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Is Taiwan ready to follow HK¡¦s example?
By Wu Hui-lin §d´fªL
Wednesday, Feb 03, 2010, Page 8
Milton Friedman, recipient of the Nobel Prize in Economics in 1976, once said:
¡§If you want to see capitalism in action, go to Hong Kong.¡¨ Hong Kong was handed
over to China in 1997 under the ¡§one country, two systems¡¨ principle, with the
Chinese Communist Party (CCP) saying it would maintain the territory¡¦s
capitalist system and way of life unchanged for 50 years.
For the last 13 years, Hong Kong has, on the surface, remained unchanged, but in
real terms, conditions are already changing. Based on the annual Index of
Economic Freedom report compiled by the Wall Street Journal and the Heritage
Foundation, while Hong Kong has kept its high level of economic freedom, the
system is in fact rotten.
This became more evident after Hong Kong signed the Closer Economic Partnership
Arrangement (CEPA) with China in 2003. With Hong Kong¡¦s economy falling under
CCP control, the overall environment and quality of life in the territory
deteriorated, the rich-poor gap widened and social problems worsened. Not long
ago, a CNN feature showed 19 Hong Kong residents squeezed into a 58m² ¡§cage-like
home,¡¨ drawing a stark contrast with the territory¡¦s astronomically expensive
luxury mansions.
Last October, BusinessWeek cited a report by the UN Development Program that
said Hong Kong¡¦s rich-poor gap, based on the Gini coefficient, was the widest
among the world¡¦s advanced economies. Generally, a coefficient of 0.4 is seen as
a warning sign: Hong Kong already shot past this level by scoring 0.434. The
report also said Hong Kong has both a large number of extremely wealthy people
and the world¡¦s biggest public housing sector. Moreover, other than foreign
workers, workers in the territory do not enjoy minimum wages.
Aside from the economic drop-off, political freedoms have fared even worse.
General elections for chief executive and members of the Legislative Council and
Executive Council have repeatedly been postponed. Hong Kong also blindly follows
Beijing¡¦s lead in issuing entry permits. For instance, six key members of the
US-based Shen Yun Performing Arts (¯«ÃýÃÀ³N¹Î) troupe were refused visas at the last
moment last week, forcing the entire group to cancel seven sold-out
performances.
Taiwanese should pay close attention to Hong Kong as it serves an example of
what could happen here if the government continued to desperately seek an
economic cooperation framework agreement (ECFA) with China. The current economic
recovery already reflects this ¡X a stock market awash in funds and speculation
in the housing market.
Taiwan¡¦s richest 20 percent continues to be more than six times wealthier than
the poorest 20 percent. Its Gini coefficient hovers between 0.34 and 0.35,
unemployment is near 6 percent and wage hikes in the industrial and service
sectors since 1991 have lagged significantly behind economic growth figures.
Since 2000, salary growth has slowed further and even begun to drop. Aside from
rising housing prices, there has also been an influx of hot money from abroad.
It is hard to imagine what will happen if these problems are compounded by
massive amounts of Chinese investment.
More importantly, the reason Hong Kong has been able to maintain the appearance
of ¡§one country, two systems¡¨ is that Taiwan has not yet fallen into the CCP¡¦s
hands. As soon as Taiwan becomes a special administrative region like Hong Kong
and Macau, the three and China will become ¡§one system¡¨ ¡X the CCP-controlled
Chinese system. We must ask ourselves if we are willing to see this happen.
Wu Hui-lin is a researcher at the Chung-Hua Institution for
Economic Research.
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