King Kong: Why Hong Kong is booming again

Hong Kong is simply booming,' says Wykehamist fine art dealer Ben Brown, who is married to jewellery designer Louisa Guinness. He is about to open a large new modern art gallery in an old colonial building (one of the very few with ceilings high enough to show important contemporary art properly) in the Central district between Hong Kong's two separate Mandarin Oriental hotels. 'You can tell that things are going well again; people aren't working through their holidays any more.'

Brown decided to open a gallery in Hong Kong - ahead of major global dealers such as Larry Gagosian - not only to try to tempt wealthy Hong Kong-based expat financiers with spare cash to buy a pair of Candida Hofer prints (he sold more than 20 to people in Hong Kong this year), but more importantly because he wants to be at the front of the queue to sell important Western art to the new breed of super-rich Chinese buyer (the number of Chinese billionaires jumped from 101 to 130 last year), whose appetite for the finest and most expensive art, jewels and vintage wine - as well as discreet banking and investment services - appears insatiable.

'What has happened is that Hong Kong is no longer a great colonial city, it is now a great Chinese city and with that title come pluses and minuses,' says Brown. 'On the one hand it is like the freewheeling Wild West with serious law and order, so you know that if you buy property your title is good. But on the bad side, rents, even for fourth-rate shoeboxes, are super-expensive, pollution is a major problem and you can't enjoy the same sort of culture and lifestyle as you can in London. And you have to be resilient. It's a very liquid market. The speed with which things can collapse and go up and go down is remarkable compared to what we are used to.'

Whereas in England, thanks to the property market and stock market, everybody got richer for 17 years without stopping, in Hong Kong they have been through considerably tougher times. 'When you lose a chunk of your net worth for the first time it always hurts more,' he says. 'In Hong Kong people are used to taking a few blows, so they enjoy the good times when they can.'

Hong Kong residents are certainly used to dealing with the unexpected. First Hong Kong had the 1997 Asian financial crisis, then SARS in 2002/3, when The Peninsula hotel had zero occupancy, which was humbling for a city that prides itself on having some of the best hotels in the world. 'The economy just stopped for three months, so now they are used to adversity, which means they bounce back quicker.'

Brown hopes to be at the vanguard of the new wave of Chinese wealth that is pouring into Hong Kong. His decision to take the highly ambitious (and expensive and risky) step of opening a gallery was not because the London market was especially slow, with bankers saving for school fees rather than splashing out on art, but rather because the opportunity in Hong Kong is simply too good to miss.

Hong Kong didn't suffer as much in the financial meltdown of 2008/9 as London or New York. 'We are just talking about a slowdown,' says Saint-Exupery. 'Things were never as dramatic as here in London. The Chinese see Hong Kong as their Monaco because it is increasingly becoming the playground of conspicuous consumption for them. If you look at who's buying real estate, 40 per cent of luxury flats today are bought by mainland Chinese.'

The only drawback, he admits, is that culturally Hong Kong is comparatively undistinguished. 'Hong Kong is one of the primary beneficiaries of the Asian resurgence,' he adds. 'But it will only achieve "greatness" if it successfully establishes itself as a prominent cultural centre.

It has a long way to go before it can compete with London on that level. You don't move to Hong Kong for the restaurants or the theatre.' Maybe this is one reason why Hong Kong entrepreneurs such as David Tang, the retailer and restaurateur behind Shanghai Tang and China Tang, and David Yeo, the Hong Kong restaurant mogul who has just opened the Aqua restaurant overlooking Liberty in W1, have long wanted to validate themselves by succeeding in London as well.

What is going on with the current Hong Kong boom is similar to what is happening in London, where the economic faultlines between the affluent middle-class, who are struggling to survive the recession, and the super-rich (such as Goldman Sachs bankers who will be taking home an average £500,000 bonus this year) has simply shifted the divide between rich and poor. The difference is that whereas flashing money around is currently verboten in London's financial classes, in Hong Kong it is still the norm.

At official Goldman Sachs events or dinners in London (I was told by the manager of a private club where Goldman Sachs was hosting a client event), it is currently prohibited for any Goldman Sachs banker to so much as order a glass of champagne, let alone have a bucket standing on the table. ('If even a guest orders a glass of champagne, don't bring it,' the manager was told.) Conspicuous consumption is out. In Hong Kong, however, not showing off that you had just spent £10,000 on a bottle of trophy wine at dinner in a restaurant would be a social crime.

Which is why Hong Kong is now increasingly regarded not only as the gateway to China and the financial capital of the Far East but also as the vintage wine capital of the world, from an auction house point of view. Part of the reason for this is because of the Hong Kong government's abolition of wine duty in 2008.

The Chinese can't seem to drink enough fine wine, by which I mean vintage first-growth labels which sell for $500 a bottle and are marketed not as something just to knock back but as trophy brands (such as Château Latour and Château Lafite).

