Chinese Vice Premier Li Keqiang swept through Hong Kong’s financial district today, with police blocking footbridges between the world’s fifth-biggest stock exchange and the Asian headquarters of JPMorgan Chase & Co. (JPM) when his cavalcade of more than 18 vehicles passed beneath.
The front-runner to replace Premier Wen Jiabao arrived as a helicopter flew overhead with a banner by Industrial & Commercial Bank of China (601398) Ltd. for tomorrow’s 20 billion yuan ($3.1 billion) sale of bonds by China’s Ministry of Finance. While the skyscrapers and fundraising are badges of Hong Kong’s success, Li today toured a public housing estate in a city where a growing wealth gap is stoking discontent.
Chief Executive Donald Tsang has failed to win backing from a majority of the public for more than a year, according to the latest findings in a University of Hong Kong survey tracking his popularity since his appointment in 2005. Fourteen years after Hong Kong’s autonomy was enshrined in law to calm fears for the capitalist enclave, Tsang is increasingly turning to the Communist central government to sustain economic growth.
“Beijing is quite concerned about the economic stability in Hong Kong, as the city may see a rising risk of unrest over poverty,” said Willy Lam, an adjunct professor of history at Chinese University of Hong Kong. “Since the handover, Hong Kong has made no real progress in diversifying its economy, relying heavily on finance and property for growth, sectors that won’t create lots of jobs.”
Li said he would announce policies to support local development at a forum tomorrow on China’s latest economic plan. Central bank Governor Zhou Xiaochuan, Commerce Minister Chen Deming, and China’s top economic planner Zhang Ping will also speak at the meeting, according to a government statement.
“The inclusion of Hong Kong in the 12th five-year plan shows the central government’s care and support,” Li, who is responsible for China’s affordable housing policy, said on his arrival at Chek Lap Kok airport.
While Hong Kong faces challenges, Li told Tsang he had “confidence” in the city’s future.
While Hong Kong’s stock exchange overtook Germany and France during Tsang’s watch to become the world’s fifth-biggest by market capitalization, it was outstripped by China. Hong Kong also lost its place this year as the world’s biggest center for initial public offerings as the flow of multibillion-dollar sales by Chinese state-owned companies dried up. Hong Kong IPOs raised $15 billion this year, while the U.S. had $36 billion worth, according to data compiled by Bloomberg.
Li’s visit comes a week after the city said its economy shrank for the first time since 2009 as exports grew at a slower pace.
Hong Kong’s export-led economy is sinking into a recession that is likely to last for at least a year on weak global demand, Daiwa Capital Markets economist Kevin Lai said yesterday. The city posted a 0.5 percent contraction in the second quarter from three months earlier.
The Chinese government has pledged to help Hong Kong develop as an offshore yuan center. China’s currency is not now fully convertible, and policy makers are seeking to promote its use in global trade and investment.
Li is due to attend a ceremony marking the Ministry of Finance’s sale of “dim sum bonds” tomorrow, its third and largest issue of yuan-denominated debt in Hong Kong. The ministry will start selling 20 billion yuan ($3.1 billion) of debt tomorrow.
The timing of ICBC’s helicopter ad was a coincidence as it was planned before Li’s trip was confirmed, said Hilda Chow, a spokeswoman for the Hong Kong arm of the world’s biggest bank by market capitalization. The campaign will run for the three days that Li is in Hong Kong.
Tsang’s public-support ratings rebounded last month to 48.3 out of 100, according to the University of Hong Kong’s Public Opinion Programme today. In July, Tsang’s popularity hit a record low of 45.6, it showed.
A 45 grade could signal a “governance crisis,” poll director Robert Chung said. China’s top official on Hong Kong, Wang Guangya, warned the city’s leaders in June that home prices may turn into a “political problem.”
Wen said in March that Hong Kong’s leaders should resolve “deep-rooted conflicts” and raise living standards.
Wages adjusted for inflation in Hong Kong are lower now than they were a decade ago, as incomes failed to keep pace with rising rents, supermarket prices and school costs.
Tsang will finish his term next year, and his replacement will be selected by a group of people appointed by the Chinese government.
Li is one of nine members of the Communist Party’s ruling Politburo Standing Committee and is mentioned by political analysts such as Li Cheng of Washington’s Brookings Institution as being a likely successor to Wen.
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