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A FRIWAFTT* essay about Hong Kong

This posting is a bit of a FRIWAFTT (as in fools rushing in…) about the ongoing standoff between the Occupy Central/Umbrella Revolution protests (dominated by young people) and the Hong Kong government (as a proxy for the Politburo Standing Committee of the Communist Party of China).

Economic newspapers over the past several years have pointed to the rising Gini coefficient of income distribution in China. Jonathan Kaiman, writing for the Guardian newspaper in July 2014 says that China’s “Gini coefficient, a widely used indicator of economic inequality, has grown sharply over the past two decades. A Gini coefficient of zero represents absolute equality, while one represents absolute inequality. About 20 years ago, China’s Gini coefficient for family net wealth was 0.45, according to the People’s Daily website, a Communist party mouthpiece, but by 2012 it had risen to 0.73.
According to some analysts, societies that have a Gini coefficient of more than 0.40 are at increased risk of widespread social unrest. Data from the OECD gives the US the highest Gini coefficient in the G7, after taxes and transfers, at 0.39, followed by the UK at 0.34 and Italy at 0.32.”

The website socialindicators.org.hk lists the Gini coefficients for Hong Kong in 1981 and in 2011 at 0.45 and 0.54 respectively. In 2012, the Chinese government refused to release the country’s Gini coefficient to the World Bank and the UN. Using data from six surveys conducted by five universities in China, University of Michigan sociologist Yu Xie estimates China’s Gini at around 0.55 in 2012, perhaps a more accurate figure than the 0.73 of the Guardian article cited above.

China’s leadership has proved to be extraordinarily astute and capable in walking the tightrope between managing its exploding economy and keeping a firm hold on political power in the years since Deng Xiaoping’s famous maxim “it doesn’t matter whether a cat is white or black as long as it catches mice.” From the point of view of the Chinese leadership, the Hong Kong protests could prove to be a heaven sent opportunity to experiment with ways to nudge the Gini downward on the island before attempting to repeat the exercise on the mainland. If this long-term positive scenario plays out, then one should expect more turbulence in Hong Kong over the short to medium term while the necessary political nudging and jostling takes place.

*The author applies the FRIWAFTT label (fool rushing in where angels fear to tread) to himself since he is neither an economist nor an expert on Hong Kong affairs, but merely an observer with strong opinions that one is thankfully free to express in Hong Kong.


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