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Leung Faces Record Hong Kong Wealth Gap as City’s New Leader

Photographer: Jerome Favre/Bloomberg

Leung Chun-ying gestures during a news conference after winning the chief executive election in Hong Kong, China. Close

Leung Chun-ying gestures during a news conference after winning the chief executive... Read More

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Photographer: Jerome Favre/Bloomberg

Leung Chun-ying gestures during a news conference after winning the chief executive election in Hong Kong, China.

Leung Chun-ying, the property surveyor who was a surprise choice to be Hong Kong’s new leader, takes office July 1 facing immediate demands to narrow a record wealth gap and come up with plans for universal suffrage.

Leung, 57, has pledged to raise the income of the poorest and boost Hong Kong’s housing supply. City officials said this month that its wealth gap, the biggest in Asia, widened to the worst since records started being kept in 1971.

Public discontent in Hong Kong may draw as many as 100,000 protesters at the start of Leung’s term to push the government to address rising living costs and hold China to its promise to allow direct leadership elections in Hong Kong by 2017. Leung will need to address that pressure from below while meeting China’s demand for stability as it goes through its own once-a- decade leadership transition later this year.

“He’s going to make a number of changes in livelihood issues,” said Martin Lee, the founding chairman of Hong Kong’s Democratic Party, which is questioning the legitimacy of Leung’s election victory. “He will do it right away because he wants to endear himself to the Hong Kong people. These are the things that would make Hong Kong people less afraid of Communist rule.”

The Democratic Party’s challenge to Leung poses his first real crisis. Party Chairman Albert Ho said in an interview yesterday that Leung misled the public about illegal structures built at his home, and is seeking to overturn the vote.

Leung Disappointed

Leung, who founded his own property assessing company, said on June 25 he was “disappointed in himself” over the structures, which include a metal gate and a basement, and didn’t know they were illegal.

The latest allegations may make it more difficult for Leung to restore the public’s trust in the city’s leadership after his predecessor, Donald Tsang, acknowledged taking trips on yachts and planes owned by billionaire businessmen. He must also win over tycoons including Li Ka-shing, Asia’s richest man and founder of Cheung Kong Holdings Ltd. (1), who had supported a rival for the chief executive position.

“He certainly has fences to mend on the business side, and he has to appeal to the public,” said Michael DeGolyer, a professor of political science at the Hong Kong Baptist University. “We may see a stronger attempt to get business and the public on the same side in terms of, for example, better integrating our economy with the rest of China.”

Hu’s Visit

Chinese President Hu Jintao will visit Hong Kong for the swearing-in ceremony, and will announce measures boosting the city’s economy. Hong Kong may cut its 1 percent-to-3 percent growth forecast for the year should the euro-zone economy deteriorate, Financial Secretary John Tsang said June 4.

China will strengthen ties with Hong Kong by promoting tie- ups between the two financial markets, the Xinhua News Agency said yesterday. Hong Kong Exchanges & Clearing Ltd. today said it agreed to a joint venture with the Shanghai and Shenzhen bourses to develop index-linked and equity derivative products.

The visit will be a stark contrast to Hu’s trip in 2007 to preside over Tsang’s swearing in, when the city was on the way to 6.4 percent economic growth and the benchmark Hang Seng Index would rise 39 percent for the year. The index is up 4 percent so far in 2012.

“In the next five years, we’ll make prudent adjustments, and seek changes while maintaining stability,” Leung said today at a press conference. “We will safeguard the core values that we’ve treasured for years, resolve deep-seated conflicts, improve the livelihood of our people, and work towards the harmony and stability of our society.”

Wooing Business

Since winning the election in March, Leung has sought to woo the business community, said James Tien, the chairman of the Liberal Party, which supported former Chief Secretary Henry Tang for the top job.

“He said his aim is not to bring down the rich, but to help the poor,” said Tien. “As a supporter of Henry Tang, even I feel he’s been proactively tackling the issues that matter. Everyone seems to think that his actions so far have been very down to earth.”

Leung retained John Tsang as financial secretary, and appointed Carrie Lam as chief secretary, the second-most important job in the city, the government said today. Tsang has been in his position since 2007, and Lam is now in charge of land policy. Anthony Cheung, a government adviser who chairs a committee on subsidized homes, will take over from Lam.

Leung has set up a poverty task force and pledged in a blog post in May to solve the housing problem through better planning and more supply. “Inaction and procrastination will only make people suffer,” he wrote.

Surveying Company

“He really understands the problems faced by ordinary people in Hong Kong,” said Barry Cheung, the chairman of the Hong Kong Mercantile Exchange who ran Leung’s election campaign. “His heart is in the right place.”

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. He resigned last year.

While Leung was elected by a 1,193-member panel comprised of billionaires, lawmakers and professionals, he campaigned on a promise to deliver change for regular people. During a debate, he questioned why the poor were reduced to fighting over pieces of cardboard scrap to sell, striking a chord with workers including Yuen Mei-wan, 56, a night security guard.

“It’s hard to describe the scenes of people looking through trash unless you’re here to see for yourself,” Yuen said. “There are a lot more of them now. I have very high expectations for Leung. I just want a change.”

Average Income

Hong Kong’s Gini coefficient, which measures income inequality, has gained from 0.43 in 1971 to 0.537 in 2011, according to government statistics. A reading of zero means income equality and one complete inequality.

The average gross household income of the poorest 10 percent of Hong Kong’s population fell to HK$2,170 ($280) in 2011 from HK$2,590 in 2001, according to a June 18 report from the Census and Statistics Department. The comparable income for the richest 10 percent advanced to HK$137,480 a month from HK$122,740.

Property prices have advanced more than 80 percent since the start of 2009, according to data compiled by Centaline Property Agency, making Hong Kong the world’s most expensive place to own a home.

About 100,000 people are expected to turn out for the July 1 protests, according to James Sung, a political scientist at the City University of Hong Kong.

‘Tricky Situation’

“C.Y. is facing a tricky situation right now,” said Bernard Chan, president of Hong Kong-based insurance provider Asia Financial Holdings Ltd., who previously served as a government adviser with Leung. “On one hand, you have people who complain they can’t buy anything, while the ones who own properties won’t want prices to go down.”

Leung also faces lawmakers asking him on his plans to help Hong Kong achieve universal suffrage in 2017, which China has promised.

For Hong Kong’s working class, Leung’s economic policies matter most, said Cheng Ji-jun, a housekeeper in a hotel whose rent takes up more than half his monthly income.

“My salary is low, the burden on my family is heavy,” said Cheng, who doesn’t plan to join the July 1 protests because he’ll be working at the time. “When you need to do so much to maintain your family finances, you don’t have time to think about other things.”

To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Simon Lee in Hong Kong at slee936@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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