Blessed are the rich in Hong Kong
by Philip Bowring
SCMP October 18, 2004
How rich are we? Do you believe that Hong Kong people are richer than those
in Germany and Japan, despite the size of our flats, the levels of car ownership
and the amount spent on security, health, education, and the like? But we are,
at least according to a comparative table in The Economist, with a per capita
gross domestic product of US$28,810 (HK$224,700).
Statistics do, unfortunately, matter. They have become a yardstick
of government success and say a lot, true or false, about income
distribution. One economist
recently noted: "The primary significance of GDP reporting now is as a
propaganda tool and as a cheerleading prop for Pollyanna-ish analysts on Wall
I will not bore you with details of why, despite official protestations,
I believe that Hong Kong's GDP deflator exaggerates real growth.
Nor will I, for now, again dispute the claims of the government that
social security recipients were overcompensated because increases
reflected projected inflation rather than (as claimed by an April
1998 Legco Finance Committee document) being retrospective.
Let us take the official - not The Economist's - statistics at their
word and ask: who gets what of the HK$190,000 that this society is
projected to earn on a per capita basis this year?
One thing is for sure, whatever one believes about the timing of welfare
adjustments, the old and needy, and those whose sweat built Hong Kong,
have been receiving a fast-declining share of total income. Official
per capita GDP in the middle of this year was 13 per cent higher than
at the time of the handover. But welfare payments have been cut to
ensure that they do not grow faster than inflation.
So who does get the national income? If we take the median monthly
salary (about $10,000) and multiply it by the size of the working population,
we get a figure of $390 billion, or just 31 per cent of GDP at current
prices. Use the household income data - median income of $18,000 a
month for 2.1 million households - and income is HK$454 billion, or
about 36 per cent of GDP. That includes the income of tens of thousands
of small businesses. Clearly, the median earner is getting a small
slice of total income.
Average household incomes are higher than the median income in most
societies. But the situation is extreme in Hong Kong for two reasons.
One is that wage and salary differentials are far greater than for
any society in the upper-middle global range. The other is the very
high level of corporate profits. Gross profits are still about 45 per
cent of GDP, compared with 55 per cent paid to employees. The level
of profit to turnover of the domestic operations of banks, property
companies and utilities remains remarkable.
Big profits sometimes mean strong investment and fast growth. But
Hong Kong's investment to GDP ratio is only 25 per cent, which is above
western levels but below equivalent East Asian economies. Much of it
is attributable to the high price of property. Corporate profits more
than household savings explain Hong Kong's huge - $135 billion last
year - current account surplus. The savings are being invested outside
Hong Kong, buying banks in the US, power stations in Australia and
buildings in Shanghai. Median income households are being squeezed,
while domestic corporates diversify, often more for the benefit of
management than shareholders.
So, upper-middle-class Hong Kong, with your low-tax, $2.2 million
household income - 10 times the median level - and your $50,000 a year
maid, remember how lucky you are compared with your counterpart in
Germany or Japan. And for the bottom 80 per cent of the population,
remember how unlucky you are compared with those same peers.