I maintain that the majority of the protest and discontent in Hong Kong is mainly due to economic reasons. Hong Kong has always been a place of wide gaps between rich and poor. But in recent years it has gotten much worse. The reason in part is because China has gotten much wealthier and Hong Kong and its monetary and economic system has not adapted itself to this fact. The currency for one thing. The value of China's currency has risen about 25% since 2005 and the HKD has stayed the same. Since HK imports so much of its needs from China that it has help to drive up the cost of living for all people's in the territory. And of course as China gets richer and the currency gets stronger the inflation pressure on HK will increase. This will affect more and more people and will be a constant and growing source of discontent and resentment amongst the HK populace. People often blame Chinese tourists for the high inflation but that's wrong. When tourists spend their money in hotels, restaurants, taxi's and shops is when they put money into the pockets of the Hongkongese. Without those tourists arrivals Hong Kong would be much worse off today. The reason for the high inflation is in part because of the exchange rate. Hong Kong and the Hongkongese have to pay 25% more today from what they were paying 9 years ago just from the difference in the exchange rates. Of course the exchange rate is not the only source of inflation in HK. The HKD is pegged to the USD and that's the reason why the value of the HKD hasn't risen in all those years. HK doesn't have a independent monetary policy and is led by the nose by the FED. HK isn't even an afterthought for the policy makers in Washington or Beijing when they make up their monetary policies. But the effect on HK is enormous. And HK has no way to respond as it doesn't have its own central bank.
Then there is the 0% interest rates that HK has gotten from the FED. That has also helped to increase the gap between the rich and poor in HK as it on the one hand increase asset prices and on the other hand suppress wages. It has also helped in the feeding of the speculative frenzy in HK. The rich has benefitted from it and the poor has paid the price for it.
Then of course there are the speculators from China that has poured into the housing market in HK since the early 1990's. Once again because of the increase in wealth in China that too has ballooned to the extend that the local Hongkongese has been priced out of the market. Which of course is another source of resentment on part of the Hongkongese towards the Chinese.
I think the solution will be radical monetary reforms that means either Hong Kong re-calibrate the peg to the USD or they get rid of the peg all together and set up their own central bank. They then will print the HKD either as a free floating currency or one that is pegged to a basket of currencies that includes all of the most important regional and global currencies. This salution is more preferable because this gives HK a means to respond to the monetary policies coming in from both China and America. But rather that will happen is another question. Since this means that a lot of vested interest will be hurt and those interest (read plutocrats) are in control of the political process. A lot of real estate moguls in HK will have to go bust or lose a lot of money if HK had a independent central bank with a (responsible) interest rate policy could cause a correction (read collapse) in the real estate market. I don't think they would like that. Would a democratic regime change all of this ? Well, in the case of the US, Europe and Japan it didn't. That is in part why HK is in such a mess today.
I wonder how many of the people who are protesting today understand this.
A note on those Chinese tourists.
The reason why there are so many Chinese tourist shopping in HK or even in America and Europe is because of China's policy to tax the toys of the rich. The tariffs and taxes in China has made brands like Louise Vuitton and Chanel twice as expensive as in those other places. But the rich will have their toys one way or the other! So the policy has backfired and the rich instead of shopping inside China they shop outside of China in HK, America or in Europe. If they would reverse that policy then there will be fewer people buying stuff in HK but that is going to be bad for the HK economy. But you can't have everything in life.
