Hong Kong: The Making of a new Tier-1 Metropolis in China

Updated: Jul 14

John Lee Ka-chiu (李家超), the new leader of the Hong Kong Special Administrative Region (HKSAR), was sworn into office on July 1st, on the occasion of the 25th anniversary of the handover of Hong Kong to the People’s Republic of China. Xi Jinping took this opportunity to leave mainland China for the first time since early 2020.


Lee, the former policeman turned security chief, in his inauguration statement laid out his vision for a “new chapter for Hong Kong” and vowed to continue the city’s development, putting particular emphasis on the greater integration with mainland China.


The new 21-member government will keep only six members of the previous government under the leadership of Carrie Lam and appoint three deputies to the three major departments – the Administration’s Office, the Financial Office and the Justice Department, allowing for better strategy and inter-agency coordination and smoother day-to-day operations.


This institutional adjustment reflects the profound challenges that the new government faces. The cost of living in the city has been an issue hovering over Hong Kong’s people since the handover 25 years ago, and alongside Beijing’s heavy-handed approach to the HKSAR led to street protests and mass demonstrations in 2003, eventually culminating in the mass protests of 2019.


As a result, in its congratulatory letter to the new cabinet on June 19th, the Hong Kong and Macau Office of the State Council handed the new government five tasks: implementing the “one country, two systems” principle comprehensively and accurately, tackling the most prominent, immediate and realistic problems faced by ordinary Hong Kongers, boosting Hong Kong’s social development, aligning the SAR closer with the Chinese national development agenda, and enhancing its international competitiveness.


Unaffordable housing, a gaping wealth gap and gloomy development prospects for the youth are getting particular attention in Beijing’s “to do” list. It is therefore no surprise that Lee’s government will push ahead to deal with one of the most unaffordable housing market in the world. The new Housing Bureau is now under the watch of the Financial Secretary and a new entity created by the former Transport and Housing Bureau, which was overseen by the Chief Secretary himself. Previously, housing was not part of the Financial Secretary’s remit. This new set-up shall help the new government tear down bureaucratic walls and mobilize resources to increase land and affordable housing supply.


A second major priority is the greater integration with mainland China. Lee on his first day in office called his counterparts in the Greater Bay Area (GBA) on seizing opportunities for further economic integration. It is widely believed that Hong Kong has become less “international” since the handover. The rapid economic development in the GBA may soon put Hong Kong on par with the rest of metropolises in Guangdong province, Shenzhen or Guangzhou – a downgrading for the city that once boasted an economy of over 1/4 of the mainland’s economy and was one of the few recognized truly international financial centers.


In order to ensure post-colonial Hong Kong’s success also in the second half of the 50 years under “one country, two systems”, mainland China will try its best to defend the city’s status and attractiveness. This includes mass inflows of mainland capital and talent into the city in the coming years, turning Hong Kong into something like the other tier-1 cities along the coast on the mainland.


Already in his election campaign, Lee propagated a plan to align the city’s development with China’s 14th Five-Year-Plan, under which Hong Kong shall further consolidate its status as an international financial, shipping and trade center, while at the same time turning it into an international innovation and technological center. The open nature towards foreign capital shall therefore remain a key character of Hong Kong.


Whether these promises are enough to convince foreign capital to remain in Hong Kong remains to be seen. Against the backdrop of new geopolitical bloc-building tendencies, Hong Kong will find itself increasingly squeezed between a rock and a hard place, making any long-term commitment from Western firms hard to come by.


Overall, mainland China will grant Hong Kong a certain latitude, allowing capitalism to exist and grow to make sure that the city would play its role as a gateway to the outside world, also for another reason: this could help China better deal with international isolation it would be subject to in the event of a military takeover of Taiwan.

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