Hong Kong tycoon Li Ka-shing is again in the media spotlight after he mentioned in late February the possibility of publicly listing his retail business A.S. Watson Group, which is part of the Hong Kong-listed conglomerate Hutchison Whampoa.
“No matter what, if Watsons was to list in two locations, Hong Kong will definitely be one of them,” Li said.
There has been speculation that Li is preparing to pass the torch to his oldest son, Victor Li, because he did not host a press conference for the company’s results announcement last year. But the eighty-five-year-old billionaire told reporters on February 28: “I’m not considering retirement.”
In July, Hutchison Whampoa announced a plan to sell Hong Kong supermarket chain ParknShop, raising speculation Li will transfer his business operations overseas. This prompted some criticism, but in November, he met with the media to say he is not pulling up stakes, calling the speculation nonsense.
Li grew up in poverty, and has seen his fortune grow amid great changes in Hong Kong’s society. The people of the city seem to be changing their view of Li. A decade ago he was seen as “Superman Li,” but now many say his family controls too many aspects of their lives, from daily necessities to utilities and property.
Many people say Hong Kong’s declining economic status in the region is supported by such discontent regarding the rich. Ye Xiang, a former advisor of the Hong Kong Securities & Futures Commission, said that as the relationship between the former British colony and the mainland grows closer, some of the city’s residents believe that they have not enjoyed the benefits equally.
Li says the rise of populism in the city is dangerous. “Hong Kong is like a coddled child,” he said. “If this kind of popular sentiment festers, it could very well impair the Hong Kong as we know it beyond our recognition in a few years.”
Li has spoken to Caixin several times recently about the development of Hong Kong and his own business strategy. The following is the first of a two-part series:
Caixin: What is behind the rise of populism in Hong Kong in recent years? What do you think the solution is?
Li Ka-shing: The widening wealth gap is a growing global social problem and it is a very thorny issue for governments everywhere. If a government set policies through the emotive lens of populist sentiments, it might make you feel better, but not necessarily fare better. It is a dangerous sliding slope and a cause for a vicious circle.
I grew up poor. I understand poverty. If you need to worry about subsistence every single day, such tough experiences leave an imprint on your mind. But dwelling on bitterness and resentment only pins you down. The focus should always be on how to resolve our challenges.
Simple measures of poverty relief are not the antidote to counter the complexities of intergenerational poverty because it will neither improve competency nor bolster competitiveness. It is disheartening that many politicians play on the public sentiment to serve self-interests like getting votes or solidifying power bases. When a society is mired in discord, it will dent its economic vitality, which is hardly good for anyone.
Reforms in education and self-enhancement are important tools to engender social upward mobility. I believe failing to do so is akin to a crime against the future. This advancing wave of technological explosion is more than mere mechanized replacement. It entails a sweeping reorganization in the chain of manufacturing process. We need to beef up human capital and the innovation ecosystem.
Hong Kong needs to play catch up in the race for knowledge development and innovation investment. The future is all about technology. Its outlook is bright and could be a real solution to bridge the wealth gap. This is the responsibility of the government.
The boom of the gaming industry in Macau provides many job opportunities for Hong Kong, but we should not be misled by the unemployment rate of 3.3 percent and be complacent about the urgency to compete for quality jobs. Such short-term vision will sow the seeds of trouble for tomorrow.
Just by looking at numbers, Hong Kong labor statistics show increasing optimism within the tech industry. When contrasted against international surveys, however, figures reveal that our definitions of employment and achievements within the tech industry are actually below global standards. According to the Hong Kong government, about 30,000 people, or eighty per 10,000 employed, are tech employees. And according to other leading surveys, in countries with advanced technological output, such as Israel, IT staff and engineers account for 140 per 10,000 employed. The figures are eighty-five in the United States, eighty in Japan, forty-five in China, and thirty-two in Singapore, yet we must wonder why Hong Kong is not on this list. In Hong Kong, how many of these employees are actually scientists and IT professionals? Are our government policies and environment conducive to technological developments? A high-quality employment environment should encourage each individual to perform in his full capacity and under a diversified industry structure.
How should Hong Kong encourage innovation?
If we compare Singapore and Hong Kong, you will find that public sentiment toward social and business environments is quite different. You don’t see Singapore screaming against foreign investors benefiting from their investments in the local economy. Singapore’s policy toward foreign labor is more proactive, but its unemployment rate is more or less the same as Hong Kong’s. Unlike Hong Kong, Singapore does not enjoy the committed support of the mainland. In addition, Singapore needs to shoulder a budget for foreign policy and national defense, but the Singapore government is quite committed to attracting capital and talents. Innovation has brought continual success to Singapore.