At a recent Sotheby's wine auction in Hong Kong, a single six-litre bottle of Ch‚teau Pétrus sold for £58,000. Increasingly the world's finest wine cellars are no longer in the private estates of France, England and Italy but in customised vaults in Shanghai and Beijing. In the Christie's spring 2009 global sales, Asian and Chinese buyers accounted for 61 per cent of the total sale value, compared to seven per cent in 2005.

The sheer buying power of these new super-rich Chinese dwarfs any other country, so Hong Kong is the obvious place to set up shop, whether you want to sell them fine art, fine wine or financial services. 'The Chinese buyer has arrived internationally,' says Andy Foster, president of Christie's Asia, pointing out that at Christie's most recent New York jewellery sale, five of the top ten lots were bought by Asian private buyers.

'In all the classic buying areas, the Chinese are now generally outbidding Europeans and Americans. You see them win, almost every time. In Hong Kong, mainline Chinese clients are buying very heavily. It's a combination of increased appreciation of art, status seeking and trophy buying.'

One lot that is being closely watched is the 'Vivid Pink' diamond, the largest fancy pink diamond ever to be offered for sale at auction, which will lead Christie's Hong Kong Sale of Extraordinary Jewels on 1 December. Set in a ring by Graff, this 5ct pink diamond carries an estimate of US $5 million to $7 million, making it one of the most valuable pink diamonds ever. 'Nobody is in any doubt that it will probably go to a Chinese buyer,' says a source. 'This is almost a stocking-filler present for many of the Chinese billionaires.'

With the Hang Seng Index going from 12,000 to 21,000 points in the last 12 months, Brown, among others, admits that people are feeling a 'bit flush' at the top end, which is where he is focusing his energy. 'They weren't six months ago when many thought the world as they knew it might have ended.'

Brown has an advantage on his dealer rivals, having been born and brought up in Hong Kong, where his parents have lived since 1963. He concedes that for those who don't have his advantages, moving to Hong Kong is not nearly as easy as it was when Brits ran the place. 'I don't think it's easy to move to,' he says.

'If you run a small investment firm or hedge fund in London, and were to move to Hong Kong, you might be 35 per cent richer, but I think you would find it hard to improve your lifestyle that much - other than the fact that you would have a lot of help to iron your shirts. You would be in a much smaller space for the same money; per square foot, you are probably talking 100 per cent more expensive than London.'

One reason many Londoners might be considering a move is that while the UK government has become obsessed with legislating against excessivebankers'bonuses,andtaxingentrepreneurs and financiers until they bleed at 50 per cent, Hong Kong enjoys a 16 per cent salaries tax rate. 'That makes a huge difference to somebody earning, say, £1 million a year,' admits one such banker who didn't wish to be named.

The truth is that although Hong Kong is booming, it is not a place to go unless you have the connections and the drive to succeed. It is far less easy than it was. While some Brits are arriving, many are disappearing, too. Figures from the Immigration Department show that the number of Western expatriates in the city of 6.9 million has dropped from 106,740 in 2001 to 71,150 in 2006. The fall in British expatriates is particularly steep, dropping from 13,490 in 2005 to 11,420 the following year.

It's not hard to see why this might be: if you don't speak Cantonese and aren't on a huge expat package (with rent paid, a driver, a country club allowance and so on), life in Hong Kong is not nearly as much fun as it used to be. The vast majority of expat packages are now pretty much the same as those offered to locals: you don't get school fees paid, and you don't get flights back home on Cathay Pacific Business Class paid for. Indeed, just getting into the international schools is a major problem.

So, for anybody who has a young family, the idea of living in an expensive shoebox out in the sticks - such as Happy Valley, where the racing is - and not getting all the perks that the old expat crowd enjoyed, as well as having to deal with pollution, expensive restaurants, and the driving ambition of the locals, is too much. Plus, all the successful people in Hong Kong leave for three months during the summer to go to their 'other' homes - whether it be Cornwall, the South of France or Australia - so to be one of the few stuck in Hong Kong during the long, noisy summer is a pretty miserable plight.

What is certain is that Hong Kong has moved on a long way from the 1980s when the city experienced a Wall Street-style boom. That was an era of fast money, expensive one-bedroom rents in the Mid-Levels, dinner parties in The Peak (the Mayfair of Hong Kong), with more uniformed servants running around than in the Palace of Versailles, and, above all, social reinvention.

The idea was for a family black sheep to make his first fortune, shock his family by returning home for Christmas with a Chinese girlfriend (and a suitcase full of handmade silk shirts from a local tailor at $25 a shirt) and party till dawn on the company's Amex card. Did I mention the cheap Cuban cigars?

I do so because I could so easily have been one of the above expat FILTH types as I nearly decided not to go to university and stay in Hong Kong after arriving there, aged 18, on my gap year in 1985. I was introduced to a City broker at a dinner party, who took me into his boardroom overlooking the harbour and offered me a job in his firm, saying I could make more money in three years than any of my contemporaries would make in ten.

The good times in Hong Kong were rolling then, too, and I could return to England a millionaire before I was 25. It sounded tempting. Until he looked down at his rosewood table and saw that, while we'd been talking, my cigar had rolled off the ashtray and burned a large hole in his table. I didn't get the job. I've never been back.