By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
China’s experiment with Hong Kong is facing its biggest trial. The former British colony has mostly thrived in the 17 years since it was handed back to the People’s Republic. But a planned “Occupy Central” democracy protest is about to test Hong Kong’s openness – and China’s patience.
Hong Kong has defied the gloomy predictions of its demise that greeted the 1997 handover. Despite competition from Singapore and Shanghai, it has become a stronger financial and commercial centre. The authorities in Beijing have mostly respected Hong Kong’s special status, which former paramount leader Deng Xiaoping summarised as “one country, two systems”. Many citizens who decamped to Canada or Australia before 1997 have returned.
Yet tensions are rising. Economic success has brought inequality, while ultra-low interest rates – the result of Hong Kong’s currency peg to the U.S. dollar – have pushed up property prices. The cost of the average apartment has doubled in five years. Regulatory demands that buyers put down a large lump sum before qualifying for a mortgage have made owning a home an even more remote prospect for many citizens.
Lots of large cities suffer from similar problems. In Hong Kong’s case, however, the outlet is rising anger at mainland Chinese who cross the border to spend their new wealth on property and luxury goods.