October 9, 2018 / 4:26 AM / 2 months ago

Breakingviews - Hong Kong’s political risk takes new form

Hong Kong Chief Executive Carrie Lam attends an interview with Reuters in Hong Kong, China July 14, 2017. REUTERS/Bobby Yip - RC14FDECF0F0

HONG KONG (Reuters Breakingviews) - Hong Kong’s political risk is taking a new form. The Chinese territory’s leader, Carrie Lam, has made a good start tackling the housing crisis and other parts of her domestic agenda. Public sentiment has improved. With mass protests less likely, she may push for a controversial security law next.

Four years after massive pro-democracy protests rocked the former British colony, paralysing the financial district and denting some economic activity, tensions have eased. Lam, a former civil servant, is pushing ahead with plans to combat the city’s severe shortage of affordable housing, addressing a major source of dissatisfaction. In June, she announced half a dozen new policies, including a tax on vacant flats and a much-needed overhaul of how subsidised flats are priced. The latter is expected to halve the cost of an apartment for eligible lower and middle-income families. More measures are expected in Lam’s annual policy address on Oct. 10.

The public has thus warmed to Lam’s administration, if not her personally. Her approval rating has fallen to a low of 40 percent, but public sentiment on the government and society markedly improved when she took office in July last year, according to data from the University of Hong Kong. Unexpectedly low turnout for legislative by-elections in March suggests political fatigue is setting in; the pro-democracy movement may be losing traction.

That might make room on the agenda to re-introduce a security law known as Article 23, which bans acts of treason, secession, and sedition. An earlier attempt to pass the controversial bill in 2003 rankled opposition groups as well as ordinary residents and drew half a million protestors onto the streets. But since then Lam has banned a pro-independence political party and kicked out a foreign journalist after he hosted the leader of that party to speak at an event, both unprecedented acts that met little popular resistance.  

The city’s financiers appreciate stability, and there’s little support in the business community for separatism. But the risks of further erosion of the rule of law and increasing censorship are rising. Lam may have won points in Beijing by drawing a red line around the subject of independence. Investors can only hope that line holds.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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