Here's the real reason China wants a loyalist to lead Hong Kong

May 28, 2015 14:11
Leung Chun-ying has been sidelined to prevent him from causing any further trouble at this critical moment in the political reform process. Photo: Bloomberg

The initial public offering of Chinese broker Huatai Securities closed on Friday, attracting more than 260,000 investors.

The company raised more than HK$34.72 billion (US$4.48 billion) after pricing the IPO at the top end of an indicative range.

If it decides to exercise a greenshoe option, it will come away with up to HK$39.9 billion, making the IPO the world’s largest this year.

Unlike the IPOs of large state-owned enterprises such as China Life and Ping An Insurance, which were backed by four Hong Kong property tycoons, Huatai's fundraising was mainly supported by mainland institutional investors.

Big domestic and foreign institutional investors in Hong Kong largely took a backseat.

Mainland tycoons have come of age and see themselves as bigger investors than their Hong Kong counterparts.

Meanwhile, the increasing dominance of mainland companies and capital in Hong Kong's stock market is an irreversible trend.

State-owned enterprises and so-called “red chips” account for almost half of its capitalization.

Altogether, wealthy mainlanders hold an estimated HK$50 trillion worth of Hong Kong-listed equities and Hong Kong properties.

These economic interests are being turned into political influence.

The Communist Party and its political proxies in Hong Kong are mindful of safeguarding national sovereignty and security over the election reform issue.

They are warning that anti-communists and non-patriots will not be allowed to run in the 2017 chief executive election.

However, that is only a pretext.

What they are really concerned about is the safety of the enormous assets of second-generation Chinese tycoons in Hong Kong.

Beijing wants to make sure Hong Kong's next leader will look after their interests.

In just a few years, President Xi Jinping successfully consolidated his power. Without question, he will have the final word over who gets to be Hong Kong chief executive come 2017.

A national-level united front strategy is at the top of Xi's agenda. He is personally overseeing its implementation, saying it is the party's paramount mission to attract emerging corporate leaders. 

Meanwhile, Chief Executive Leung Chun-ying has been pushed to the sidelines and was recently “ordered” to take 10 days off to prevent him from causing any further trouble at this critical moment in the political reform process.

It is rumoured that he went to Peru.

Lawmakers are scheduled to meet key Beijing officials on May 31 to exchange views on the political reform package.

We shall see if the meeting will break a deadlock over the proposal.

It seems Xi has no one to rely on in Hong Kong other than Tung Chee-hwa, who has been busy recruiting members to his foundation, aptly named Our Hong Kong Foundation.

Among the members are several hard-line Leung supporters, some of whom might be potential candidates for chief executive in the future.

The present political atmosphere is rather similar to that in 2010 before the passage of an election reform package.

This time however, things are different in the wake of last year's pro-democracy protests which raised people's awareness about their political rights.

Also, a new generation of political activists has emerged.

However, unless they can make a difference in this historic moment, our political future will remain in the hands of Beijing.

This article appeared in the Hong Kong Economic Journal on May 21.

[Chinese version 中文版]

Translation by Alan Lee

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Hong Kong Economic Journal columnist