Bloomberg News

Leung Victory in Hong Kong Poll Turns Focus to Democracy

March 25, 2012

Leung Chun-ying speaks during a news conference after winning the election for chief executive in Hong Kong. Photographer: Jerome Favre/Bloomberg

Leung Chun-ying speaks during a news conference after winning the election for chief executive in Hong Kong. Photographer: Jerome Favre/Bloomberg

Leung Chun-ying, a former property surveyor, pledged to address Hong Kong’s wealth gap and demands for universal suffrage as the city’s next chief executive after winning a poll in which only one in 5,900 people could vote.

A 1,193-member panel of Hong Kong billionaires, academics and professionals chose Leung over two other candidates to lead the city for the next five years. Crowds outside the election venue protested the lack of democracy in the former British colony, with one waving the colonial-era flag and others holding signs opposing China’s ruling Communist Party.

Leung, 57, will help shape the city’s economy and relationship with China through 2017, when Beijing has pledged to allow Hong Kong to elect its own leaders. He must also address anger over rising living costs spawned by an influx of money from mainland China and surging property prices that have made Hong Kong the world’s most expensive place to buy a home.

“Rule of law, human rights, integrity, lack of corruption and press freedom are all part of our life,” Leung told reporters after his selection. “This election has helped build a foundation for universal suffrage in 2017.”

While the city’s 7.1 million people couldn’t vote, public opinion helped shape yesterday’s selection, with some committee members saying they had to heed opinion polls that put Leung 17 percentage points ahead of his main rival, Henry Tang. Tang was seen as the front-runner and Beijing’s favored candidate until an admission of an extra-marital affair and a basement built without proper permits damaged his poll numbers.

Switched to Leung

As the vote neared, Hong Kong media including the South China Morning Post reported that Beijing had switched to backing Leung. China may want to keep Hong Kong stable as the ruling Communist Party begins its own leadership transition later this year, a process that was complicated by the removal of Chongqing party secretary Bo Xilai on March 15.

China’s leaders also want a prosperous Hong Kong because the city, which has a fully convertible currency, is used as a way to internationalize the yuan. Companies are issuing more bonds denominated in yuan in Hong Kong, and cross-border yuan flows have surged.

“Leung has strong backing from China,” said Vasu Menon, a vice president of wealth management at Oversea-Chinese Banking Corp. in Singapore. “China is quite committed to ensuring that Hong Kong thrives because it is going to help the mainland get plugged into the global financial system in a bigger way. Leung is going to be a conduit for change.”

Positive for Markets

Menon said Leung’s selection should be “modestly positive” for Hong Kong stocks. The Hang Seng Index (HSI) has gained 12.1 percent this year after falling 20 percent in 2011. The benchmark was little changed at 10:50 a.m.

Hong Kong’s economy is at risk of contracting should exports fail to improve, Financial Secretary John Tsang said in February. Growth will be between 1 percent and 3 percent in 2012, down from 5 percent last year, according to government estimates.

Prior to the vote, Leung was dogged by claims that he is a secret member of the Chinese Communist Party. Martin Lee, the co-founder of Hong Kong’s Democratic Party, wrote an article published in Next Magazine last week saying he believed Leung has been an underground party member, an allegation that Leung denied. The Basic Law, Hong Kong’s mini-constitution, bans its leader from having any party affiliations.

Party Voice

“I think CY is part of the communist party,” said protester Gary Cheung, 33, who works at a trading company, using Leung’s initials. “His behavior and attitude is well documented to be in line with the communists. This is not a guess. He will be a voice for the party and not for the Hong Kong people.”

An estimated 2,000 people turned out to protest yesterday’s selection, according Candice Siu, an officer at the Hong Kong Police public relations branch. Leung, speaking at a press conference in Cantonese, pledged to maintain “harmonious stability,” echoing his two predecessors as chief executive in using phrases that are staples of the Chinese Communist Party.

Leung, a former government adviser who advocates closer ties with mainland China to boost growth, has pledged to build more public housing, increase land supply and provide residents with tax-breaks to help them buy homes. He also promised to speed up public projects like expanding the city railway system and encourage the use of electric and hybrid cars.

689 Votes

The election committee chose Leung with 689 votes, or 61 percent of ballots cast. Tang garnered 285 votes while Democratic Party lawmaker Albert Ho got 76 votes. Leung succeeds Donald Tsang, who has led Hong Kong since 2005.

Leung must restore confidence in the city’s leadership and build trust between political parties, newspapers including the Apple Daily and Hong Kong Economic Times said today in editorials.

“You have a chief executive that doesn’t have the people’s mandate, and the integrity and credibility are in question,” lawmaker Emily Lau said today. “I think he’s really got a very, very tough task ahead.”

While looking to boost the economy, Leung must also navigate growing friction between Hong Kong residents and mainland Chinese. A Feb. 1 advertisement in the local Apple Daily newspaper portrayed mainland Chinese mothers as locusts for entering Hong Kong to give birth in local hospitals and taking up city resources.

Hong Kong residents enjoy civil liberties including a free press and freedom of assembly not available in mainland China under the “one country, two systems” formula that returned Hong Kong to China in 1997.

Best for Business

One of Leung’s tasks will be retaining Hong Kong’s spot as the best place in the world to do business. The city, which serves as the main gateway to China, placed top in the Bloomberg Rankings index based on six factors including economic integration and the costs of setting up business.

Leung, a graduate of the Hong Kong Polytechnic, founded his own surveying company in 1993. He became Asia chairman and a director for London-based DTZ Holdings Ltd. in 2006 following a merger between the two companies. Leung resigned last year to run in the election.

At age 31, Leung was appointed by Beijing as a member of the committee to help draft the city’s basic law, which would become Hong Kong’s de-facto constitution after its handover to China in 1997. Speaking yesterday, he said that Hong Kong “does not need major reform.”

Leung must battle a public perception that he is stiff and uncomfortable in the spotlight.

“Bill Clinton, he’ll make you think he’s your best friend inside of 10 minutes,” said Ronnie Chan, chairman of developer Hang Lung Properties Ltd. (101) who has known Leung for 30 years and is one of his most vocal supporters. “For CY, you may not feel that even after knowing him for 10 years.”

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Stephanie Tong in Hong Kong at stong17@bloomberg.net; Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editors responsible for this story: Hwee Ann Tan at hatan@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net


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