Hong Kong leader seeks to rebuild with post-protest policy address

Reuters News
Posted: Jan 13, 2015 3:05 AM

By James Pomfret

HONG KONG (Reuters) - Hong Kong leader Leung Chun-ying is expected to focus on property, the economy and youth issues in his policy address on Wednesday, seeking to bolster support after last year's massive pro-democracy protests and widespread calls for him to quit.

The annual policy blueprint has been a key platform for leaders in the Chinese-controlled city to hand out billions to the less-advantaged in the form of tax breaks, or to signal shifts in economic, property and political policies.

This year, however, after months of political upheaval that saw protesters occupy key parts of the city for more than two months, Leung must try to boost his ratings among a population that knows that, under Beijing's watchful gaze, he is unable to offer anything significant in the way of democratic reform.

The balancing act is to heal divisions, maintain strong ties with Communist Party rulers in China, on which Hong Kong's economy overwhelmingly depends, and ensure the financial hub's economy - expected to grow around 2.2 percent this year - remains on a steady keel.

"It (the policy address) can rescue his approval ratings a little bit," said political analyst Ma Ngok. "It really depends on the public reception on the economic and livelihood policies, because people really won't have much expectations on the political front."

The former British colony returned to China in 1997 under a "one country, two systems" formula that gives it some autonomy from the mainland and a promise of eventual universal suffrage. Beijing has allowed a free vote for city leader in 2017, but insists on screening any candidates first.

As one of the world's most expensive cities for property, housing is again likely to be a focus. Leung is expected to boost supply to moderate prices, including spikes over the past year in smaller to medium-sized flats.

The government has already pledged to supply 480,000 flats over the next 10 years, but Barclays analyst Paul Louie said Leung may bolster this with a subsidized housing scheme and open up hilly, pristine country parks to limited development, a move likely to infuriate environmentalists.

In tiny Hong Kong, more than seven million people are packed in high-rise apartments into just 30 percent of the territory, with green belts, country parks, woodlands and wetlands taking up the rest of the land.

"Unlike 12 months ago, when home prices had only risen 2.3 percent in 2013, this past year's 11.2 percent increase should enlist a more hawkish tone, perhaps with a reference to 'some signs of overheating'," Louie said in a research report.

Leung will also likely make it easier for local firms to hire foreign talent from abroad, media said.

And with the pro-democracy protests largely driven by students, Leung may also offer concessions such as a new-business start-up fund for youngsters, the South China Morning Post reported.

At a time when China's economy remains vulnerable to a protracted slowdown, Hong Kong has struggled on many fronts given the small and open economy's growing ties with the mainland.

The torrent of initial public offerings, crucial to its financial services sector and broader economic health, has dried up, including from China. The offshore yuan market has slowed markedly thanks to more offshore yuan hubs coming online.

Even financial services, one of the pillars of the city’s economy, have seen torrid times as large global institutions struggle. Standard Chartered Bank recently shuttered its global equities operations and laid off a number of people, many of them in Hong Kong.

Some analysts said that economic incentives alone were unlikely to appease the youth.

"Will our young generation welcome these measures (after the protests)?" asked Joseph Wong, a former senior Hong Kong government official. "I really don't think so."

(Additional reporting by Saikat Chatterjee and Donny Kwok; Editing by Nick Macfie)