By Kathy Chu
HONG KONG--A key reason why protesters in Hong Kong are
demanding free elections for the first time is their
dissatisfaction with the state of the city's economy and the
pro-business establishment that runs it.
Hong Kong has one of the world's biggest wealth gaps and its
highest real-estate prices. Years of stagnant wage growth have
created deep frustration among students and the middle class.
One target of their frustration is the city's tycoons, a handful
of families and colonial era conglomerates that control most of the
real estate, many of the retailers and nearly all of the utilities
and buses.
"Tycoons don't need sympathy, but they're between a rock and a
hard place," said Jean-Pierre Lehmann, a visiting professor in the
University of Hong Kong's business and economics program. "Hong
Kong has a number of critical problems, such as inequality, and the
tycoons are seen as being an emblem of that."
To be sure, protesters are angry about the rising influence of
mainland China on the former British colony, but when asked, many
students will express frustration with their economic
prospects.
Many of the city's tycoons have been noticeably silent since the
protests began. Those who have spoken out have called for an end to
the protests while finding gentle words for the pro-democracy
movement.
Asia's richest man, Hong Kong tycoon Li Ka-shing, who Forbes
says is worth about $31.4 billion, said in a statement Wednesday
that he understood the "passion" of Hong Kong students but urged
them to go home.
The tycoons' words don't resonate with young protesters such as
Arnold Chung, 19, who expects to live with his parents for years.
Average starting salaries for university graduates have risen 1%
annually over the past 17 years, to 198,000 Hong Kong dollars (U.S.
$25,522) a year, lagging behind inflation and lagging far behind
the rise in housing prices.
"The young generation doesn't listen to Li Ka-shing," said Mr.
Chung, a student. "We expect rich people to say this (protest) will
disturb the economy."
Even as thousands of protesters took to the streets, Mr. Li's
Cheung Kong property development arm was unveiling apartments that
totaled 165 square-feet, among the city's tiniest homes. The
apartments, about the size of a one-car garage, haven't been priced
yet, but slightly larger units have recently sold in the city for
between HK$1.77 million and HK$3.6 million ($228,000 and $464,000
U.S.). Mr. Li and Cheung Kong wouldn't comment beyond Mr. Li's
earlier statement.
Once seen as the proud symbols of Hong Kong's rising power,
these tycoons have faced criticism for getting richer while
residents fall behind. Many have benefited from China's growth,
which aligns their interests with Beijing and further alienates
them from the protesters.
"These people are seen to be making a lot of profit with the
government's help," said Joseph Cheng, a political-science
professor at the City University of Hong Kong.
Hong Kong's tycoons range from Mr. Li, whose empire began with a
factory making plastic flowers, to colonial-era conglomerates such
as Jardine Matheson Holdings, run by the Keswick family, which got
rich by trading opium and other goods in the mid-1800s.
They are typically family-run empires that have large
real-estate businesses--five Hong Kong companies account for 70% of
the private residential market, according to brokerage firm
CLSA--and government concessions in industries such as
telecommunications, ports and transportation. Some own retail
outlets in highly concentrated industries such as supermarkets,
where two tycoon-owned chains dominate sales, and they have
franchises for goods such as Coca-Cola.
The wealth concentrated in these families makes Hong Kong among
the most unequal places in the world, and the inequality has gotten
worse over the past decade. According to Welch Consulting, an
economic consulting firm, Hong Kong has 41 billionaires worth a
total of $203.9 billion, equal to 74.4% of the city's annual
economic output. The only country with a higher concentration by
this measure is the southern African nation of Swaziland, where the
wealth of its one billionaire equals 99% of GDP, the firm's
analysis of International Monetary Fund data shows. The ratio for
Georgia, the No. 3 ranked country is 32.2% and for the U.S. its
14.1%.
The wealth of the city has become increasingly concentrated. In
2000, 65.6% of the city's assets were controlled by the wealthiest
10% of its people, according to Credit Suisse. In 2007, the figure
was 69.3% and this year it is 77.5%, making the concentration among
the highest in the world and the growth among the fastest.
Some other tycoons have spoken, but carefully. Peter Woo, chair
of Hong Kong-based real-estate developer Wheelock & Co., said
this month that the pro-democracy protests cannot continue, saying
that Hong Kong has already won because people have the right to
protest.
Jardine Matheson said in a statement that it respects the
public's right to express its views, but "we believe that any
expression of views should also respect the rights of fellow
citizens."
Most of these companies have felt the protests firsthand.
Students blocked the road in front of Mr. Li's headquarters and
they forced a third of the Chow Tai Fook jewelry stores, controlled
by the family of Cheng Yu-tung, to close early. Guests at Jardine
Matheson's flagship Mandarin Oriental Hotel also had to walk 400
meters to their rooms because the street was closed.
One way the tycoons exert control over Hong Kong is through the
1,200 member committee that has selected the city's chief
executive. While some members are elected by the public, most are
selected by business groups. A new version of this committee will
likely be used to approve the candidates for the next chief
executive's election in 2017, which frustrated protesters, who want
candidates to be nominated by the public.
Negotiations between the city and students are likely to start
next week and one area city officials have said could be negotiated
is the makeup of that committee. While that could erode the
tycoons' power, few expect the change to be dramatic.
"Beijing has relied on cooperation with the tycoons to control
the selection of the chief executive," said David Webb, a former
investment banker who runs corporate governance site Webb-Site.com.
"There's no way that they're going to shift the composition of the
committee from the tycoons to the pro-democracy camp."
Another way the government could placate protesters is to
announce a plan to make housing more affordable in Hong Kong. That
was a big focus for Chief Executive Leung Chun-ying when he took
office and something that Beijing has backed.
The tycoons' difficult position was illustrated before the
protests exploded, when China's leaders called them to Beijing to
get them to publicly support the rules it has approved for
elections in the city. They dutifully traveled to Beijing, met with
China's President Xi Jinping, among others, and made statements
afterward.
The effort didn't help much. "Their sway on public opinion is
declining, particularly among those below 30," said Willy Lam, an
adjunct professor at the Chinese University of Hong Kong's Centre
for China Studies. "But nonetheless, Beijing still subscribes to
the old belief that Hong Kong people are economic animals, and
these tycoons are major employers."
Then when the protests hit, most of the tycoons went quiet.
Wei Gu
and Chester Yung contributed to this article.
Write to Kathy Chu at kathy.chu@wsj.com