely to mean continued price falls. That won't stop until the cost of living in the city begins to approximate costs in neighbouring Guangdong province--where prices are rising.

That may take a while. Currently, property prices in the border city of Shenzhen for a mid-range flat are around $150 per square foot--that's at least half the going rate for Hong Kong. Salaries too are half or less of what they are in Hong Kong, though in certain clerical and accounting jobs anecdotal evidence suggests that the wage gap is narrowing fast. The middle-class, white-collar workers who are migrating north in search of jobs are also part of that adjustment process.

"I don't know what is going to happen, but basically you will see the cost of living continue to decline for most people in Hong Kong until we are more or less equivalent to the people in China," says Cheung at Hong Kong Polytechnic. "And at that point, the long decline will probably stop."

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