March 26th, 2012
01:10 PM GMT
Hong Kong, China (CNN) – After a divisive and fiery campaign season, Hong Kong has a new chief executive. His name is Chun-ying Leung, or C.Y, for short. He’s a 57-year old pro-Beijing politician who made his multi-millions in Hong Kong property.
But the city native inherits the leadership mantle as his hometown faces a series of unenviable economic challenges. And it’s not just Hong Kong’s financial problems he has to address - it’s also his own popularity problems. More precisely, lack thereof.
On Sunday, Leung could be seen giving the thumbs-up for victory in Sunday’s fourth chief executive election. But he’s gotten a thumbs-down in approval. The Hong Kong Standard, a local newspaper, said Leung only mustered a 40% approval rating. Compare that to the 70% rating of the two previous chief executives.
To change that, Leung said he would address a swath of economic woes after he takes over in July.
“On economic and political polices, I will consult widely on measures to tackle the deep-rooted problems on uneven distribution of income, inflation, housing, medical services, education and political reform," he said. "I stress we do not need major reforms - just a government that is proactive and introduces change while maintaining stability."
So Leung says Hong Kong doesn’t need major reforms - but there are major economic issues that loom long and large over the island.
The first is Hong Kong’s growth, or in this case potential contraction for this first quarter of 2012. In January, Hong Kong data showed both imports and exports fell for the first time in two years. Europe’s debt crisis and slower demand from the continent are partly to blame. Leung is at the mercy of weak overseas demand in a time of sluggish global growth.
Hong Kong’s income gap is another issue. Civic Exchange, a Hong Kong think tank, says it’s the widest of all countries in the OECD, the Organization for Economic Cooperation and Development. The city’s GINI coefficient, a measure of wealth disparity, is higher than that of Japan, the United Kingdom and the United States. It edges out Mexico by a hair.
And any Hong Kong resident can tell you that home prices are just ridiculous, notching up as some of the most expensive in the world per square foot. Leung has said he’ll aim to build more low-income housing to increase market supply and affordability.
That would help boost his popularity among low- to middle-income earners. But would that hurt the big-name developers that have the money as well as the political clout? Based on their share price reaction on Monday, it seems not.
Cheung Kong Holdings, owned by Asia’s richest man Li Ka-shing, rose nearly 2.5%. Henderson Land jumped nearly as much. Sun Hung Kai managed about a quarter of a percent gain too.
That follows Citibank’s earlier research note from this morning that said Leung’s property strategy isn’t that much different from the outgoing administration’s.
Also, one Citic Securities analyst told me the city’s high-end property prices will really continue to depend on mainland Chinese buyers - and not so much on what Leung could or would do.
So Hong Kong’s new chief executive-elect has his work cut out for him, to keep Hong Kong from falling into recession and to pull his own approval numbers up.
He’s got the next five years to try.
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