Hong Kong’s Rich Get Richer as Economy ShrinksRichard Frost and Billy Chan
The gap between Hong Kong’s rich and the rest of the population is widening as surging asset prices shield the wealthy from an economic contraction.
The CHART OF THE DAY shows gauges of stock and home prices in the city have more than doubled since 2008 to record highs. While the median household income rose 25 percent in the period, lifted by the introduction of a minimum wage in 2011, the total increase was just 4 percentage points above the rate of inflation. The lower panel shows Hong Kong’s economy shrank in the second quarter compared with the previous three months.
Rising asset prices have helped make Hong Kong home to the highest concentration of multimillionaires on earth -- and create the world’s most unaffordable housing market. Property developers Li Ka-shing and Lee Shau-kee, Asia’s richest in the Bloomberg Billionaires Index, have grown their wealth by at least $1.9 billion each this year. One in five of the city’s residents lives in poverty, the government said last year.
“The widening wealth gap is making it harder for people from different walks of life to live in Hong Kong,” said Marcella Chow, a Hong Kong-based economist at Bank of America Corp. “People cannot actually afford to buy property even if they want to.”
The median home price was 14.9 times the median household income in 2013, the highest ratio worldwide, according to Demographia, a consulting firm based in Illinois. Hong Kong has more people with net assets worth at least $10 million among 30 cities tracked by New World Wealth in a study released this month. Hong Kong’s economy shrank last quarter as consumption and business investment fell, while unemployment rose in July.
Dissatisfaction with the city’s government has climbed to 63 percent, the highest since 2004 when protests spurred the departure of then-Chief Executive Tung Chee-hwa, according to a survey by the Hong Kong Transition project released in April. The city of 7.2 million has lured more than $100 billion of inflows since August 2008 as the Federal Reserve cut interest rates, the city’s central bank said. A currency peg ties Hong Kong’s monetary policy to the U.S.
The government is working hard to alleviate poverty and future plans include an allowance for low-income working families, the Labour and Welfare Bureau wrote in an e-mail.