Li Ka-Shing: When Shanghai Overtakes Hong Kong

Here's a nice illustration of a recurrent debate concerning Asian political economy that I will be able to use for classroom purposes. Hong Kong-based tycoon Li Ka-Shing, known as "Superman" for his business prowess, has offered a pointedly Asian opinion on the prospects of Shanghai overtaking his hometown as the world's gateway to China. While teaching development studies, I make it a point to differentiate the perceived utility of political and economic freedom. The Western view, of course, is that both go hand in hand. On the other hand, many Asian commentators believe that leaders have the right to withhold political freedom provided that economic freedom of the growth-promoting variety is given.
Hence Li Ka-Shing's very Asian point: As the Chinese megacity is granting more economic freedom of the sort Hong Kong enjoys--Shanghai is soon to become a free trade zone with looser capital controls, currency convertibility and so on that other PRC cities do not enjoy--Hong Kong's comparative advantage in those respects may be eroded. What's more, the clamor for too much political freedom among Hong Kong's residents is distracting it from the real task at hand of maintaining its economic preeminence. A card-carrying CCP member could not have said it any better:

Li Ka-shing, Asia’s richest man, said Hong Kong needs to raise its competitiveness if it wants to avoid losing out to Shanghai, where China is setting up a free trade zone, Radio Television Hong Kong reported. Li, the 85-year-old chairman of Hong Kong-based Cheung Kong Holdings Ltd. (1) and Hutchison Whampoa Ltd. (13), said the Shanghai free trade zone “will affect Hong Kong heavily,” RTHK reported on its website, citing comments Li made at a briefing yesterday.

The [Shanghai Free Trade Zone] may allow freer yuan convertibility, liberalize interest rates and relax restrictions on foreign investment, which may threaten Hong Kong’s status as China’s biggest financial center. The former British colony risks falling behind its rivals if citizens there don’t start rallying behind Chief Executive Leung Chun-ying, a Chinese official said yesterday.

“China is a big market and in the long term it can’t just rely on Hong Kong as its only hub,” said Kevin Lai, a Hong Kong-based economist at Daiwa Capital Markets Ltd. “I worry more about the deteriorating political environment in Hong Kong than about Shanghai establishing a free-trade zone.” Leung’s government has increasingly been drawn into a debate about the speed of electoral reform, as opposition lawmakers press for the open nomination of candidates for the election of Hong Kong’s next leader in 2017, rather than by committee as legislated.

Stupid politics, Li Ka-Shing is probably saying...what about making money, Hong Kong's real purpose? And what are we to make of those "Occupy," er, more-communist-than-mainland-self-styled-Communists?

Li said that Occupy Central, the movement proposed by some civic groups to pressure the Hong Kong government into accelerating the introduction of full democracy, may damage the economy and the city’s reputation as a financial center, according to the RTHK report.

Hong Kong residents should focus on the economy rather than politics, as Singapore leapfrogs the Chinese city as a financial center by many measures, the Standard newspaper reported today, citing remarks made to a business delegation by Wang Guangya, director of the Hong Kong and Macau Affairs Office. The city should give more support to Leung, he said.

He may be 85, but alike octogenarian Lee Kuan Yew, he's as sharp as tacks and unafraid to offer an unpopular opinion if it needs to be aired. For what it's worth, the various "Occupy" movements are closely associated with US-based protests. I think he missed an opportunity here to say, "Do you want to make Hong Kong's economy like America's?"

That should shut them up real good.