By Clare Jim and Farah Master

HONG KONG (Reuters) – As Beijing seeks to tighten its grip over Hong Kong, it has a new mandate for the city’s powerful property tycoons: pour resources and influence into backing Beijing’s interests, and help solve a potentially destabilising housing shortage.

Three major developers and an adviser to the Hong Kong government said that the Chinese authorities delivered this message to the officials in closed-door meetings. This was amid wider efforts to make the city more patriotic and conform to a strict national security law.

According to an insider close to the mainland, they were informed that the rules had changed. The source declined to identify the person because the sensitive nature of the matter. According to the source, Beijing no longer tolerates “monopoly behaviour”.

This would represent a significant shift for Hong Kong’s largest property companies. The companies have long exerted outsized power under the city’s hybrid political system, helping choose its leaders, shaping government policies, and reaping the benefits of a land auction system that kept supply tight and property prices among the world’s highest.

Their influence extends further to society through the sprawling business operations of four prominent developers: CK Asset (OTC:) Development Henderson Land (OTC-) Development Sun Hung Kai Properties, New World Development and Sun Hung Kai Properties. Li Kashing (CK Assets), Hong Kong’s richest person, owns property and supermarkets. He also has pharmacies and utilities.

Beijing would have a hard time removing these tycoons from the equation, given their deep ties to the city’s politics and economy. CY Leung is a former Hong Kong leader who serves as vice-chairman for China’s highest advisory body.

Leung stated to Reuters that they are a significant component of the political and economic environment in China. I believe we should be careful about what we do, and not just throw out the baby with the bathwater.

INFLECTION POINT Chinese officials and the state media blame tycoons. The tycoons are accused of failing to prevent protests against government in 2019, which they claim were due to sky-high real estate prices.

Protests were joined by many people of different ages and socioeconomic classes, demanding more democracy and less Beijing’s interference in Hong Kong. Beijing had promised Hong Kong wide-ranging freedoms through 2047.

These new instructions mark an important turning point in power relations between Beijing and the tycoons who used to hold a kingmaking position in Hong Kong’s political leadership.

Raymond Tsoi (chairman of Asia Property Holdings in Hong Kong) said that the emphasis now is on the country’s contribution. This is different from what Hong Kong’s traditional business sector is used to,” he added.

In March, Beijing made sweeping electoral changes. The new Hong Kong election committee is responsible for selecting the next leader and some of its legislators. However, many prominent tycoons such as Li, 93 will not attend the meeting for the first times since 1997 when Hong Kong had been under Chinese rule.

According to Hong Kong’s Constitutional and Mainland Affairs Bureau, the new electoral committee would better represent Hong Kong and go beyond specific interests.

According to a source familiar with Chinese officials, Reuters was told by Reuters that a group from the Hong Kong and Macau Affairs Office as well as the Liaison Office(HKMAO), had tried to limit the power of those groups who were perceived to be doing little to benefit Beijing’s interests.

HKMAO was not able to respond to our requests for comment.

Sun Hung Kai expressed confidence in Hong Kong’s future and said that they would invest further there. New World Development and Henderson Land did not comment. CK Holdings didn’t respond to a request. Li has not responded to our request for comments.

‘GIVE BACK MORE’

Developers have already taken measures to show the message was received.

New World and Henderson Land donated land to social housing. The first public-private partnership applications for the program since May 2020 were submitted by Sun Hung Kai and Nan Fung Group as well as Henderson Land, Wheelock, Henderson Land, and Henderson Land.

This program allows developers to use a greater percentage of open ground, while providing public housing in the same area. Reuters was told by several that last year’s programme wasn’t attractive due to the restrictions placed on developers and the risk of high costs.

Hopewell Holdings’ Gordon Wu stated that Beijing was not instructing us on what to do. However, it is telling us we need to resolve this issue. Wu added that while the Chinese government won’t pressure you, they will be patient but may put you under pressure.

Due to sensitive nature of this issue, another source from the developer community said Chinese officials had set expectations and given no deadline.

The source was a Hong Kong official who is a high-ranking developer. He said that they can keep their businesses going as long as the society benefits. He stated that efforts must be made to reduce the housing shortage in this sector.

Along with Chinese corporations, many developers made statements and published newspaper ads to support electoral and national security laws.

While critics claim they have crushed democracy, authorities say they are necessary in order to stabilize the country after 2019 protests.

Adrian Cheng (41), who was appointed chief executive officer of New World by his grandfather said to Reuters that the company needed to be more relevant in a changing environment, where companies must balance different interests.

It is not an easy task. Cheng explained that she sees a lot of gray hair in her.