Hong Kong's tycoons are here to stay

It is often said that a small coterie of billionaire business dynasties have huge power in Hong Kong. Family Capital wrote a story about five of them (and we could have added a lot more.) But is it really true that they dominate the economy? And anyway, is that such a bad thing?

Roger King, a professor and expert in family businesses at the Hong Kong University of Science and Technology who has lived in the territory since 1975, says: “Family businesses are important in Hong Kong, if you look at our listed companies, close to 70% are dominated by family businesses. But that’s no different from most societies.” He points out that a third of the firms on the S&P 500 are family controlled, and that Germany’s industrial backbone is made up of family-owned firms.   

“I don’t think business tycoons have too much power in Hong Kong. Powerful businessmen can influence governments everywhere in the world, not just in Hong Kong,” says Professor Oliver Rui, a family business specialist from the China Europe International Business School.

Many of Hong Kong’s billionaires have made their money from the high land prices in the territory, and that has pushed prices so high that many young Hong Kong residents complain that they can’t afford to buy, or even rent, a home of their own. And it’s true that a small number of people got very, very wealthy.

But that is hardly the tycoons’ fault. As Professor Rui points out, the British adopted a policy that ensured land prices were high when they controlled Hong Kong, and “smart businessmen just took advantage of this policy and made their fortunes.” He adds: “Selling land is the only sustainable revenue source for the Hong Kong government. I don’t think they will change this in the short term.”

Professor Kevin Au, Director of Centre for Family Business at the The Chinese University of Hong Kong Business School agrees that life is hard for younger people in Hong Kong, and that economic woes are at least partly behind the recent student protests, but argues that “it is not particularly bad compared to Europe because many of the youngsters can still find jobs. Its just that Hong Kong has become very expensive, the youngsters have to find a new way to get ahead and society has to find a new way to help them.”

The problems of high prices is not only caused by the property-owning families, but because a lot of large corporations have come to the territory and forced up prices, he says. “Any large city has this problem at the moment, such as London or New York,” Professor Au adds.

What of the business families’ political clout? Do they have too much power? Not long ago a group of them travelled to Beijing where they were met with warm handshakes and hospitality by Chinese premier Xi Jinping. “The so-called influential people in Hong Kong are the same as what you would classify as wealthy people,” says Professor King. That, he says is “because we do not have a mature political system” whereby other interest groups can get their voices heard.

Professor Au agrees, saying that that Hong Kong does not have Western democracies’ system of political parties and lobbyists that channel the interests of lots of groups into the political decision-making system. The powerful families have had a lot of influence in the past, and it is only natural that they want to keep it.

So because of the system “the only way for them to keep their power is for them to park themselves with politicians, and they collude, and that is why so many people are disappointed and want change.” The tycoons, he says, “are making themselves look like villains who just try to control and don’t give anything back.”

So will Hong Kong change? And how? Economically, there are not many options. “If those tycoons move their businesses out of Hong Kong there will be no winners, only losers,” says Professor Rui. “The Hong Kong government has proposed many alternate initiatives in the past such as centres for high tech, innovation, traditional Chinese medicine, higher education harbour, tourism and so on. Unfortunately, none of them has been successful.”

And don’t hold out for democracy in the territory any time soon, says Professor King. “Quite frankly democracy has not proven itself to be the system of the future,” he says. “In Asia, we traditionally have  a hierarchical society. That’s the way it is. We shouldn’t necessarily see the West as the model.”

The system left by the British, in which law is strong and is separate from the legislature, is a good one, says Professor King. Despite ruling the territory for over 150 years, the British didn’t leave a political party system, though. If the democrats want to make progress, they will have to play by the existing rules.

The tycoons might have to learn to play some subtler games if they want to be better liked, but the tycoons are here to stay.