The patriotic Chinese-American Ronnie Chan Chi-chung, chairman of Hang Lung Properties Ltd. (00101.HK) and chief campaign donor of Chief Executive Leung Chun-ying, recently published an 8,000-word article in the interim report of his company expressing unusual pessimism about the growth prospects for the Chinese economy.
What Chan said was nothing new.
Many western economists and China observers have warned of a possible economic downturn in China over the next few years, as exports and domestic demand in the country continue to remain weak.
However, the fact that these bearish words were coming out of the mouth of a pro-establishment businessman like Chan raised a lot of eyebrows in the mainland.
Some even said his words “have shocked 1.3 billion people”.
After 30 years of economic reforms, it is apparent that the so-called “Chinese model” has run into a dead end.
Unless China undergoes a drastic economic restructuring and industrial transformation, the prospects for its economy are anything but promising, and a deep recession is looming on the horizon.
The key to China’s economic transformation lies in whether Beijing can facilitate the growth of high-value-added and innovative industries to replace as its growth engine the labor-intensive industries that have dominated the country’s economic growth for the past 30 years.
That requires huge and long-term investments in advanced technologies, and it may take years before these investments eventually pay off.
The fact that Chan, a real estate developer who only knows how to build shopping malls and new homes, is expressing pessimism about China’s economy rather than investing more in new industries suggests he is not only lacking confidence in the communist regime under President Xi Jinping, but also unable to keep up with the latest trends in the economic development of the mainland.
Chan is not alone, as he represents a generation of Hong Kong business tycoons who made their fortune by taking full advantage of Beijing’s favourable policies for foreign investors during the early days of China’s economic reforms, when the country was short of capital, technology, talent and know-how.
These tycoons in fact lacked the vision and adventurous mindset any great entrepreneur should have, and they only got rich easily because they were able to capitalize on the cheap land and labour in the mainland in the 1980s.
Now that labor-intensive manufacturing is losing momentum and is no longer the growth engine of China’s economy, these tycoons are running into trouble, too, as they failed to foresee the new economic circumstances in China and switch their investments from low-end industries to high-value-added sectors.
As a result, the returns of their investments continue to shrink, and they are among those hit hardest amid the economic downturn across China.
To put it bluntly, they only have themselves to blame for their current business hardships.
Despite the fact that China still recorded 6.9 percent growth in gross domestic product in the third quarter, people are at best taking this figure with a grain of salt, as everybody knows official economic figures in the mainland are often exaggerated, if not totally made up.
That the manufacturing sector only accounts for 45 percent of China’s GDP suggests the country is no longer “the world’s factory”.
Even though the service sector now accounts for 51.4 percent of the mainland’s GDP, unlike the service sector in the western developed world, it is dominated by the catering and retail industries, which rely heavily on unskilled labor, while high-end professional services only account for a very small portion of the market.
Therefore, while the service industry in the mainland may be booming, there is hardly any role that Hong Kong talent can play, and Leung’s calls for our young people to seek career opportunities in the mainland are utter nonsense.
To make matters worse, the decision-making power in Hong Kong is in the hands of mediocre technocrats, and the only thing they know is to keep asking for more favorable economic policies from Beijing and seek its permission to open more mainland cities for the Individual Visit Scheme, rather than coming up with new ideas to jump-start our economy.
With a bunch of ignorant people in charge, no wonder our city is in continuous decline.
This article appeared in the Hong Kong Economic Journal on Oct. 28.
Translation by Alan Lee
[Chinese version 中文版]
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