Hong Kong's dirty secret

Tam Kin-wai's home has a high ceiling. Unfortunately, the single room he occupies with his wife and 12-year-old son is higher than it is wide or long. At about 35 square feet, it has space for two wooden bunk beds fixed to the back wall, a small black-and-white television balanced precariously on a shelf and a little bedside table. Every inch of space in what feels more like a storage cupboard than a place of abode is piled high with clutter: clothes, chipped cups, bedding, an electric fan, a roll of white toilet paper. Guests can either stand just inside the doorway in the only vacant space, or (as I did) sit beside Mr Tam on the lower bunk bed.

Mr Tam, a retired light-bulb maker who came to Hong Kong from mainland China in the 1960s, is one of an estimated 100,000 people in the territory who reside in cubicle-sized apartments. A short taxi ride away (if you can afford it), Dai Yun-po, a hard-of-hearing 80-year-old, and Kong Siu-gau, 63, live in even more shocking conditions. Retired construction workers fallen on hard times, they sleep in cages with mesh walls and ceilings too low for them to stand up. To do so, they must join a dozen other caged men in a communal area. When I arrived they were all standing – since there were no seats – watching a television program about the latest Forbes list of billionaires. If Mr Dai and Mr Kong were dogs, someone from animal rights would have taken up their case years ago.

These are extreme examples of Hong Kong poverty, to be sure. Yet a territory better known for its breathtaking harbour-front skyline and its money-making possibilities has plenty of misery to go round. In a city of seven million people with an average per capita income of nearly $US30,000, 1.23 million live below the poverty line, earning less than half of a desperately low median wage. The city's Gini coefficient, which measures income inequality, is the worst in Asia (worse even than India and mainland China) before the limited effects of the city's half-hearted income redistribution are counted.

The few hundred US dollars a month that many people live on do not get you very far in a cramped city-state with some of the world's highest rents. Mr Kong pays $US160 a month for caged enclosure. Since there are no cooking facilities, he spends a good deal more on take-away food.

Widespread poverty is a largely untold story of Hong Kong. Were it not for subsidised public housing, where 40 per cent of Hong Kong residents live, conditions would be much worse. As it is, thousands of pensioners pick through garbage to make ends meet. How could things have come to this in one of Asia's most prosperous and glittering cities? There are at least three reasons.

First, Hong Kong has been as badly hit as anywhere by low-cost competition from mainland China. In the 1980s, when many Chinese were drawn to the territory's booming economy, there were an estimated one million manufacturing jobs in Hong Kong, according to Chua Hoi Wai of Hong Kong's Council of Social Service. That number has fallen to 200,000 as jobs have seeped across the border. Factory wages have fallen from US$1,300-US$2,500 a month in the heady 1980s to as little as US$700. The median wage has not budged in a decade, says Mr Chua, while those of the mid- and top-earners have soared.

Second, land prices are kept artificially high. Property tycoons and private property owners wield huge influence on an undemocratic legislature. The government auctions off parcels of land sparingly, since nothing upsets the powerful more than negative equity. A scheme to build new public housing for sale at below-market prices has been frozen. CY Leung, a prominent politician, describes Hong Kong as being divided into those who own property and those who do not.

Third, Hong Kong has a tradition of small government and a credo of "positive non-interventionism”. A free-market philosophy lauded as key to Hong Kong's success as a financial centre, positive non-interventionism has little to offer if you are living in a cage. The upshot is no public pension, no unemployment benefit or disability allowance. As yet, there is no minimum wage. Government expenditure is around 16 per cent of gross domestic product. Now you know what Sweden spends the other 34 per cent on.

Fernando Cheung, a pro-democracy activist and university lecturer, says many of Hong Kong's poor are migrants from mainland China. They fled poverty, turmoil and tyranny and are used to being treated as "objects, not subjects”, he says. That makes them stoical and undemanding.

Mr Tam, the retired light-bulb maker, fits his description. He has no regrets about fleeing mainland China for Hong Kong despite the poverty and poor living conditions in which he now finds himself. But he does note, on occasional trips back to Guangdong province, that the country he left half a century ago grows every day richer. Most people over the border now live better than he does, he admits. "Even their kitchen is bigger than my house,” he says, in a voice miraculously devoid of envy.