By Turnip Magazine

Why is it important to protect your sovereignty? Without it, you have no way of solving your own problems.

Recently, the atmosphere in Taiwan has been very strange. The consensus among many is that sovereignty is a “fake” issue, or that sovereignty is no more important than social issues. Some points of views even seem to be that sovereignty and social issues are mutually exclusive.

I completely disagree when people say that a country’s sovereignty and its social issues are not related to each other. In reality, not only are the protection of a country’s sovereignty, and the resolution of social problems, not mutually exclusive, but they actually share a cause and effect relationship.

A good example to explain this is a problem of great concern to Taiwan’s younger generation: housing prices. Let’s look at Hong Kong to best illustrate the problem.

A government’s three most important policies for tackling the issue of soaring housing prices are: Interest rates and financial regulations, the tax system, and social housing policy.

In Hong Kong, the problem of rising housing prices is even worse than it is in Taiwan. Hong Kong regularly claims the title of the city with the worst housing price to income ratio in the world, with Taipei still a little way off.


Credit: Reuters / TPG

How does the loss of sovereignty impact housing prices?

Let’s start with financial aspects first. The Hong Kong housing market plays a very important role for China; it acts as a safe haven. Chinese capital goes into Hong Kong because, in relation to the rest of China, Hong Kong has much looser foreign exchange regulations. However, Hong Kong doesn’t have substantial local industry, so where can people invest their money? The answer: Hong Kong's property market.

Is there a way for Hong Kong to restrict Chinese funds from entering the market? Most probably not. With so much new money in China, all the second generation “rich kids” need a safe haven like Hong Kong in order to hide their money. You may think that the four major banks in Hong Kong can just simply change their interest rate policies to counter this. Unfortunately, they can’t, because the power that the banks had is now controlled by China, so there is no way that they would allow interest rates to fluctuate too much as it would affect investments from China.

To put it bluntly, Hong Kong doesn’t even have the ability to create a “soft landing” for housing prices; as the U.S.-China trade war has recently gone into full swing, when the time comes that China needs to consolidate its resources and eventually pulls the large amount of money stowed away, Hong Kong will be unable to stem that tide. In the end, it will be the hardworking and impoverished local citizens that will take the brunt of it.

Next, we need to look at the tax system. In the past few months, there have been many news stories reporting that the Hong Kong government wants to raise the stamp duty on real estate transactions to stabilize the housing market. The stamp duty rate is currently 15 percent of the transaction price, but that becomes 30 percent on each property after that (commonly known as double stamp duty). However, one of the laws in Hong Kong states that China’s central government department and its subsidiaries (such as the Liaison Office, or LOCPG HK) are exempt from paying stamp duty when buying property in Hong Kong. As a result, when the new stamp duty laws are implemented, it is only the general buyer that has to cough up the cash. The Liaison Office and its affiliated departments say they are “purchasing dormitory rooms” in order to take advantage of the tax-free benefits when purchasing apartments, which are then leased out under the name of the Liaison Office’s subsidiaries to non-employees for a profit.

What on earth can the Hong Kong government do against this “supreme government?” The Hong Kong government were trying to use the new tax system to attack the housing market. Unfortunately, it has backfired and the only people it will affect are the locals that need to take out loans in order to buy their homes. So the shark that is the Liaison Office has managed to slip through the net this time around.


Credit: AP / TPG

The Liaison Office of The Central People’s Government in Hong Kong (LOCPG HK) located in Sai Ying Pun.

