The future of Hong Kong: Complacent Chaps

The baby boomer generation of Hong Kong people struck it lucky to be at the right place at the right time. Now, they are at the top and become extremely complacent. But complacency will not help Hong Kong.

The 1970s to 1990s were the fast growing period of Hong Kong:

Real GDP yoy growth. Source: Census and Statistics Department

In the 1970s to 1980s, there are only two Universities in Hong Kong: University of Hong Kong, and the Chinese University of Hong Kong, while we now have 8 institutions with the word “University” in their names. In those days, people who went into Universities were truly crème de la crème. With limited supply of college graduates, these graduates were highly sought after because demand for them was high. To be at the right place at the right time should be the luckiest thing that can happen in anyone’s life, and they struck it lucky.

Fast forward to the 1990s. Growth has been slower in general, and economic volatility has been higher. And even though we have seemingly seen some real growth in the economy, the reality is that Hong Kong has been through a long period of deflation after the crash in 1997 as a result of the Asian Financial Crisis.

CPI yoy change. Source: Census and Statistics Department

The late 1990s to early 2000s was the “lost decade” for Hong Kong. Even though Hong Kong now looks very prosperous, the median household income has barely grown in nominal term in the past 10 years.

Growth, Any? Median Household Income Source: HK government

Hong Kong is largely in-charge by baby boomers who came out of universities in the 1970s and 1980s. They were the lucky ones: extremely lucky ones. They came out to the society at the fastest growing period, which was both unprecedented and will not happen again. It was not unusual for these people to be the top-ranking people in the corporate ladder in their 30s, simply because they were highly demanded but in short-supply. This is the tale of the “golden era” of Hong Kong: if you study well, go into the universities, you will be successful and rich.

Now, they are probably in their late 40s or 50s. They are still in top ranks, earning 7-digit or more salary each year. They delegate most of the work to those in their 30s and 20s (or the so-called post-80s, who are born in the 1980s), so they do not need to work hard. They are too complacent, and too proud of their achievement, without realising how lucky they are.

There are many examples, both anecdotal and publicly known stories, of how these people fail to keep up with the latest trend and knowledge, recognise true threats to Hong Kong, and are resistant to change.

For example, there are some really senior equity research analysts who have absolutely had no idea what efficient market hypothesis really means. They oddly believe in efficient market hypothesis, but at the same time looking at past price patterns to look for clues (problems: 1. if EMH is true, even in its weak-form, that would imply that studying past price patterns will not work; 2. if you believe in EMH, quit your job).

In government, officials are also rather late in recognising changes in the society. The controversy surrounding the construction of the High-speed Rail epitomised that the current government was late in recognising the issues and did not have very good idea on how to tackle with problems. The current Hong Kong government only deals with problems reactively, but not discovering and solving problem proactively. As a result, they only take actions when problems arise, but unable to foresee threats and opportunities.

The recent response of the Hong Kong Exchange & Clearing (388.HK) to the proposed takeover of ASX by SGX also demonstrated how those people high up in the leadership of government and corporations have absolutely got no sense of threats. I have written an article attacking the complacency of HKEX, and this case perfectly demonstrate the general mind-set of Hong Kong leadership.

In short, the leaders of Hong Kong, whether in public sector or private sector, are rather complacent about their own status and proud of their achievement. Unfortunately, their complacency are a stumbling block for younger generations, and their achievement has nothing to do with their intelligence. Ignorant about new trend and knowledge, and without any vision on where Hong Kong is headed to, these are not the type of chaps that I can trust to run this city.

The future of Hong Kong Series:

Preface
1. “High Land Price” Policy
2. Real Estate Tycoons and Monopoly
3. Complacent Chaps
4. Reduced Upward Mobility and Generation War
5. Problems of the Young Generation
6. Solutions

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.