The remarkable resilience of Hong Kong

Oct 30, 2022
John Lee Ka Chiu and Xi Jinping in Hong Kong 1 July 2022

Vibrancy and efficiency combined with a particularly safe living environment all remain evident in Hong Kong in a way not commonly seen in other large, modern global cities. Still, the series of tests which the HKSAR faces today are acutely demanding. This, though, resonates with the position faced in most jurisdictions worldwide. Hong Kong, meanwhile, has an extended track-record of candidly accepting matters as they are, over time, prior to regrouping and moving forward affirmatively.

Hong Kong’s new Chief Executive, John Lee, Ka-chiu, recently delivered his first policy address. Christine Loh’s companion piece in this series succinctly explains how John Lee has delineated a series of major proposals addressing priority needs, including: economic development; housing; health; infrastructure; technology; recruiting high-end talent to the HKSAR; and addressing the particular requirements of younger Hong Kong residents.

It is a demanding list. Professor Lau Siu-kai, commenting on the policy address, noted how the government’s ambitious plans will “severely test its ability, courage, wisdom and stamina”. He also noted how executing these initiatives will, in certain cases, require sacrifices by individuals and social groups. John Lee would be unlikely to disagree. No one is under any illusions that the tasks facing Hong Kong are less than comprehensively demanding.

However, as Christine Loh persuasively argues, both the opportunities available to Hong Kong, not least related to Mainland China and the Greater Bay Area, of which the HKSAR is now an essential part, and its remarkable human capital resource-base, mean that it remains fortunately placed. This advantageous situation is further confirmed by the closely reasoned contribution from Grenville Cross to this series, on the deep legal strengths of the HKSAR, (insert link).

What I wish to explore here are the durable foundations of Hong Kong’s, long-term, political stamina. Hong Kong’s exceptional, collectively lived experience, stretching over some 180 years, adds further important grounding for the argument that Hong Kong looks set to do well, yet again, during coming decades, despite facing significant new (and enduring) internal and external challenges.

When the British secured Hong Kong Island by 1842, after provoking and then winning the First Opium War with China, the original plan (copied from Singapore) to finance the new duty-free, trading colony was to sell opium openly in Hong Kong via private dealers and charge significant franchise fees. For various reasons, this proved to be a revenue flop.

The opium trade swiftly flourished, however. In turn, the demand for land on Hong Kong Island became exceptionally strong. British Empire colonial experience led the new Hong Kong Government to adopt a scheme of selling land on a strictly regulated, leasehold basis. In revenue terms, this proved to be an extraordinary success. The opium trade, which relied hugely on smuggling into China where its sale remain illegal, was massively profitable. Leasehold land sales created an exceptionally robust revenue stream.

The British began the Second Opium War in 1856 and were later joined by the French. The rationale for the conflict drew on certain provocation arguments. Unsurprisingly, the Anglo-French forces won the war. Following this, the British acquired the Kowloon Peninsula (still more land to lease) and the sale of opium in China was made legal. Business in Hong Kong boomed.

By the 1880s the Hong Kong Government had amassed savings from its revenue regime which totalled more than a year’s expenditure. A comparable level of super-solvency has largely been maintained ever since in Hong Kong. Thus, even after the recent, extensive additional COVID pandemic spending, the fiscal reserves of the HKSAR, stood at about US$105 billion in July, 2022. This is still around 115% of regular annual government spending.

Next, it is helpful to consider how, since British settlement began, Hong Kong has been subject to a series of acute stress tests, numbers of which have regularly spilled over from Mainland China. The turbulence in China leading up to and after the first Chinese revolution in 1912, included a long-term, unforgiving invasion by Japan and a terrible Civil War prior to the creation of the People’s Republic of China (PRC) in 1949. Hong Kong was invaded at about the same time as Pearl Harbour was bombed, and ruled by the Japanese for over three years. As Hong Kong was recovering from that forbidding occupation, the Korean War began, creating new geopolitical tensions.

Desperate immigration from the PRC also increased after 1949 significantly enhancing Hong Kong’s human capital – but also placing major demands on publicly provided services. Later came the Great Leap Forward and the Cultural Revolution in China amplifying the immigration flow. Hong Kong also witnessed very serious, deadly internal political riots in the 1950s and 1960s. In summary: the neighbourhood was frequently menacing; disruptive spies from around the globe flocked to Hong Kong; and serious internal tensions regularly flared up.

