If only we had persisted back then.

Written by: Huashang Taolüe | Produced by: Bi Yajun

Amid the economic downturn and distress caused by the collapse of the real estate market, from the Hong Kong government to property developers, and even the entire Hong Kong society, faced two choices:

1. Vigorously save the property market and continue to use it to drive the economy.

2. Endure the pain of the property market and turn crisis into opportunity, promoting economic transformation and upgrading.

Caught between a rock and a hard place, Hong Kong made a choice and is still paying for it to this day.

【1】

"Hong Kong is not an ATM!"

In the afternoon of August 13, 1998, not long after the highly anticipated Hong Kong government press conference began, Donald Tsang, the then Financial Secretary of the Special Administrative Region, made this powerful statement.

At that time, the Hong Kong stock market had been continuously shorted by international speculators like George Soros for nearly a year, and the Hang Seng Index had plummeted from over 16,000 points to just over 6,000 points.

Amidst the widespread despair in the market and the critical moment when the economic system was on the verge of collapse, Chief Executive Tung Chee-hwa secretly traveled to Beijing to secure the firm support of the central government for the announcement to be made at the press conference on the 13th: the Hong Kong government would intervene in the market on the 14th to counter international financial speculators.

With the strong support of the central government, the Hong Kong government not only won this breathtaking financial battle but also earned billions of dollars in book profits. George Soros, who had advocated for Hong Kong's defeat in The Wall Street Journal, suffered heavy losses and fled with his tail between his legs.

However, Tung Chee-hwa, who had won the financial battle, was not happy.

From 1991 to 1997, Hong Kong's already high property prices quadrupled in six years, and the entire city was caught up in a frenzy of property speculation.

In 1995, British capitalists like Jardine Matheson and Swire sold off their Hong Kong properties, which would normally have led to a decline in property prices, but it ended up adding fuel to the fire.

Some speculators capitalized on the fact that Chinese capital took over some of the dumped properties to stabilize the market before the handover, spreading rumors that mainland funds would support the Hong Kong property market after the handover. They even went so far as to assert that the central government would buy property in Hong Kong for officials above the provincial level.

Under various rumors, it became a near-universal consensus that Hong Kong's property prices, no matter how high they were speculated, would not fall after the handover. "It would be foolish not to buy a house in Hong Kong before 1997."

Buying and speculating on property became a trend in Hong Kong, with financial institutions and property developers working until late at night being the norm. Some people even gave salesladies gifts worth tens of thousands or even hundreds of thousands of dollars to secure a property. "It was as if not being able to buy a house meant the end of the world."

Amid this frenzy, Hong Kong's property prices, which had already averaged around 70,000 Hong Kong dollars per square meter in 1995, skyrocketed by another 50% over the next year and a half, reaching an average of about 100,000 Hong Kong dollars per square meter, completely deviating from the level of economic development and affordability for residents.

By 1997, the average mortgage burden ratio of Hong Kong residents had reached 93.2%. That is, out of a monthly salary of 10,000 Hong Kong dollars, 9,320 Hong Kong dollars were spent on mortgage payments. Many low-income groups could not even repay their mortgages with their entire salaries.

Such severe overextension was doomed to be unsustainable without external support. However, when the stock market crash severely damaged Hong Kong's wealth, the rumored external force—mainland funds supporting the market—did not materialize.

When the Hong Kong government intervened in the financial market, the property market had already plunged into a dive, with both property prices and transaction volumes falling by more than 50%...

The stock and property markets are the lifeblood of Hong Kong's economy.

The sharp decline in both these markets plunged Hong Kong's economy and people's livelihood into a dark moment, leaving the newly appointed Tung Chee-hwa feeling like he was walking on thin ice.

【2】

After World War II, Hong Kong's economy developed rapidly, and the urban population continued to increase, but the British Hong Kong government long-term blockaded land development outside the core urban area, deliberately maintaining a situation where supply could not meet demand in the property market.

Some even believe that pushing up property prices was a deliberate challenge created by the British Hong Kong government for post-handover Hong Kong. One piece of evidence is that this round of property price hikes began in 1991, and it was precisely from 1991 that the British Hong Kong government further tightened land supply.

The prosperity of the property market under high property prices made real estate developers and the British Hong Kong government financially lucrative.

By 1997, the chairman of Henderson Land Development, Lee Shau-kee, who held the top spot in Hong Kong's real estate industry, had a net worth of over $15 billion and achieved the highest ranking among Chinese in the global rich list to date:

Fourth in the world.

