The magnificent and affluent harbor city is home to billionaires such as business magnate Li Ka-shing, the 15th richest man in the world according to the latest Forbes rankings. Yet it has also been pegged by the United Nations as having the greatest income gap in all of Asia and the highest poverty rate (share of the population with income of less than 50 percent of the median income). 

In Hong Kong, the average disposable household income of the top 20 percent income earners is 21.15 times higher than the average disposable household income of the bottom 20 percent income earners, a ratio far higher than found in other developed Asian countries. In comparison, the top 20 percent income earners in Taiwan and Japan earn over six times as much as the bottom 20 percent, and the figure stands at more than five times in South Korea and at 13 times in Singapore.

"Some 1.3 million people out of a population of 7 million people live below the poverty line," says Ho Hei-wah, director of the Society for Community Association. In other words, one out of every five persons in Hong Kong is poor. Nearly half of these have a job but instead of belonging to the middle class, they are "working poor" who barely scrape by.

Over the past decade and more, Hong Kong's manufacturing sector relocated to cheaper locations such as neighboring China. At the same time, Chinese nationals were allowed to buy real estate, which led to speculation and skyrocketing property prices.

"Prices are no longer just sky-high, they are outer space prices," says Hong Kong resident Leung Yun-yee (粱潤儀). "One square foot in a suburb 30-40 minutes away from the city center by subway tops 10,000 Hong Kong dollars (roughly NT$430,000 per square meter).

"I have managed to save some money. If I hadn't started to work at age 13 and instead continued to study like others, I would be doomed now," exclaims Ng Yu-hang, owner of the popular Good Hope Noodle restaurant.

"Young people like me generally earn a (monthly) salary of around 15,000 Hong Kong dollars. My friends find it very difficult to pay the bills and get by, not to mention buying a home or doing business and being your own boss."

Middle Class Sinking into Poverty

Homes for the elderly are particularly common in Hong Kong, with four of them in just a 100-meter radius around Tai Kok Tsui Rd. in Kowloon.

"When their kids get married, many old people cannot afford the down payment to help their children buy a home. So they have no other choice but to give their homes to the children and move into an old people's home," explains Ng Tsui-ping (吳翠屏), a reporter who covers real estate.

The 2008 Hong Kong movie The Way We Are, which is about a mother and son who live in Tin Shui Wai New Town, gave this area with public and private housing estates in the New Territories the reputation of being home to Hong Kong's poorest citizens. "It no longer is. Now Sham Shui Po is even poorer," Ng says.

Some 15 years ago, Sham Shui Po and Tin Shui Wai were notorious for their cage homes, apartments that were subdivided into tiny rented spaces the size of a bed. Divided in the middle by a corridor, such one-story apartments would have rows of three-level bunk beds. Since their inhabitants were afraid that the precious few belongings they had could be stolen, each bunk bed was surrounded by an iron cage, hence the name cage homes. No matter whether the cage home dwellers were sleeping or had gone out, the cages were locked. There was an utter lack of privacy since people could see each other through the wire mesh.

On Christmas Eve in 1990, a fire in Sham Shui Po claimed the lives of seven people and injured 49 others, many of whom were cage dwellers who were not able to unlock their cages in time to escape the flames.

After this tragedy, the cage homes were banned. Apartments were then subdivided into smaller units through wall partitions.

We are in Pei Ho Street in Sham Shui Po. The eight-story apartment block does not have an elevator. We break into a sweat climbing the hot and stuffy staircase before even reaching the second floor. Fifty-something Ngan Sang (顏生) lives on the sixth floor of the building. He squats in front of a computer desk not bigger than an A3 size sheet of paper scrutinizing a fashion magazine. Ngan used to be a typical middle class employee but two years ago he was laid off by his employer, the audio equipment department of German engineering and electronics company Bosch. Ngan has not found a job since. Now he is considering a career change, planning to become a nail stylist.

Ngan's cubicle apartment has a surface area of a little over three square meters. Clothing and other daily necessities hang from the walls on all four sides. Nine households live in the 100-square meter apartment, sharing a bathroom and a kitchen. Ngan points out the advantages of his tiny space. "It doesn't have a window, so it is particularly cheap, only 1,200 Hong Kong dollars [a month] (NT$4,800)."

A heated debate is raging among academics and politicians over whether Hong Kong fulfills the criteria of an M-shaped society, a term coined by Japanese economist Kenichi Ohmae. It describes a polarized society in which the majority of a once broad middle class sink to lower class levels. However, Lu Jincheng (呂金城), political science professor at Sun Yat-sen University in Guangzhou, remarks that no matter which yardstick is applied, the entire middle class is already on a downward slope just like Ngan. Their quality of life is deteriorating and people are not able to protect their offspring from further economic decline, leading Lu to conclude that an M-shaped society is emerging in Hong Kong right now.

According to Hong Kong government statistics, 170,000 people live in cubicle apartments. Social activist Ho begs to differ. "The government figures are questionable. We estimate it's more than 200,000 people," he says.

"Hong Kong has too many families that even though they get financial assistance and have work, they work as security guards or as cleaners in hotels and can hardly get by on their wages," Ho says. "They remain at the bottom of society forever. They have no money to spare to improve their lives, not to mention investing in the next generation."

With poverty being passed on from generation to generation, upward mobility has become nearly impossible in Hong Kong. Even the downward mobility of the territory's middle class, which Ho worries about most, has already become a reality.

Translated from the Chinese by Susanne Ganz