Economist.com Cities Guide: Hong Kong Briefing - March 2006

News this month

An unwitting accomplice

Hong Kong has landed in the centre of a dispute between America and North Korea. In late February the South China Morning Post revealed that a local subsidiary of the Bank of China Hong Kong, China’s second-largest lender, was used in the trade of counterfeit dollars from North Korea. American officials charge that about $2.67m in three accounts at Chiyu Banking was being used to fund the trade in “supernotes”, high-quality counterfeit $100 bills printed at state-owned companies in North Korea.

The revelation resulted from an inquiry by America's Secret Service and the Hong Kong and Macau police after a tip-off from private investigators. Last September America imposed sanctions against North Korean companies and Banco Delta Asia, a Macau bank, for money laundering, counterfeiting and arms dealing. The controversy helped scupper six-nation talks on North Korea’s nuclear programme, and America has refused to ease its sanctions. Macau is often identified as a hub for illicit trade from North Korea; this is the first time Hong Kong has been directly implicated.

Square one

Plans for the 40-acre West Kowloon Cultural District at the western end of Victoria Harbour are now up for grabs. Beset with mounting criticism over the project, the government announced on February 21st that it would scrap almost eight years of work on the HK$40 billion ($5.2 billion) cultural hub. The problematic design—chosen in 2002—came from Lord Foster, an English architect, and featured a 21-hectare glass canopy. But the roof was unpopular from the start, and developers balked at new requirements to donate HK$30 billion to the operation of the arts and cultural facilities.

Despite this setback, Rafael Hui Si-yan, Hong Kong's deputy leader, stressed that planning for the district would move forward. A new board, chaired by Mr Hui, will be assembled this month to assess the city’s cultural needs and issue recommendations by September. The public seems to support this scheme, and the move has reportedly given Donald Tsang Yam-kuen, Hong Kong's chief executive, a boost in popularity. But few expect the controversy over the hub to totally evaporate.

Budget brouhaha

There are few short-term thrills in the conservative government budget presented by Henry Tang Ying-yen, the city’s financial secretary, on February 22nd. Some called it prudent, others miserly. Keen on retaining Hong Kong’s HK$4.1 billion consolidated surplus—the first in nine years—Mr Tang resisted calls for sweeping tax cuts and set government spending at HK$245.6 billion, about HK$2 billion less than last year. The city’s 17.6% tax on business profits will stay put, and Mr Tang said he would consider a new sales tax to broaden Hong Kong’s revenue base. He did, however, propose cutting the salary tax by one percentage point for Hong Kong’s top three income brackets. Home-owners also received a boost as limited tax deductions for mortgage payments were extended from seven to ten years.

With Hong Kong’s economic growth predicted to slow from 7.3% to 4%-5% this year, Mr Tang offered measures to make Hong Kong more attractive for foreign trade. In 2005 Singapore surpassed Hong Kong as the world’s busiest port, so Mr Tang plans to lower levies on ships and streamline port bureaucracy. He also hopes to boost Hong Kong’s stockmarket, now competing with Shanghai’s, by cutting taxes on trading securities, futures and options by 20%.

Bird flu flap

Hong Kong has strengthened safeguards against bird flu following the death of a man in Guangzhou, on the mainland, from the H5N1 strain on March 2nd. Health officials have urged calm, stressing that the chances of infection in Hong Kong are slim. Imports of live poultry from the mainland have been suspended until at least March 27th. But Hong Kong’s residents remain troubled: the city imports an average of 30,000 live birds from the mainland each day, and no urban market would be complete without cages of slightly frazzled-looking fowl.

Having endured the trauma of the Severe Acute Respiratory Syndrome (SARS) outbreak of 2003, which killed nearly 300 people and infected around 1,755, the city is now preparing for the worst. In February, Hong Kong outlawed all backyard poultry-farming and keeping certain birds as pets. The government has also begun poisoning wild crows after a few birds died of the virus. Scientists are concerned that the most recent infection in Guangzhou could indicate that the strain has developed a resistance to the vaccines widely used by farmers on the mainland. The city is sending a team of doctors to Guangzhou to help determine the source of the infection.

Honourable mention

After years of anxiety, Hong Kong's role as China's international financial centre has earned a gratifying vote of confidence from the mainland. The Beijing government's 11th five-year plan, announced on March 5th, will promote Hong Kong as a source of investment and a launching pad for mainland companies seeking to expand outside China. It was the first time that a five-year plan had mentioned Hong Kong's development in 53 years.

Since the 1997 handover of Hong Kong's sovereignty back to China, locals have feared that Beijing officials would prefer to let the former British colony wither as Shanghai grew. These concerns mounted during the six years of economic contraction that followed the Asian Financial Crisis. But Hong Kongers now credit central-government initiatives with reviving Hong Kong after the SARS outbreak of 2003. Since then, the mainland's treatment of Hong Kong's economy—if not its democratic reforms—has more or less earned the satisfaction of locals.

Catch if you can

March 2006

The Silk Road: Treasures from Xinjiang

Until March 19th 2006

Featuring some of China's most intriguing archaeological treasures, including the immaculately preserved mummies of Cherchen Man and the Beauty of Loulan, this show highlights the rich cultural heritage of China's far north-west. As part of the Silk Road trade route that ran across ancient Eurasia, Xinjiang has long lured different races and religions, and its dry climate helps preserve relics in remarkable condition. Cherchen Man, discovered by Chinese archaeologists in 1978 in the Tarim Basin in Xinjiang, still has eyebrows, fingernails and facial hair some 2,800 years after his death. Where he and the 4,000-year-old Beauty of Loulan came from, with their apparently Caucasian features, is just one of the region's enduring mysteries. This show affords a rare opportunity to see this stunning collection outside the mainland.

Hong Kong Heritage Museum, 1 Man Lam Rd, Sha Tin, New Territories. Tel: +852 2180 8188. Open: Mon, Wed-Sat 10am-6pm; Sun 10am-7pm. Entry: HK$20. See the museum website for more details.

More from the Hong Kong cultural calendar