Borderline Insanity in Hong Kong


By Bruce Einhorn For years, as skeptics have questioned Hong Kong's future, local officials have talked about turning the city into the Manhattan of southern China -- a financial, logistical, and creative hub for the booming Pearl River Delta. With cities in the mainland, like Shanghai, usurping Hong Kong's traditional role as the gateway to China, this Manhattanization of Hong Kong is the former British colony's new role, boosters claim.

Four years have passed since Hong Kong's return to Chinese rule, and that integration doesn't seem to have progressed much. But recently, local lobbyists told us that the government really was serious about greater integration between Hong Kong and neighboring Guangdong province. The two sides would be ready to make some major announcements after a meeting in late July. "Watch this space," one lobbyist said.

On July 25, the news finally came. And I'm afraid that we're not sure what the fuss was about. After meeting for several hours in the mansion that used to be the home of the British governors but now sits largely unused (Chief Executive Tung Chee-hwa doesn't like it), officials from Hong Kong, Guangdong, and the border city of Shenzhen unveiled their initiatives. The most important: Extending the operating hours at the main border crossing into Shenzhen, at the village of Lo Wu, so that people could travel more easily. Shenzhen officials had proposed keeping the border open 24 hours a day. That was too much, though, for the Hong Kong officials, so the two sides agreed to keep it open longer instead.

SMALL CHANGE. How much longer? A whopping 30 minutes. And even that would only be on public holidays. This underwhelming announcement comes at a time when Chinese cities are usurping Hong Kong's traditional function as the gateway to the mainland. And this kind of timidity hurts Hong Kong's effort to find a new raison d'etre.

As mundane as it might sound, opening hours of border crossings do matter a great deal. To understand why, it's important first to recall that Hong Kong is one of the world's most expensive cities, largely because property prices are sky-high. Some Hong Kong people have started living in Guangdong, where costs are far less, and commuting across the border to work in Hong Kong. But a big obstacle is the border crossing at Lo Wu, which closes at 11:30 p.m. and doesn't reopen till 6:30 the next morning. The crossing itself is about an hour by train from Hong Kong's business district.

So imagine that you are a Hong Kong person who's made the move to Guangdong. You work in Central, the financial district, and one night you're stuck late at the office. Or you and your spouse have tickets to see a show at the Performing Arts Center in Wanchai. Chances are slim that you can get back to Lo Wu in time to cross the border before the 11:30 witching hour.

LARGER REPERCUSSIONS. That prevents a lot of people from making the move, which is just fine for Hong Kong's property developers. The city's exclusive group of real-estate tycoons has grown rich thanks to highly favorable government policies that restrict the amount of land available for development. That's made Hong Kong housing costs some of the most costly in the world. For years there was little that most Hong Kong people could do about it. With Hong Kong a little enclave of the U.K., where else could they go?

The return to Chinese rule answers that question. They can move to Guangdong, where people speak the same Cantonese dialect and where living standards have increased enough so that there's less difference between many of its cities and Hong Kong. Not that many people have done it yet, partially because of the problems with the border. Opening up 24 hours would make moving to Guangdong much easier to imagine for many Hong Kong people.

That's what the local property tycoons fear, since opening the border would put pressure on property prices in Hong Kong itself. Just as Hong Kong's major airline, Cathay Pacific, has been using government policy to protect it from competition (See BusinessWeek, 6/8/01, "Hong Kong Can't Keep Its Skies Closed Forever"), so too are real estate developers afraid of competition from China. And just as it's accommodating Cathay Pacific at the expense of ordinary residents of Hong Kong who have to pay higher ticket prices, so is the government also coddling property barons to the detriment of Hong Kong residents.

To see just how ludicrous the situation is, compare Hong Kong to New York. After all, local officials do, repeatedly saying that they want Hong Kong to be like the Manhattan of the Pearl River Delta. Imagine, then, what would happen if Manhattan were to close the Lincoln Tunnel and the PATH trains every night at 11:30. That's what we have now in Hong Kong.

And you don't even have to go so far as the U.S. Here in Asia, Hong Kong often compares itself to its Southeast Asian rival, Singapore. The city-state is an island adjacent to Malaysia, and the two don't have the best history of getting along. Still, Singapore keeps its border with Malaysia open 24 hours a day. Yet Hong Kong can't manage to keep its border open with China -- which, remember, is the same country!

POLITICS AS USUAL. Of course, opening the border would not be painless: It's not just property barons who would suffer. So would many Hong Kong people who bought homes during the boom years before the Asian crisis and now suffer from negative equity. But if Hong Kong officials expect us to take seriously their rhetoric about Greater Hong Kong, then they need to do a lot more to make the integration happen.

To be fair, the two sides did announce some other points at the July 25 meeting. Not only will Hong Kong keep the border crossing open an extra half-hour for a few days a year, but the government will also make the immigration queues nicer by installing 72 fans at the border crossing. Hong Kong also promised to try to help Guangdong officialdom rescue a couple of disappointing real-estate projects backed by well-connected officials. They include a new airport in the city of Zhuhai, across the estuary from Hong Kong, that almost no one uses. Another is a plan, backed by Guangdong officials as well as a top Hong Kong businessman, to develop the backward Pearl River Delta town of Nansha into an information technology zone.

All this raises questions about what Hong Kong officials mean when they say they want to make the Hong Kong Special Administrative Region the hub for the Pearl River Delta. How does that rhetoric square with policies that end up protecting Hong Kong property developers from competition? Or helping to bail out troubled projects across the border? Watch this space, indeed. Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BW Online


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