Hong Kong's current political system – a halfway house between Western-style democracy and Chinese single-party socialism – strikes the perfect balance, at least as far as business is concerned.
The slogan given to the arrangements between Hong Kong and China, following the transfer of sovereignty from the UK to China in 1997, is 'one country, two systems'. Unique in character, it was always going to be a challenging project. But, the recent student protests on the streets of Hong Kong – dubbed the Umbrella Revolution – suggest not so much that the system is failing but that it is more or less working.
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The same style of protest could not be held over the border in mainland China without much more serious repercussions. So far, thankfully, the demonstrators have been dealt with by the local police in a restrained manner.
That all this can occur indicates Hong Kong does have key elements of a liberal capitalist society, namely the right to free speech, a relatively free press and the rule of law. It does not yet have full Western-style democracy, and never did during 156 years of colonial rule. Now, the plan to give Hong Kongers in 2017 the first ever universal vote to choose their chief executive – but from a list of pre-selected pro-Beijing candidates – is the cause of the students’ ire. They do not want democracy “with mainland characteristics”; they want the real thing.
For bankers and business people, Hong Kong in many ways has the perfect system. The capitalist institutions function well and business is conducted on a level playing field. Furthermore, governments are pro-business and do not indulge in large-scale public spending to placate populist sentiments and win elections.
This is the point made by Hong Kong’s current chief executive CY Leung in a recent interview, when he warned against the dangers of populism. It is a common argument heard in Asia. But it will only be sustainable as long as the governments making it can use pro-business policies to deliver rising living standards across society as a whole.
Both Hong Kong and China are currently struggling with this. Property prices are sky high and out of reach of ordinary citizens, and there is a growing income divide. If these challenges can be met, only then will the status quo be maintained on both sides of the border.
