China expands presence in Hong Kong with $99m worth of property purchases

Residential buildings stand illuminated at night in Hong Kong, China.
Residential buildings stand illuminated at night in Hong Kong, China. PHOTO: BLOOMBERG

HONG KONG (REUTERS) - The Chinese government has spent at least US$70 million (S$99 million) buying Hong Kong properties over the past 12 months, official records show, as Beijing expands its presence after mass democracy protests raised tensions in the China-ruled city.

Three sources close to Chinese officials said the move reflected Beijing's desire to tighten its grip in Hong Kong after the youth-led "Occupy Central" civil disobedience movement last year that posed one of the biggest political challenges to China's Communist Party leaders in decades.

"They're very concerned," said a Hong Kong delegate to China's parliament, the National People's Congress, who meets with Liaison Office staff. "I think it's natural for them to expand ... They feel they have to try harder, most definitely."

The Liaison Office declined to comment on the purchases, which appeared to be mostly to house staff. It was not possible to confirm whether it has increased the size of its staff in Hong Kong.

Hong Kong's Basic Law includes promises from China of a high degree of autonomy for the former British colony, but there is no legal restriction against the Liaison Office, Beijing's main representative in the city, buying property.

- PROPERTY PORTFOLIO -

Since December, when the Occupy protesters and road blockades were cleared away by police, the Liaison Office has paid more than US$70 million for at least 62 new apartments, according to a Reuters review of more than 500 land registry records.

This included a new block of 48 flats sold for HK$480 million ($87 million) by a company owned by Henderson Land's billionaire chairman Lee Shau-kee.

A spokesperson for Henderson Land said this was a "private investment" by Lee and declined to comment further.

The Liaison Office, set up in 1999, two years after Hong Kong reverted to Chinese rule, already owned a sizeable real estate portfolio in one of the world's most expensive property markets.

Reuters calculations, based on the purchase prices listed on land registry documents, suggest the Liaison Office has spent around HK$3 billion on properties including an ocean-front clubhouse in the upmarket Stanley area, offices in six locations and at least 490 apartments.

Around a quarter of that sum was spent after 2012.

The Liaison Office has also sold one car park, one residential block, two shops, three apartments, one beachfront villa and three office units for a total of HK$1.23 billion since 1999, documents showed. It was not possible to establish if the Liaison Office has other holdings, or whether it has sold other units that were not detected by Reuters.

The Liaison Office declined to comment when contacted by telephone and fax. The Hong Kong and Macau Affairs Office, an agency of China's State Council, did not respond to faxed requests for comment.

- LITTLE KNOWN -

The role of the Liaison Office and its operations in Hong Kong are little known, and it does not publish information on the size of its staff, its budget or property holdings.

There have been other recent signs of Beijing stepping up operations in Hong Kong through a high-level branch of the Communist Party's Central Committee - the United Front Work Department - to try to thwart the recurrence of another populist movement.

"I can't say for sure they've speeded up their expansion since Occupy," said another source with ties to Liaison Office officials. "But this is consistent with their pattern of expansion over the past few years ... It will continue."

A former staffer of the Liaison office told Reuters the latest moves were a "re-allocation of their offices and dormitories" rather than an outright expansion, although he declined to give more details.

A third source said there has been a "conspicuous increase"in Liaison Office staff carrying out youth outreach work and grassroots patriotic initiatives since Occupy, in a bid to cool the democratic fervour of local youth.

-STAFF ACCOMMODATION -

The Liaison Office and state-owned Xinhua News Agency, which before the Liaison Office was established acted as a quasi-representative office for Beijing in Hong Kong, have been purchasing property since 1980 through a private company: Newman Investment Company Ltd, documents show.

Newman's two directors, Li Wenze and Li Zailin, are employed as deputy directors in the Liaison Office's financial administration department, according to Reuters' examination of Hong Kong company records and a source with direct knowledge of personnel within the office.

When reached on his office telephone, Li Wenze hung up when asked to comment. Li Zailin was not reachable for comment.

Reuters correspondents visited seven of the Liaison Office's wholly-owned property blocks, purchased between 1985 and 2003. All were used as staff accommodation, according to people working in the buildings, property agents and neighbours.

"It's full of people from the Liaison Office," said an employee working at 'Louis Heights', a 27-floor residential skyscraper in a gritty part of western Hong Kong Island.

"I can't tell you more," the worker said, glancing around several times before hurrying off.