PM Lee says Hong Kong's leaders must act on grievances

[HONG KONG] Prime Minister Lee Hsien Loong says the "one country, two systems" principle that governs Hong Kong may not last unless the government makes progress on protester concerns over the lack of affordable housing in the Asian financial hub.

In an interview with Bloomberg's editor-in-chief John Micklethwait on the sidelines of the World Economic Forum in Davos, Mr Lee said he sympathises with Hong Kong protesters, but doesn't see how their methods - which have included violent rallies, petrol bombs and vandalism - will resolve their problems. Hong Kong youth are frustrated by the world's most expensive housing market and the fact that Hong Kong has dwindled in importance to China as mainland cities have become richer, he said.

"I can understand the issues which lead people in Hong Kong to feel anxiety and frustration and disappointment at what the future holds for them," Mr Lee said, noting the median price of a dwelling in Hong Kong now costs 21 times the annual salary. "But I can't see how this path is going to lead to improvements in all of these difficult problems."

Mr Lee, who last year criticised Hong Kong's protesters at a conference for making unrealistic demands and trying to "humiliate and bring down the government", said Hong Kong authorities nevertheless need to act on economic grievances that underpin the protests.

TIGHTENING GRIP

Although many demonstrators say they are fighting for greater democracy rather than for cheaper housing, some - including Hong Kong Chief Executive Carrie Lam - have pointed to a lack of affordable housing and inequality as key factors in the city's unrest.

Singapore's leader said the lack of a house or even a space to call one's own was a "basic hygiene issue, it's not a higher-order one".

Mr Lee said China's 50-year promise to guarantee Hong Kong separate freedoms under the "one country, two systems" principle after its return to Chinese rule in 1997 was at risk if the local government did not act.

"Ideally, at some point, as the temperature comes down and people cool down, it is possible for the Hong Kong government to make progress on some of the basic issues" that bug the protesters, he said.

"It's very hard - I mean they've tried to, but they haven't succeeded," Mr Lee added. "But if they don't make some progress, it's hard to see how 'one country, two systems' can work for another 27 years."

BLOOMBERG