Now, let’s look at public housing. You may already be familiar with how China is trying to dilute Hong Kong’s self-identity by deliberately introducing new immigrants from all across China. Moreover, they have implemented welfare policies especially for new immigrants. For Hong Kong locals, getting public housing is an extremely difficult task; in addition to joining a waiting list, they must also meet the low wages and low savings requirements, but on the other hand, the requirements are relatively loose for new immigrants seeking public housing. In many cases, an applicant could own two or three blocks of apartments and have millions of dollars worth of assets back in their home town, but when they come to Hong Kong, all they have to do is deceive the Hong Kong government – it is unlikely that anyone will dare to actually check – and then sign on the dotted line and swear an oath of allegiance. New immigrants also have many ways of leapfrogging others on the waiting list. For example, if a man from Hong Kong was to marry a lady from China and they have few children, then they can be allocated larger public housing units, or they could even split the family’s registered addresses and acquire an additional housing unit. In addition, if a woman from China gets divorced and needs help from a social worker because she has children to support, then she can get allocated yet another housing unit. Due to these loopholes, there have been plenty of rumors related to fake marriages and fake divorces, which has created even more resentment among the locals.

Originally, public housing estates were built for Hong Kong locals to live in. However, in reality, around 50 to 60 percent of the public housing estates in the New Territories are occupied by new immigrants.

In conclusion, what I want to express is this: When you have no national sovereignty, many social problems will just get swept under the rug. If Hong Kong was an independent country today, it would have control over its own financial laws; it would be able to set its own interest rate policies without needing to create taxation back doors for high-level CCP departments, and it would also be able to impose stricter immigration laws. However, once “Sai Ying Pun” (LOGCP HK) starts to rule Hong Kong, and the Hong Kong Government gets reduced to just a rubber stamp, talk about “stabilizing the housing market” and “housing for everyone” will be as good as empty promises. There are many ways for the Chinese to quash Hong Kong’s government and keep control of the country out of its own grasp, while the locals have to continue working hard and paying taxes that help support their cultural cleansing.


Credit: AP / TPG

A 'subdivided flat' in Hong Kong.

Let’s take social issues, such as labor rights, as a further example. Due to Hong Kong’s history of free economy, its labor laws have always been much looser than Taiwan’s, but did anything improve after the 1997 handover? The answer is a resounding no, and that is because the Hong Kong Government and the Legislative Council are all under the control of the Communist Party of China, which has categorically denied Hong Kong the right to resist the exploitation from Chinese enterprises.

Another issue, for instance, is same-sex marriages. What happens when HK gets fully absorbed into the One China system, how will it be incorporated into China's constitution and national policy? In principle, there will be many human rights issues not just violations against same-sex relationships.

Yet another issue that illustrates the situation is the supply of utilities such as water and electricity; China is now forcing Hong Kong to use Dongjiang Water, which is selling water to Hong Kong at a highly inflated price, instead of allowing Hong Kong to drink water from their own local reservoirs where the quality of the water is mostly probably better than the water from Dongjiang Water.

So what does it mean to have sovereignty? Having sovereignty means having the right to determine your own laws and it gives a country the ability to solve its social problems on its own. When a country has no sovereignty, it has no ability to solve any of its economic or social problems, because foreign states will only seek what is best for themselves, and never take the initiative to find a solution.

Even if we don't give up Taiwan’s status as a country, when you compromise its sovereignty for short-term economic gains, it will only ever lead to an endless stream of complications. For example, if all of our agricultural exports start going to China, whether you have a bumper crop or a poor harvest, China might decide not to play along, so even when the Taiwanese government invests money in order to stabilize produce prices, China’s actions could easily cancel out the majority of all that hard work.

Likewise, say we introduce a large amount of Chinese-funded investments to stimulate the Taiwanese housing market, when the Taiwanese housing market bubble bursts and needs to create a “soft landing,” the Chinese investors can choose not to sell and prevent the market from ever lowering; or worse yet, they can choose to start a sell-off, which will first incite panic and, in turn, cause the market to crash land.

So is there any correlation between sovereignty and social issues? Of course there is, and that correlation is a cause and effect relationship.

The views expressed in this article are those of the author and do not necessarily reflect the editorial policy of The News Lens.

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This article first appeared on the Chinese-language Taiwan edition of The News Lens and can be found here.

Translator: Zeke Li

Editor: Nick Aspinwall (@Nick1Aspinwall)

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