Hong Kong Leadership Contest Starts as Leung Challenges Tang in March Poll

The race for Hong Kong’s top job started as former government adviser Leung Chun-ying said he’ll run against former Chief Secretary Henry Tang in the March 2012 election, as the city faces a widening wealth gap and slowing economy.

“There are rising voices from the community seeking for change,” Leung, 57, said at a press briefing yesterday. “I aim to make Hong Kong a more prosperous, righteous and improved society.” The outgoing Asia Pacific chairman of London-listed property broker DTZ Holdings Plc will challenge Tang, 59, who announced on Nov. 26 his candidacy for the chief executive post.

Hong Kong’s economy barely grew in the third quarter, and surging home prices and inflation have spurred protests and led to a record-low approval rating for the government. Leung and Tang need to win votes from a 1,200-member election committee, some picked by China, that will select the replacement for outgoing Chief Executive Donald Tsang.

“Leung definitely has used his grassroots upbringing to good advantage to build a populist image,” said Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong. “Tang has never been able to shake off his image as the product of privilege, but he enjoys the support of Hong Kong’s tycoons. Beijing will go along with the candidate who wins the business community’s confidence.”

Tens of thousands of demonstrators marched to protest surging home prices and inequality on July 1, the 14th anniversary of Hong Kong’s return to Chinese rule. Hong Kong has the widest wealth gap in Asia, according to a report by the United Nations in 2008.

Tsang, who will step down in June after running the city for seven years, said last month the jump in housing prices, up 70 percent since the start of 2009, has been the biggest source of public anger. Tsang was the only candidate in the 2005 election after predecessor Tung Chee-hwa stepped down following protests by more than 500,000 people in 2003.

‘Plastic Flowers’

Leung, the son of a policeman, worked part-time at local food shops when studying in the U.K and said his parents earned their living making accessories at home, a popular light- manufacturing activity in the 1960s in Hong Kong.

“My mother assembled plastic flowers to help fund the family, and I helped her to bring those heavy materials back home as a primary student,” he said.

As a 34-year-old in 1988, Leung became the head of the committee responsible for drafting the Basic Law, the city’s de facto constitution adopted after the former British colony was returned to China. Leung was one of the non-official members in the Executive Council, which advises the government on major policy issues.

Among his backers are Vincent Lo, chairman of Shanghai- based developer Shui On Land Ltd. (272), and Hang Lung Properties Ltd. Chairman Ronnie Chan.

‘Tong Tong’

Tang was financial secretary before becoming Hong Kong’s second-highest ranked official, a career path that mirrored Chief Executive Tsang. His father is Tang Hsiang Chien, who was ranked the 40th-richest person in Hong Kong in 2010 by Forbes Magazine. The younger Tang was the managing director at the textile manufacturer founded by his father before he joined the government in 2002.

Tang’s best-known policy success was to abolish duties on wine in 2008, helping the city overtake London and New York as the world’s biggest wine auction market. As financial secretary in 2007, he handed out income tax rebates and property-rate waivers, earning him the nickname of “tong tong,” a term for sweets, from the local press.

“The chaos in Europe and U.S. economies could hit Hong Kong hard, we need an experienced and capable helmsman to lead us,” Joseph Yam, who steered the city through the 1997-1998 Asian financial crisis as then-head of the Hong Kong Monetary Authority, said on Nov. 24 in declaring for Tang. Yam’s backing echoed that from Peter Wong, chief executive officer for Asia Pacific at HSBC Holdings Plc.

About 200 supporters attended Leung’s press conference at the exhibition center yesterday. In contrast, Tang announced his candidacy at the exit of Admiralty subway station, after he took a 15-minute ride from Sham Shui Po, a district of working class and low-income families in Kowloon. He met demonstrators there and was forced to dash to the subway, according to the South China Morning Post’s report.

Relationship Scandal

In the latest opinion poll, Leung had the support of 35 percent, while Tang was backed by 10 percent, according to the University of Hong Kong’s Public Opinion Programme, which cited a survey of more than 500 residents conducted last month.

Eastweek magazine published an interview with Tang and his wife Kwok Yu-chin on Oct. 4, in which they were questioned about speculation that he had an affair. He later said he “deeply regrets” his failings, declining to give details.

“I believe the inappropriate relationship scandal has struck my popularity,” Tang told reporters on Nov. 17. “I went through struggles and came forth with my wife to talk about the relationship failing in public. She forgives and accepts me, I also hope to get the public understanding on this.”

‘Deep-Rooted’ Conflicts

Leung has been vocal about housing policy, urging the government to resume a program to build subsidized homes that was halted in 2002. Tang said that residents should only buy property within their means.

Chinese Premier Wen Jiabao said in March that the city needs to resolve “deep-rooted conflicts,” underscoring concerns over social tension. The administration of Tsang and Tang has posted low support ratings, close to “governance crisis,” according to the Poll Director Robert Chung at the University of Hong Kong.

“Only a capable chief could unite a capable team,” Tang said during his district tour, in response to criticisms he was part of the government with low popularity.

The committee to be formed in December that will decide the next chief executive is elected from several sectors that represent business and political interests, skewed in favor to the candidate backed by Beijing, said Joseph Cheng, professor of politics at the City University of Hong Kong.

Home prices have surged on low mortgage rates and an influx of mainland Chinese buyers. Inflation, excluding government subsidies, was 6.4 percent in October, the highest level since records started being kept in 2007. The city’s economy narrowly skirted a recession, with a 0.1 percent gain in the third quarter from the previous three-month period, after a contraction in April through June.

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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