A decade on, some are beginning to wonder: has the wax fallen out? On Sept. 11, Tsang suggested that Hong Kong’s laissez-faire tradition was outdated. “Everybody says Hong Kong has a ‘positive nonintervention policy’,” Tsang told journalists after a conference on China’s next five-year plan. But he said the policy was crafted “a long time ago” and claimed the government “had never said we’d made it a blueprint.” Tsang’s own writings and even Hong Kong’s high-school textbooks speak otherwise. All of which suggests what some observers have feared since the end of British colonial rule in 1997: that Hong Kong is heading into a new era of bigger government.
Tsang’s statements have cost him some public support, according to opinion polls. But he remains certain to retain his post in next year’s scripted reappointment by 800 handpicked voters. Indeed, his main rival, “Iron Lady” Anson Chan last week announced that she would not challenge him because “the results are preordained.” Yet a real debate on economic policy has begun. Already, a think-tank head has accused Tsang of “flirting with a socialist fantasy”; a pro-democracy political rival claims his comments could scare away international investors, and even Nobel laureate Milton Friedman, the economist who once hailed Hong Kong as a manifestation of his own free-market views, last week told the South China Morning Post that Tsang’s statement “is a move in the wrong direction.”
The debate illustrates just how far the city has veered from the free-market principles first set down by Sir John Cowperthwaite, colonial financial secretary in Hong Kong from 1961 to ‘71. He kept taxes low, encouraged entrepreneurship and refused to build a costly welfare system. Those concepts, which his successor dubbed “positive non-interventionism,” kicked Hong Kong’s manufacturing economy into self-propelled overdrive and quickly established an alternative to the government-led growth models then fashionable from New Delhi to Singapore.
Hong Kong now faces a new set of challenges. It needs to defend its place at the top of a trade and logistics supply chain stretching deep into China, consolidate its position as Greater China’s financial hub and maintain one of Asia’s highest living standards for a population approaching 7 million. To achieve those goals Tsang’s government has moved to aggressively integrate with China and promote the move from low-cost manufacturing into higher-priced services. In a recent letter to Hong Kong newspapers Tsang wrote, “In the face of rapid changes in the world and on the [Chinese] mainland, we must take a proactive, yet pro-market, approach.”
Tsang’s new mantra is “big market, small government.” Yet by the numbers, government in Hong Kong isn’t small anymore. Public spending now accounts for roughly 23 percent of gross domestic product, up from 14 percent in the late 1980s. Tsang has even proposed a new goods-and-services tax to broaden the government’s revenue base. Over the past decade Hong Kong doled out billions to build a new IT hub and a huge science park, as well as to fund Hong Kong Disneyland, a joint venture in which the government is majority shareholder, and which Tsang, as financial secretary, had a huge hand in creating. Tsang and his team meet routinely with leaders in Beijing, who praise his efforts to integrate Hong Kong with the state-guided mainland economy.
Now, he is moving to subsidize threatened industries like traditional medicine and film. Critics cite many examples of state pandering to constituencies: the government justifies a new waterfront state office complex in part for the construction jobs it will create, and has pledged to set a minimum wage, in a bow to unions. A planned culture center at the western edge of the Kowloon peninsula is a controversial boon to developers. Andrew Work, executive director of the neoliberal Lion Rock Institute, says Tsang’s team is “building a case for intervention. The overarching philosophy is ‘we know better than you’.”
Under Cowperthwaite, who died earlier this year, big projects were built by the private sector or not at all. Economist Francis Lui, an economist at the Hong Kong University of Science and Technology, expects Tsang to bend to political pressure from the business lobby more easily. “He will be more proactive, but it will happen gradually,” he says. Until Hong Kong hits the rocky shore.
