Housing, income and booksellers key issues for CY Leung's policy address

Leung Chun-ying, Hong Kong's chief executive
Xaume Olleros | Bloomberg | Getty Images

Hong Kong chief executive Leung Chun-ying promised a continued moderation in home prices, a new look at working hours and a commitment to political independence, in his fourth annual policy address to a populace that is losing faith in his ability to resolve the city's pressing issues.

The city, one of two special administrative regions of China (Macau is the other), has long struggled with pricey housing, a costly standard of living and a lack of free elections; all factors that have pushed Leung's popularity rating to its lowest level since he took office in 2012, according to a Tuesday poll by the Hong Kong University Public Opinion Program.

Lee Cheuk-Yan, Legislative Council member and vice chairman of the opposition Labor Party, told CNBC that Hong Kongers had reason to complain.

"People have to wait on average three years and six months before they can get public flats, there are no standard working hours and the universal pension fund scheme is still under discussion," he said.

"If you live in private units, rents are so high that it can eat up 75 percent of your income. We don't see any improvement on this and we can't expect anything from Leung because supply has gone down, waiting times have increased and wages haven't improved."

Home supply

In his Wednesday address, Leung reinforced measures to boost supply in a city that boasts the world's priciest homes by square foot; 97,100 public housing units will be produced over the next five years, of which 76,700 would be public rental housing units and 20,400 subsidized sale flats, he said.

The feasibility of land reclamation in Lung Kwu Tan, located on the west coast of New Territories, to build up the city's land reserve would also be explored, he added. Private developers will add a further 87,000 units over the next three to four years, Leung said— a number Dow Jones calculated was the highest since 2004.

"Our efforts over the past three and a half years have produced results," Leung said, referring to cooling measures such as a double-stamp duty for some buyers. "The housing supply has significantly increased and property prices and rentals have started to fall, reversing the perception that property prices and rentals can only go up ... We should continue to tackle the housing problem head-on and must not concede."

His remarks come after officials lowered public housing supply targets for the coming 10 years to 460,000 units from the 480,000 target set in 2014. Critics say the reduced supply is worsening the city's income equality since public housing tenants often have more disposable income because they spend little on rent, compared to those who struggle with private flats.

As of the third quarter of 2015, the median monthly household income was just $3,221, according to official data.

An elderly lady looks into a shop display of the Causeway Bay Books store in Hong Kong.
Outcry over China violation of 'one country, two systems' after HK bookseller disappears


Attempts to set up a standard working hours regime remains a hot-button issue, despite Leung promising regulations in his 2012 manifesto.

The city has some of the world's longest working hours, with Hong Kongers logging an average of 2,300 hours at work every year, versus the 1,700 hours in other OECD (Organization for Economic Cooperation and Development) nations, according to a 2014 government report.

The 61-year old leader said on Wednesday that officials would complete a second public consultation exercise on working hours with the aim of submitting an extensive report this year.

But Liberal Party legislator Tommy Cheung warned that standardized hours could be catastrophic for the economy.

"We already have [a] minimum wage and we've seen how it has reduced competitiveness in the work force. A couple of things could happen: if the economy turns bad, then the unemployment rate will turn higher, but when the economy is going great, like when we introduced minimum wages in 2011, then we see higher inflation and a lot of people not working in certain industries, such as restaurants."

On the retirement front, the city remains divided on whether a universal pension scheme is needed and how to fund it. Efforts to revamp the Mandatory Provident Fund [MPF], a compulsory savings scheme for retirement, have been controversial and aren't expected to be implemented any time soon.

"One of my main complaints about our MPF, introduced in 2000, is that it created a false sense of comfort about the savings challenge," explained David Dodwell, executive director of the Hong Kong-APEC Trade Policy Group.

"Under present MPF arrangements, a family earning $3,092 a month would have MPF savings of just $3,608 a year—less than the amount needed to maintain the family's income level in retirement."

On the matter, Leung used his address to call on the public to "actively express their views and engage in an in-depth, informed, objective and rational discussion" in order to reach a consensus on retirement policies.

Has the 'one country, two systems' policy failed?
Has the 'one country, two systems' policy failed?

Political freedoms

The matter of political freedoms, a heated topic following 2014's pro-democracy protests, has re-emerged in recent weeks, after the disappearance of five men who specialized in books critical of China's Communist Party elite, became public. Some of them are believed to have been spirited across the border by Chinese agents.

"The thing that Hong Kongers are desperate about is the 'One Country, Two Systems' after the disappearance of the booksellers," Lee said.

'One Country, Two Systems' is a principle that grants Hong Kong high levels of autonomy from mainland China and is considered a cornerstone of local society. But the alleged political kidnapping of the booksellers is being seen as a flagrant violation of the system, further infuriating pro-democracy activists who have taken to the streets in protest.

So far, Beijing has refused to comment on the whereabouts of Lee Bo, Gui Minhai, Lui Bo, Cheung Ji-ping and Lam Wing-kei, while Hong Kong police say they are conducting a "thorough investigation" into the matter.

The situation echoes cries from 2014's Umbrella Movement where citizens protested against Beijing's meddling in Hong Kong affairs, especially the right to elect the region's chief executive and the legislative council. Under Hong Kong's constitution, universal suffrage is an "ultimate aim" but it remains out of reach after the mainland ruled out open nominations for the 2017 election.

Speaking on Wednesday, the city's chief executive said "the government will continue to uphold Hong Kong's core values such as human rights, freedom, democracy, the rule of law and clean governance.

"It will fully and faithfully implement the principles of 'one country, two systems', 'Hong Kong people administering Hong Kong' and a high degree of autonomy in accordance with the Basic Law."

Frank Lavin, CEO of e-commerce platform Export Now, told CNBC that the many issues raised by residents underlined Leung's difficult role.

"It always strikes me that the chief executive has a tough high-wire act. He's got to be an authentic champion for the Hong Kong people but do so in a way that's not offensive to Beijing."

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