These families have long benefited from close ties to the Hong Kong government and the city’s banks. But the younger set does not necessarily have the same political capital with Beijing.
That is why an extradition law in the works is currently making Hong Kong’s business community particularly nervous. If passed, the legislation could transfer fugitives in the city to China, where courts are under control of the ruling Communist Party. Money has not helped multimillionaires caught up in President Xi Jinping’s sweeping corruption crackdown. Last May, the former chairman of Anbang Insurance Group Co, billionaire Wu Xiaohui, was sentenced to 18 years in prison after a one-day trial, where he was convicted of fraud and embezzlement.
The head of Hong Kong’s pro-business Liberal Party has criticised the proposed law, saying it would hurt foreign investment in the city. The silence from the city’s developers, meanwhile, has been deafening.
A bigger threat to Hong Kong’s property tycoons is perhaps growing competition from mainland developers, who stand to benefit from Beijing stretching further into Hong Kong. These firms ramped up their presence in the city three years ago as Chinese officials ratcheted up efforts to cool the domestic property market. Conglomerate HNA Group Co’s ability to beat local players in its bid for four plots of land at the former Kai Tak airport came as a shock. Mainland developers have logged US$12 billion worth of land deals in Hong Kong in the last three years.
Over the past year, Chinese real estate firms, including HNA, have started to shrink their footprint in the city as Beijing pressures debt-laden companies to lighten their load. But mainland developers still have massive balance sheets: Take China Vanke Co, which had total assets last year of US$222 billion, compared with just US$61 billion for New World Development. As soon as Beijing reopens funding taps, the city’s developers could find themselves on the back foot once again.
There is a Chinese saying: Wealth never survives three generations. Educated at some of the world’s most elite schools, many of Hong Kong’s property heirs may be savvy enough not to fritter it away. They are still flush with cash and Hong Kong’s record real estate prices are making them richer by the day.
But their dominance will fade. At the end of 1997, Chinese firms comprised just 16% of the market value of Hong Kong’s stock exchange; now they account for around 68%. It is just a matter of time before the city’s real estate goes the same way. — Bloomberg LP
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