STOCK MARKET WATCH -- Wednesday, 1 August 2012

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21. The myth of a free Hong Kong economy

http://www.atimes.com/atimes/China_Business/NH02Cb01.html

HONG KONG - Open any standard economic textbook and look for the definition of a free economy; its key characteristic is the lack of government intervention. Less state intervention means a freer market.

On this standard, Hong Kong has been hailed as the world's freest economy for more than two decades. But is this the whole truth? What if the main sectors of the whole economy are dominated by a few oligopolies or even a virtual monopoly?

Let's look at the hypothetical case of Mr and Mrs Chan, an average Hong Kong household. Both Mr and Mrs Chan are senior-level employees of the Hong Kong government and earn a total



monthly salary of HK$85,000 (US$10,900).

The Chan family bought a 800 square feet (74 square meters) flat from Cheung Kong (owned by the richest local tycoon, Li Ka-Shing) and has to pay a mortgage of HK$30,000 a month. The couple subscribes to the 3shop mobile phone service, a subsidiary of Hutchison Whampoa (also owned by Li) and pay a monthly service fee of HK$2,000.

Wherever they go to buy their daily necessities, they use Park'n Shop (a supermarket chain owned by Li), where they spend about HK$5,000 every month.

Whenever the Chan family pays their electricity bill (HK$1,000 per month), it goes to Hong Kong Electricity (again owned by Li). For pharmaceutical products, they go to Watsons (again owned by Li), and they spend HK$2,000.