After quashing opposition groups in Hong Kong, China’s leaders plan to target the city’s yawning wealth gap and lack of affordable housing that Beijing blames for fueling social unrest.
Senior officials are discussing ways to broaden the city’s tax structure and increase land supply in an effort to mitigate inequality and high living costs in one of the world’s most expensive cities, according to people familiar with the discussions. The deliberations could lead to far-reaching overhauls of Hong Kong’s economic and social-welfare systems, although specific proposals haven’t been put forward, the people said.
Changes to Hong Kong’s low-tax system would raise revenue for more social spending, but one challenge is how to do so without undermining the city’s attractiveness as a financial and business hub. Land-policy reforms can help improve access to cheaper homes, although officials must overcome the entrenched influence of local property tycoons whom Beijing regards as too passive in their support of government goals.
For Beijing, efforts to curb dissent in Hong Kong over the past year—from rounding up opposition figures on national-security charges to a planned revamp of the city’s electoral system—are meant to pave the way for social and economic overhauls. The political crackdown has drawn flak mainly from Western governments, which accused China of violating its pledges to allow Hong Kong’s governance to remain semiautonomous until at least 2047.
What Beijing ultimately wants to address in Hong Kong is “not the politics, but the deep-seated issues” including the lack of affordable housing and the city’s “deeply polarizing income gaps,” said Bernard Chan, a member of China’s national legislature and Hong Kong’s cabinet.