Hong Kong tycoon Li Ka-shing's China withdrawal highlights broader problems: Analysts

2015-09-22

Hong Kong billionaire property tycoon Li Ka-shing arrives for a press conference in Hong Kong, Feb. 26, 2015. AFP

A recent attack on Hong Kong billionaire property tycoon Li Ka-shing in China's state-controlled media highlights the symbolic importance of his recent decision to sell off his holdings in Shanghai, analysts said.

A Sept. 13 editorial by Liaowang Institute, which is linked to the official news agency Xinhua, attacked Li after his plans were revealed.

"At this sensitive time, when China's economy is in crisis, he continues to sell off his assets and to spread pessimistic sentiment," the article said.

"He has fallen from the moral high ground," it said, reminding Li that his huge wealth as head of the Hutchison Whampoa conglomerate had come from his connections to powerful Chinese officials, not from a level playing field in a market economy.

Li, dubbed "Superman" for his business acumen, had enjoyed huge discounts to land in prime locations, the article said.

Last month, The Wall Street Journal reported that a property developer backed by Li had put an office and retail property project in Shanghai up for sale.

The report came after Li's Cheung Kong Property Holdings put Century Link and Century Link Tower, a shopping mall and twin office towers, up for sale in June.

Li and his family have sold five office and shopping mall projects in Shanghai, Beijing, Nanjing and Guangzhou in recent years, the paper said.

Party mouthpiece the People's Daily said Li is "abandoning" his country and questioned the moral and legal basis of the move.

Li has been selling off assets in both mainland China and Hong Kong for several years, restructuring some of his holdings as CK Hutchison based in the Cayman Islands.

The ruling Chinese Communist Party's powerful propaganda department soon ordered media outlets not to focus on the story, however, and the articles were followed by more moderate think-pieces in official media saying his move wasn't the end of the world.

"Stop hyping reports and commentaries on Li Ka-shing divesting from China," a Sept. 19 directive translated and posted by the U.S.-based China Digital Times website ordered editors.

'Moving their money out'

Zhong Jianhua, who directs the Center for Social Policy at the Hong Kong University of Science and Technology, said Li has good reason to be leery of China.

"There is a risk of economic decline in China right now, and people are moving their money out, and perhaps they have some concerns," Zhong said. "This has happened before in Chinese history, and naturally they want somebody to blame."

He said the attack on Li comes at a time of rising tensions between the mainland and Hong Kong, where Li's family fled from the political violence of the Cultural Revolution (1966-1976), and where he started making money by selling plastic flowers door to door in the city, then a British colony.

"A lot of factors are combining to make it more difficult for him to [do business]," Zhong said.

Zhong said Li has already had first-hand experience of life under the Chinese Communist Party.

"He has seen it all ... the political movements, the struggles against landlords, the struggles against capitalists," he said. "Once bitten, twice shy; everyone is wary."

"He was able to establish himself in a British colony, but now that's gone," Zhong said. "He may not feel enough confidence in the Special Administrative Region government."

Zhong said Li probably isn't the only Hong Kong tycoon taking steps to secure their wealth and future.

"I'm sure a lot of the Hong Kong rich are taking steps to ensure they won't get burned."

Current affairs commentator Liu Ruishao said that official displeasure at Li would likely affect the army of Hong Kong entrepreneurs who aren't as wealthy or well-connected.

"[The articles are saying that] you businesspeople all rely on government backing, and without it, you wouldn't be able to thrive," Liu said.

"The People's Daily article was saying ... that yes, you can leave, but perhaps things will get tougher for your business without official backing," he said.

"This might not have such an impact on Li Ka-shing, but it will affect smaller entrepreneurs," he said.

Behind the scenes

A Beijing-based writer identified only by his surname Liu said the official reaction to Li's withdrawal was the public manifestation of political changes going on behind the scenes in Beijing, however.

"There are quite a lot of investors from the U.S., Japan and Hong Kong and Taiwan who are also pulling out, because of rising costs," Liu said.

But he added: "Movements of capital within China are closely linked to political power ... so there is clearly some sort of political background to Li Ka-shing's leaving."

He said the move could be linked to the Shanghai political faction centered around former president Jiang Zemin.

"It could have to do with a weakening of the power of the Jiang family and the Shanghai faction," Liu said.

But Xie Tian, an assistant professor at the University of South Carolina at Aiken, said the biggest risk factors for big business in China are political rather than economic.

"The Chinese authorities should roll out new policies to change the close relationship between politics and economics, and allow a market system to play a larger role," Xie said.

However, he said Li's withdrawal from Shanghai had only bolstered his reputation as "Superman."

"China's property bubble is in a serious state right now, with high prices but no market," Xie said. "Everyone has got boxed in, except for him, because he quit."

"This goes to show that Li Ka-shing really is a master."

Reported by Loh Man-san for RFA's Cantonese Service, and by Shi Shan for the Mandarin Service. Translated and written in English by Luisetta Mudie.

Link to original story on RFA website