With tighter grip, Beijing sends message to Hong Kong tycoons: fall in line

Sun Hung Kai Properties

17/09/2021 04:56

By Clare Jim and Farah Master
    HONG KONG, Sept 17 (Reuters) - As Beijing seeks to tighten
its grip over Hong Kong, it has a new mandate for the city's
powerful property tycoons: pour resources and influence into
backing Beijing's interests, and help solve a potentially
destabilising housing shortage.
    Chinese officials delivered the message in closed meetings
this year amid broader efforts to bring the city to heel under a
sweeping national security law and make it more "patriotic,"
according to three major developers and a Hong Kong government
adviser familiar with the talks.
    "The rules of the game have changed," they were told,
according to a source close to mainland officials, who declined
to be named because of the sensitivity of the matter. Beijing is
no longer willing to tolerate "monopoly behaviour," the source
added.
    For Hong Kong's biggest property firms, that would be a big
shift. The companies have long exerted outsized power under the
city’s hybrid political system, helping choose its leaders,
shaping government policies, and reaping the benefits of a land
auction system that kept supply tight and property prices among
the world's highest.
    The sprawling businesses of the four major developers, CK
Asset  1113.HK , Henderson Land Development  0012.HK , Sun Hung
Kai Properties  0016.HK  and New World Development  0017.HK ,
extend their influence even further into society. For example,
the empire of Hong Kong's richest man, Li Ka-shing of CK Assets,
includes property, supermarkets, pharmacies and utilities.
    Because the tycoons are so deeply intertwined with the
city's economy and politics, it would be difficult for Beijing
to sideline them completely, said CY Leung, former Hong Kong
leader and now a vice-chairman of China's top advisory body. 
    "They are a major component of our political and economic
ecosystem, so we need to be careful," Leung told Reuters. "I
think we need to be judicious with what we do and not throw the
baby out with the bathwater."
        
    INFLECTION POINT    
    Some Chinese officials and state media have blamed tycoons
for failing to prevent anti-government protests in 2019 that
they say were rooted in sky-high property prices.
    The protests, joined by millions of all ages and social
strata, demanded greater democracy and less meddling by Beijing
in Hong Kong, which had been promised wide-ranging freedoms
until 2047.  
    The new directives mark an inflection point in the power
play between Beijing and the tycoons, who once held kingmaking
sway in Hong Kong's political leadership race.
    "Now the focus is on contribution to the country; this is
not what the traditional business sector in Hong Kong is used
to," said Raymond Tsoi, chairman of Asia Property Holdings (HK)
and a member of the advisory group Chinese People's Political
Consultative Conference Shanxi Committee.
    In March, Beijing made sweeping electoral changes. In a new
election committee, responsible for choosing the next leader of
Hong Kong and some of its lawmakers, a greater "patriotic" force
has emerged, while many of the prominent tycoons, including Li,
93, will be absent for the first time since Hong Kong returned
to Chinese rule in 1997.
    Hong Kong's Constitutional and Mainland Affairs Bureau said
the new election committee would be more broadly representative
of Hong Kong, going beyond the vested interests of specific
sectors, specific districts and specific groups, which it called
"inadequacies" in the system.
    The source close to Chinese government officials told
Reuters a team in the Hong Kong and Macau Affairs Office and the
Liaison Office (HKMAO) had sought to curtail the influence of
groups perceived to have done little for Beijing's interests in
the city. 
    HKMAO and the Liaison Office did not respond to requests for
comment.      
    Sun Hung Kai said it was confident about the future of Hong
Kong and would continue to invest there and in mainland cities.
Henderson Land and New World Development declined to comment,
while CK Holdings did not respond to request for comment. Li did
not respond to a request for comment.
 
    'GIVE BACK MORE'
    Developers have already taken measures to show the message
was received.
    New World and Henderson Land have donated rural land as
reserves for social housing. In recent weeks, Nan Fung Group,
Sun Hung Kai, Henderson Land and Wheelock applied for a
public-private partnership scheme, the first applications since
the programme was launched in May 2020. 
    The programme offers developers an opportunity to build on a
higher percentage of open land, but they must use at least 70%
of the extra floor area for public housing. Several told Reuters
last year that the programme was unattractive because there were
many restrictions and a risk of higher costs.
    "Beijing is not telling us what to do, but saying you need
to solve this problem," Hopewell Holdings' Gordon Wu told
Reuters, adding that "it won't be impatient but it will give you
pressure." 
    Another developer source, who declined to be named because
of the sensitivity of the issue, said Chinese officials had laid
out expectations, but no strategy or deadline.
    "We can continue our businesses as long as we give back more
to society," said the source, a senior official at a top
developer in Hong Kong. The sector needs to step up efforts to
ease the housing shortage, he added.
    Most of the developers have published statements and
newspaper advertisements, along with other Chinese corporations,
to support the national security legislation and electoral
changes.
    Critics of the moves said they crushed democratic dreams,
while authorities said they were necessary to restore stability
after the 2019 demonstrations.
    Adrian Cheng, 41, who took over as chief executive of New
World, founded by his grandfather, told Reuters late last year
the company needs to become more relevant to society, especially
in a new environment where firms have to carefully balance the
interests of various parties. 
    "It's not easy. I have a lot of grey hair you can't see,"
Cheng said.

 (Additional reporting by James Pomfret; Editing by Anne Marie
Roantree and Gerry Doyle)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))