Income gap matters
By George Chen
The opinions expressed are the author’s own.
We’ve been talking about accelerating inflation for some time, and it has resulted in another tough issue for the government to address — with much care — the growing income gap between rich and poor.
Income disparities in some affluent cities such as Hong Kong have apparently reached a critical point, with frequent protests in the former British colony. Last weekend, a group of the so-called post-1980 generation of young people went to Central to protest the wealth imbalance. They even attempted to break into Cheung Kong Centre before the police arrived and stopped them.
They viewed Cheung Kong Centre, home to many large banks like Barclays Plc and BNP Paribas, as well as the offices of Li Ka-shing, Asia’s richest and also the city’s most powerful man, as a symbol of the imbalance. I was told by friends in mainland China that a similar anti-rich atmosphere is also brewing fast in big cities like Beijing and Shanghai, where relatively poorer people are complaining about inflation, especially rising property prices and rents.
When investors feel more confident about returning to the Shanghai and Hong Kong markets as the economic impact of the Japan earthquake and nuclear crisis eases, some people predict the income gap issue may change the whole game if the central and local governments fail to address the increasing social unrest.
Does this make sense? Income gap is considered by some political scientists as one of the key causes to the recent popular revolt in the Middle East, the “Jasmine Revolution”, which already made Egypt a difference.
Local media reported that some Hong Kong lawmakers and businessmen joked that Hong Kong was “a city of protests” — in addition to the unexpected protest at Cheung Kong Centre, there were at least two other high-profile public protests in the city last weekend, potentially damaging Hong Kong’s image as a stable global business and financial centre.
If global investors lose confidence in Hong Kong, it would be certainly a lose-lose result for both the rich and the poor. Last night, former U.S. Treasury Secretary and ex-Chairman and CEO of Goldman Sachs Henry Paulson gave a talk at the University of Hong Kong. In response to a HKU student’s question, Paulson acknowledged that the income gap in the United States was also something the government needed to focus on.
Income gaps in different regions may need different solutions, said Paulson, adding that skills training and education were needed in the U.S.
However, he didn’t offer any specific advice for China. I wonder if Paulson just wanted to be diplomatic, or he may not really have an answer. He did say China’s economy was a very complicated matter and was becoming more complicated as it expanded.
The bigger the economy, the larger income gap? That doesn’t sound like a win-win deal for anyone.
George Chen is a Reuters editor and columnist based in Hong Kong. He’s also a part-time post-graduate student, studying international relations at the University of Hong Kong.
Photo: A protest sticker seen on the poster of Henry Paulson’s talk about global economy and U.S.-China relations at the University of Hong Kong on April 11, 2011 Reuters/George Chen