By 1997, real estate accounted for over 20% of Hong Kong's GDP; the proportion of real estate and related industries to Hong Kong's fiscal revenue had also reached 40%. If you count the real estate content in the financial industry, its impact is even greater.

Behind these figures are countless wage earners crammed into cramped spaces like "pig pens," struggling to make a living and unable to afford their own homes, even sighing at the sight of the "pens".

The high business costs pushed up by high property prices have also put pressure on the development of other industries in Hong Kong, forcing the manufacturing industry to relocate overseas, and the industrial economy continues to shift from real to virtual.

Tung Chee-hwa, who had long seen the problem, made up his mind during his campaign: to change land and property market policies, stabilize property prices, improve people's livelihoods; increase education reform, talent cultivation, improve the business environment, develop technological innovation industries, and promote economic transformation.

On July 1, 1997, on the day of the celebration of the establishment of the Special Administrative Region, Tung Chee-hwa fired the first shot of change, officially announcing the historic "85,000" plan:

In the next 10 years, supply not less than 85,000 residential units annually and shorten the average waiting time for public housing from 6.5 years to 3 years—allowing 70% of Hong Kong households to own their own homes within 10 years.

The Hong Kong government also simultaneously established the Housing Land Supply Steering Committee and announced the first five-year land sale program: supplying 120 hectares of land by March 1999 and an additional 260 hectares by 2002.

This series of new policies ignited the aspirations of the general public, especially the working class, who had long since given up on the dream of affordable housing, and also showed the world the potential of a more promising future for Hong Kong.

However, when the stock and property markets were both hit hard, residents' wealth and government finances fell into a困境 together.

Plans began to fall short of changes, and the future began to compromise with the present.

【3】

By mid-1998, property prices that had almost halved had left over 100,000 property buyers with negative equity. Coupled with the heavy blow to the stock market, the entire Hong Kong was enveloped in economic pain that was dark and seemingly endless.

Moreover, everything came too quickly.

From "not being able to buy a house means the end of the world" to "buying a house means buying the end of the world." In just one year, it went from "heaven" to "hell".

Previously, Hong Kong's economic public opinion, which was concerned about overheating, quickly reached a new consensus:

"Save the property market,"

"Save the economy,"

"Save those with negative equity."

Property developers demanded that the government change land policies and abolish the "85,000" plan; some homebuyers who had previously hated property developers also changed their attitudes and positions due to the depreciation of their properties and joined the ranks of opposition.

Even restaurant waiters would curse the "85,000" because of the economic depression.

Under immense pressure, in June 1998, the Hong Kong government froze the original land supply plan; in 2000, Tung Chee-hwa further publicly stated: "With the financial turmoil, there is simply no opportunity to implement the '85,000' policy."

Even so, the Hong Kong government still pressed on, ensuring that land already supplied before June 1998 was delivered on time. However, when the last batch of "85,000" housing units was launched in 2002, after a cumulative delivery of about 250,000 units under the "85,000" plan, this plan could no longer continue.

At this point, Hong Kong's property market had fallen by 70% from its peak, and property owners had lost an average of over HK$2.6 million. Some deeply indebted property buyers with negative equity even chose suicide in despair. The "85,000" plan was blamed as the culprit behind everything.

Many who had previously supported Tung Chee-hwa and his new policies also became skeptics and opponents, including some who had benefited from the "85,000" plan and owned their own homes, who switched from supporters to accusers due to the decline in property prices and the shift in their interests.

Among the dozens of tragic suicides collected by opponents due to falling property prices, the suicide of a man named Lai Sheng was only discovered five days after he took his life, along with a divorce agreement and a bank notification that he had left in his jacket pocket:

The bank informed Lai Sheng that due to insufficient collateral value for his mortgage, he was required to pay an additional HK$3.3 million in cash within a week, or the property would be auctioned off to cover the deficit.

Lai Sheng also had a special identity: he was formerly an employee of Tung Chee-hwa's family business, Oriental Overseas.

This made him the "most vivid example" of attacking Tung Chee-hwa, which was repeatedly spread and amplified. But Tung Chee-hwa had more to face at the time.

【4】

"Hong Kong aims to become a global leader in the development and application of information technology, especially in e-commerce and software development."

