Stardust in Thy Eyes

South China Morning Post  |  Feb 24, 2005

By Sin-ming Shaw

Hong Kong biggest property tycoons are accorded social prominence and political influence not seen in any other developed society.
Senior government officials treat them with deference. Their public utterances, however pedestrian, are reported by the media as if they were voices from the Burning Bush on Mt. Sinai.    
The public no doubt assumes that property industry is at the centre of the local economy dwarfing any other economic sector.  Guess again.  Its weight in the economy, beyond funding importantly the fiscal budget, is grossly exaggerated.
Take job creation, which must rank at the top of any government’s economic priorities, the property sector comes up short.
Recent data register 62,000 workers employed by the construction industry, 89,000 in the real estate sector totaling 151,500 people.
Hong Kong’s manufacturing sector which everyone has long written off as irrelevant, dying or “dead” has 168,000 on its payroll, besting the combined work force of construction and real estate.
In the import/export business there are 510,000 people employed, over 3 times that in the entire property business.
Then our wholesale/retail/restaurants/hotels sectors also employ nearly 500,000 people.
Overall, these 3 non-property economic areas employ nearly 8 times more workers than the property sector. 
If there were to be one person one vote to shape the agenda of the economy, the property owners and workers would have to take a backseat close to the exit door while the “others” would
sit at the front.
Perhaps the property sector generates more value to the economy despite their smaller work force?   Wrong again.     
Real estate’s share in GDP was 5.3% (2004 figures).  Construction was 3.7%.  The total was 9% -- not even remotely close to the less glamorous “others” from the wrong side of Mt. Sinai.
The import/export sector contributed nearly 23% to Hong Kong’s GDP.  Its sister sector, Transport and Storage, was another 8%. They add up to 31% -- more than 3 times that of the property sector.
Not only does the import/export business contribute far more to the economy, the profits of that sector also vastly dwarf those of the property cartel, and consistently so despite volatile swings in global business cycles.   
It is these profits, mostly from Kong owners’ factories turning out unglamorous products sold to the world shipped through Hong Kong as re-exports that are a major source of demand for Hong Kong properties. 
Re-export margins -- profits from goods made in China and transshipped through Hong Kong  -- as a percentage of GDP went from 10.4% in 1996 to 16.5% in 2003 while Profits of the Real Estate as a percentage of GDP peaked at 5.9% in 1997 which was a bubble year. 
Developers are also sellers.  The rest of us are buyers.  Anyone who has ever bought a share ought to know the interests of buyers and sellers do not usually coincide.
The real drivers of our economy remain the “dead” manufacturing sector now mostly relocated to the southern provinces of China responsible for an estimated 10 million workers in China.
Beijing and the Hong Kong government should be kowtowing to these invisible Hong Kong manufacturers for their contribution to the motherland since “patriotism” is so IN.  Instead, both they and the local media continue to treat property tycoons as if they were the rock upon which Hong Kong was built. 
In any other developed country developers don’t even rank as the most respectable since the business has little, if any, intellectual content.  Underpaid architects provide that.  
Developer Donald Trump in New York has wisely turned himself into a media entertainment because he knows his business is not intellectually serious in a country that does not automatically rank money over the mind. 
Why is Hong Kong different?  
Two reasons.  The property industry is concentrated in just a few individuals unlike the other businesses.  The impressive concentration of wealth dazzles the way rock or Hollywood movie stars do. 
Second, owning properties has been a successful one-way bet for many residents, including those who live in subsidized housing.   A prime exhibit is Joseph Yam, the head of the Monetary Authority who had famously “invested” in several luxury flats. 
Everyone seems hooked on this habit of property speculation and the tycoons are the biggest suppliers and addicts always kowtow to suppliers.

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