In 1997, Hong Kong’s GDP was similar to Singapore’s. But nowadays, Singapore’s is at least 30 percent higher than Hong Kong’s. Improving our competitiveness must be a priority. Attitude could be a force or a hindrance. We have a traditional saying, “A wild stallion turned loose will be hard to recapture.” Fostering populist sentimentality is the same.
Currently in Hong Kong, minor issues are easily amplified into social problems or disputes. How can society smoothly transform into a healthy democracy?
To me, having the privilege to choose is a blessing. A healthy democratic society is built upon the rule of law, is inclusive and tolerant, and embraces diversity. I have often wondered if a democratic system could effectively turn a closed-minded society into an open-minded society. We need to balance social responsibility and interests. Do you know how many people in Hong Kong pay taxes? You will be surprised to know that according to the Inland Revenue Department (in the 201½012 year) only 5 percent of the population shouldered 91 percent of the income tax.
Recently, there is a lot of heated debate over the theory of zero marginal productivity. Proposed by economist Tyler Cowen, the theory suggests that amid our recovering economy, an asymmetric balance between people’s incomes and benefits versus their output could well be the cause for continuously high unemployment rates. Someone told me that a lot of big foreign companies interview executives with the question: “Do you have any experience with layoffs?” That speaks a lot to today’s investment strategy; enterprises prefer to invest in competitiveness through enhancing efficiency and maintaining only a high quality workforce.
Therefore, I have repeatedly advocated for the government to consider increasing profit taxes, maybe a hike of 0.5 percent and earmark it for continuous education and retraining as an investment in human capital. We should always support means to increase opportunities for the younger generation. I am all for the government granting tax preferences or exemptions for small enterprises in the technology sector to encourage their development.
How do you view the 2017 chief executive election for Hong Kong? What potential challenges is the city facing beforehand?
I am eighty-five years old. The future as I see it is likely different from that of a seventeen-year-old. It is precarious to assume we can define the future. Honestly, I don’t have any idea what my grandchildren will choose to do in the future.
The most important essence of a democratic system is the restraint of power. I encourage a wider discussion, as there are many different kinds of democratic system. When you think about it, in 1997, when Hong Kong returned to China, the “one country, two systems” policy was unprecedented. I have faith that the people of Hong Kong are wise enough to make the right choice.
Churchill once said, “Politics is not a game. It is an earnest business.” It is quite unimaginable for a person who wants to serve Hong Kong to not to love the country and Hong Kong.
Hong Kong is my home and it has always been a harmonious society. I want everyone to know that we are inclusive, warm-hearted, and decent people. We all have heartfelt deep ties to our country and we have a genuine feeling toward our fellow countrymen. If you need to ask for directions in Hong Kong, you will find that most people, like me, despite our heavy Cantonese accent, will try to be helpful. Every time there are any natural calamities, our hearts passionately go out to the victims. Maybe Hong Kong is struggling through a painful identity crisis.
Continuous investment in education gives us a better shot to build a fair and equitable society. Improving opportunities for everyone is fundamental to stability and sustainable prosperity. The people of Hong Kong are passionate about their country, and the city we call home.
Since 1997, Hong Kong has experienced different stages of governance, from businessmen-led, to civil servant-led, and professional-led. Currently, what do you think is the key issue for governance?
To me, the most critical measure of healthy governance is a system built on the rule of law. This embodies the discipline in conduct, including those of authoritative power.
Every time we morphed through an economic transformation, shifting from manufacturing to the service sector, opportunities changed, and when upward mobility is throttled, the rebalance could be very disconcerting. Human capital enhancement should always be the main focus of any government.
The crucial issue is how Hong Kong can improve its long-term competitiveness through government policies. The commitment of the Israeli government toward their innovation industry is quite inspirational. They will not hesitate to offer support to investments. In one instance, the government suggested that they could consider equity participation structured to mitigate our risk for borderline cases.
My first reaction was, “They are totally not stressed over broad-brush allegations of collusion with businesses.” But they responded, “Our raison d’être is creating opportunities for our citizens.” I was very touched by such conviction.
A responsible and caring government should understand that quantifiable returns are more than monetary. Setting society on a virtuous cycle track is the true victory.
Some say Hong Kong belongs to business moguls. It belongs to the four property families. Political elites control society by partnering with economic and financial elites. But such a model is expected to change in 2017 when the election is held. How do you view the changes of Hong Kong’s business circle and its relationship with politics over the past decades?