In 1997, when Tung Chee-hwa envisioned such a future, Richard Li may have been one of the most attentive listeners.

At just 31 years old at the time, Richard Li had sold Star TV, which his father had bought for him, to Rupert Murdoch for $950 million and founded Pacific Century Group, which was listed in Singapore through a backdoor listing, partnering with Intel to vigorously pursue high-tech ventures.

How to seize the opportunity to develop Hong Kong's technology industry? Returning from Stanford, Richard Li copied an idea from Silicon Valley: building a technology incubator in Hong Kong similar to Silicon Valley, integrating industry, academia, and research.

This is the "Cyberport" that Tung Chee-hwa focused on promoting during his term and is still controversial to this day.

Initially, Richard Li only suggested that the Special Administrative Region government solely fund the construction of Cyberport, with Pacific Century assisting in later recruitment and operations. The Special Administrative Region government saw merit in his proposal but lacked the financial resources to invest. In 1998, under the double impact of the stock and property markets, Hong Kong's GDP declined by over 5.8%, and fiscal revenue also plummeted.

Unwilling to invest, Richard Li revised his plan, taking the initiative to propose a PPP model where the government provides land and Pacific Century provides funding for joint development and shared benefits, and persuaded the government to:

Skip the bidding process and sign a contract directly with Pacific Century.

Although almost all large developers, except for Li Ka-shing's Cheung Kong Holdings, were dissatisfied with the Hong Kong government bypassing the bidding process and directly cooperating with Pacific Century, the financially strained government, which hoped to make Cyberport a success, still chose Pacific Century under pressure.

The Hong Kong government had sufficient reasons for doing so: even if it were to hold a public tender, Pacific Century would still be the most suitable candidate at the time. Among Hong Kong's large corporate world, almost no one other than Richard Li and his father had more willingness and ability to develop technology. And a public tender would indeed delay progress.

The Cyberport, with a total investment of approximately HK$16 billion, includes four intelligent office buildings, a five-star hotel, a high-density residential community, and diversified supporting facilities. Pacific Century, which ultimately owns about 36% of the residential development revenue and the management rights of Cyberport, contributed its full capital; while the Special Administrative Region government, which contributed land and infrastructure as capital, enjoys 64% of the residential development revenue and ownership of other properties.

In other words, if Cyberport eventually became a real estate project, it was not "tricked" into becoming one by Richard Li but was explicitly designated by the Hong Kong government from the start, and most of the benefits also belonged to the Hong Kong government.

Why did they do this? The core reason is that the Hong Kong government wanted to do it but lacked funds, so it exchanged land for funding.

Riding on the wave of the internet technology boom at the time, Cyberport made a splash right out of the gate. In May 1999, Pacific Century, which acquired Cyberport, returned to Hong Kong through a backdoor listing and quickly became a technology upstart with a market value of over HK$200 billion.

In 2000, Richard Li further defeated Singapore Telecommunications with over HK$100 billion and acquired Hong Kong Telecom, a fixed-line telecommunications provider that accounted for 60% of Hong Kong's telecommunications market from Cable & Wireless, pushing the reorganized PCCW to a new height of HK$500 billion in market value.

The recruitment for Cyberport was also smooth. At the initial stage of the project, Pacific Century secured over 70 lease intentions from companies like HP, IBM, SoftBank, Yahoo, and Huawei, and even Bill Gates was invited by Richard Li to endorse it.

But disaster soon followed.

From March to September 2000, the Nasdaq index plummeted from 5,048 points to less than 1,200 points, and the global internet bubble burst.

Even the successful American internet companies could not withstand such a crash, let alone the conceptual Pacific Century and Cyberport. The previous success in acquiring Hong Kong Telecom also became a huge burden. The interest on the $13 billion loan borrowed for the acquisition alone was immense pressure. By September 2002, PCCW's market value had plunged to less than HK$20 billion.

The luckiest Superman, Richard Li, suddenly became the unluckiest, and the fate of Cyberport was predictable.

As Cyberport collapsed, Tung Chee-hwa's another major technology innovation plan, "Silicon Harbour," also fell apart.

In 1997, Tung Chee-hwa envisioned developing Hong Kong's technology industry with one hand on internet technology and the other on chip technology. After several visits to Silicon Valley for inspection and learning, he proposed the "Silicon Harbour" plan, which focused on chip development, and secured an opportunity:

Just after leaving Taiwan Semiconductor Manufacturing Company,