IT IS BECOMING increasingly clear what will happen to Hong Kong’s economic and legal foundations at midnight on June 30th, 2047, when the transition period to being part of China comes to an end.
Nothing.
Literally nothing.
The calendar will flip over to July 1, but the private property-based capitalistic legal/ commercial model on which Hong Kong is founded won’t change.
And though this is being billed as “the second handover”, it will be less of a change than the transfer of sovereignty in 1997. Even the flag won’t have to be switched.
‘Land leases are already being renewed long past 2047’
What’s the evidence for this? The bedrock of Hong Kong’s economy is private property. The government has been quietly renewing land leases to stretch beyond the period long seen as a deadline.
In 2020, the Lands Department granted a 50-year lease on a piece of land in Tai Po, taking the development through to AD 2070. Eight companies bid for the lease, showing that Hongkongers are confident enough to bet literally hundreds of millions on the community’s post-2047 continuation.
That property deal is one of many which have stretched past that date.
MINIMUM PERIOD
The 30 June 2047 date is clearly now being seen not as the end of the current incarnation of Hong Kong, but simply as the end of the guaranteed minimum period during which it will retain its present private-property based model.
After that, it may, technically, move towards the mainland Chinese system – which is also a private-property based system. The fundamentals are identical.
Many smart ordinary Hong Kong people know this too, queuing to buy property despite the short time frame (just 26 years) before 2047.
Early estimates suggest that from 2025 to June 29, 2047, land leases of a total of about 2,400 land lots will be expiring, and may need extensions.
EXTENDING OWNERSHIP
What about the technicalities? How exactly will ownership be extended into the fully Chinese era?
Hong Kong civil servants have been working on the issue. They realized some years ago that a large number of Hong Kong land leases were set to expire on or before June 30, 2047. The Lands Department has been collating the information on the number of lots involved, their user categorisation, and the number of owners with a financial interest in each lot. (Typically, a single land lot will have a building on top of it with multiple owners.) The data compilation exercise will be completed in phases from this year, 2021, onwards.
Early estimates suggest that from 2025 to June 29, 2047, land leases of a total of about 2,400 land lots will be expiring, and may need extensions.
IN LINE WITH THE LAW
How to handle this in line with the law? Civil servants realized that they had to look back to a policy statement promulgated by the Hong Kong government in July 1997. This said that leases not containing a right of renewal may be extended for a term of 50 years by the government.
Note that the 1997 policy did NOT say “may be extended until 30 June, 2047”, but “may be extended for a term of 50 years”. In other words, the period would move forwards with the calendar.
It also specified the specific terms of renewal. The extension would not require payment of an additional premium, but an annual rent would be charged equivalent to three per cent of the rateable value of the property.
After the British administrators left, the Hong Kong civil servants who took their place have done exactly this: they have continued to issue 50-year land leases. By this method, the leases have naturally extended beyond 2047. So the 2070 property deal mentioned above makes perfect sense.
Still, many property-related contracts have been issued with 2047 treated as a deadline — so they also needed to be taken into consideration. At the moment, the Hong Kong government has a team of people working on creating a stream-lined procedure to extend leases. Details will be announced once they have been checked by legal specialists.
‘Hong Kong people are putting their money on this promise’
How trustworthy is this conclusion? The best evidence that it is solid comes from the way relevant professional groups have moved together to support it.
For some years, government experts have been meeting with sector representatives to discuss this. The civil service communicated with the banking sector via the Hong Kong Monetary Authority in October 2016, with the Hong Kong Institute of Surveyors in May 2017, and so on.
In these and other meetings, the Hong Kong government reaffirmed its authority to grant land leases with terms extending beyond June 30, 2047. They also explained the specifics in the execution of land lease extension.
Hong Kong watchers note that property ownership sailed smoothly through the 1997 handover, technically a bigger change.
Observers also note that there’s a strong piece of evidence which shows that the people who will make this happen have accepted the past-2047-policy. Since at least 2019, Hong Kong’s commercial banks have been arranging mortgage loans with terms longer than those of the leases of the relevant premises.
When Hong Kong lenders and borrowers put their hard-earned cash on a promise, the indications are that they take it seriously.
What’s interesting is that for financially aware Hong Kong people, 2047 is not being seen as the end of a good thing but the precise opposite: the welcome end of a period of relative uncertainty.
But this fact goes unnoticed and unreported, due to the negativity on Hong Kong and mainland China generated by the international media.