I’m not certain what you meant by “the four families.” Ninety-nine point nine percent of our businesses are in highly competitive sectors. Hong Kong Electric Holdings may be seen as a monopoly in the public utility business. It services the people on Hong Kong island, and the same holds true for CLP Holdings in Kowloon and the New Territories. We acquired Hong Kong Electric from Hong Kong Land in 1986 and it is still under the regulations of the government.
Some professions in particular—for example, barristers and doctors—have high protectionist barrier. In fact, the local government is the city’s largest employer and has many projects in construction. Therefore, the government should also discuss with affected businesses labor shortages in certain sectors.
Hong Kong remains a highly competitive market. One cannot tackle the economic problem by searing at the business sector. We need to be more expansive: creating a bigger pie is seminal to a healthier economy.
Do you agree with the judgment that the golden era for Hong Kong’s tycoons is over? Will they become targets of both the rulers and the public, and be hurt during the next democratic process?
Companies in different industries in Hong Kong are all active at home, constantly building footholds on the mainland and always on the lookout for opportunities overseas. We enjoy a strong free flow of capital, and an enterprising person can always find opportunities along his way.
Businessmen should thrive under a democratic system. The Hong Kong government will certainly continue its support of the business sector to maintain economic vitality. President Xi Jinping’s commitment to reform and opening up will continue to rev up the economy, and his promise to deepen reform for a more equitable society is reassuring. Good governance will inspire public confidence and ignite hope.
We’ve seen more conflicts between the mainland and Hong Kong in recent years. How should leaders in Beijing and Hong Kong resolve these conflicts?
I need to reiterate that one should not overreact to some independent incidents and be misled that people in Hong Kong are belligerent toward our fellow countrymen.
Hong Kong is a small city and concerns over resources allocation are real. But we welcome all visitors wholeheartedly, just as we hope to be treated with respect when we ourselves are tourists. Being impertinent and discourteous is unbecoming to a civil society. Tension could be overcome by more tolerance, but the government should proactively deal with the friction arising from inadequate resources and inconveniences.
The recent attack on Kevin Lau, the former chief editor of the Ming Pao newspaper, triggered a protest against violence and calls for press freedom. How do you see Hong Kong’s current media environment and the change of public supervision?
The violent attack on Mr. Lau saddened me. We should never condone violence. The rule of law and the freedom of the press are our core values, without which will be a great loss for us.
The launch of the Shanghai Free Trade Zone will impact Hong Kong. With the gradual opening of the mainland, many of Hong Kong’s previous advantages will diminish. How do you evaluate the influence on Hong Kong by the opening of the mainland market? And how should Hong Kong deal with it?
Shanghai has been on the forefront of China’s opening up reform. The establishment of the Shanghai Free Trade Zone is a great opportunity, and many are eager to participate. The further expansion of the FTZ will push forward the improvement of the economic system.
The Shanghai FTZ has limitless potential in attracting foreign capital, technological development, tourism services, as well as financial and insurance businesses. There are plenty of chances for cooperation, and it is good news for Hong Kong.
Its ripple effect will benefit Hong Kong undoubtedly. Moreover, it is also important for Hong Kong to deepen cooperation with Guangdong Province. Many existing predicaments can be solved on the basis of sincere cooperation.
In 2001, I spoke at the 140th anniversary party for the Hong Kong General Chamber of Commerce to business and community leaders. I said China’s entry into the WTO presents a gold mine of opportunities for us. We know China, we also know the world market. The immense growth of China’s economy together with our skills in the capital and financial markets will create boundless opportunities. As you may be aware, our group, under my chairmanship, is firmly rooted in Hong Kong, but ten years ago (around the 1990s) we took a very significant step to diversify into the mainland and overseas.
Although this can be disconcerting, I think people in Hong Kong should increase their sense of urgency if we want to move forward. Hong Kong has been blessed with abundance, but we cannot be blinded by conceit, overlooking our need to upkeep a competitive edge. Economic globalization started nearly twenty years ago, but perhaps because Hong Kong was focused on the transition of the handover, we have not adopted effective countermeasures for an economic transformation. Some cities on the mainland, such as Shanghai, Guangzhou, and Shenzhen, have grown rapidly. We should be adaptive, and be informed of potential in other cities and seize these opportunities.
Hong Kong would benefit from attracting more talents. We should understand that recruiting mainland and overseas talents is not a direct threat to Hong Kong people. Before the surge of the Russian-Jewish migration in the early 1990s, Israel only had 60,000 engineers, which was insufficient for the growing demand of the flourishing high-tech industry. Migration brought 80,000 immigrants, among them 20,000 are engineers, resolving labor inadequacy and subsequently pushing Israel’s economy forward. This is an incident in history Hong Kong can learn from.
These are my sentiments from twelve years ago, many of which have been proven true.
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