Yet despite these conspicuously testing circumstances, Hong Kong still thrived. After the war Hong Kong’s per capita GDP was less than that of India and Ghana according to some measures. But by 1992 it exceeded that of the UK. This required contributions of extraordinary resilience and stamina, which is what the great majority of ordinary people brought to the task of living collectively in Hong Kong.

Additional (often politically-shaped) serious stress tests have been experienced since the resumption of sovereignty by China, in 1997. In 2003, the HKSAR was a front-line jurisdiction as the deadly SARS epidemic struck. The Occupy Central Movement in 2014 was largely peaceful but hugely disruptive. The Mong Kok riot in 2016 was short-lived but particularly violent. The violent protests which began in June 2019 and arose out of several very large peaceful protest marches, grew into a multi-month, extremely violent and destructive insurrection. As the former Court of Final Appeal Judge Henry Litton said, “What Hong Kong faced was an insurgency, the overthrow of the government, nothing less”.

Like the rest of the world, the HKSAR has also been fighting for almost three years to protect its residents during the COVID pandemic.

Hong Kong has, thus, endured an extraordinary set of resilience tests, especially since the last war, and has regrouped each time and got back to work. One can fairly argue that Hong Kong represents a striking, metropolitan embodiment of a Nietzsche aphorism (later adapted by Hemingway): whatever does not kill you makes you stronger. 

Of course, to locate the primary source of this singular resilience, we need to look towards the people of Hong Kong. What they have built and created within the particular “software and hardware” political-economic framework established by the British, is what has most fashioned Hong Kong into such a remarkable city. That software includes the durable, effective and mainly well-staffed governance and judicial systems laid down for Hong Kong under colonial rule. The hardware includes the provision of basic and then steadily more advanced public services addressing: housing; transport; health; education; and basic welfare needs, for example. In fact, the MTR (Mass Transit Railway) swiftly became one of the best such services anywhere in the world not long after it began running in Kowloon, in 1979.

Over time, the clear and steady regulatory framework assisted a significant number of fortunate residents to become wealthy. The great majority have lived out their lives far more modestly, however. But Hong Kong’s huge public housing system has still provided small, well-maintained homes for millions of residents across Hong Kong since the 1950s. Underpinning all of this have been the exceptional bonding and support systems demonstrated within the typical Chinese family.

Today, that collective political stamina which Hong Kong has crafted for itself over many decades leaves it well placed to face the future. The opportunities on offer are better than those in most places not least because Hong Kong is supported by China. And, notwithstanding acute geopolitical pressures and many internal problems demanding attention, this is a rising, positive China. The mood across the developed world, meanwhile, remains acutely shaped by a growing negative outlook.

Finally, Hong Kong’s fiscal resilience adds to its potential to cope with what may come and to make the most of what may be offered. The HKSAR still has financial reserves or public savings totalling around 30% of GDP. By way of comparison, Australia, the UK and the US each have substantial, now increasing (at higher interest) public debt levels equal to around 50%, 95% and 100%, respectively. In fact, Hong Kong’s position is healthier still. The fiscal reserves comprise just one part of the Exchange Fund which holds around US$540 billion in total assets. Amongst other things, the Exchange Fund, (managed by the Hong Kong Monetary Authority) provides backing for the Hong Kong Dollar peg to the US Dollar.

Bearing these matters in mind, I did not find it surprising when a circumspect local commentator, Wing-hung Lo recently argued that the Chief Executive’s Policy Address has given Hong Kong people the feeling that the “government is moving”.

Vibrancy and efficiency combined with a particularly safe living environment all remain evident in Hong Kong in a way not commonly seen in other large, modern global cities. Many commentators have aptly stressed that the series of tests which the HKSAR faces today are acutely demanding. This, though, resonates with the position currently faced in most jurisdictions worldwide. Hong Kong has an extended track-record of candidly accepting matters as they are, over time, prior to regrouping and moving forward affirmatively. It is a city that has persistently and collectively relied on its remarkable backbone rather than any sort of wishbone.

Share and Enjoy !

Subscribe to John Menadue's Newsletter
Subscribe to John Menadue's Newsletter


Thank you for subscribing!