Big Lychee, Various Sectors

That’s the claim made by Lantau International School, not least because of its unique location: scenic south Lantau. The lower school is in Tong Fuk, and the upper in Pui O – both villages with beaches, no less.  How’s this for a school photo?

Click on the picture to hear kids playing at 62dB, courtesy of Amadou & Mariam!

LIS now has another distinction.  It seems it has become the first school in the whole of Hong Kong to be served with a noise abatement notice by the Environmental Protection Department on account of the sound of its kids.

This happened soon after the growing school finally opened new premises in a renovated, derelict hotel at Pui O last month.  That project – you can see this coming a mile off – faced peevish opposition on the part of certain sons of the local soil.* EPD inspectors turned up and positioned their microphone right outside. Apparently, they waited for some time before recording any noise, but sure enough, lunchtime came around, the children came out and the valiant EPD officials registered 62 decibels.

Which surely makes LIS students the quietest kids in the Big Lychee. However, the EPD take their job seriously – why else do you think Hong Kong is such a calm, almost silent place? – and slapped the school with the abatement notice for exceeding the 60dB limit in ‘village type development’ (the same level that applies to country parks). A public primary school 200 metres away was not measured; no doubt the children there are studying quietly for their exams rather than running around uncontrolled to no purpose.

Like much noticeable EDP activity, noise abatement notices are rare; perhaps it helps if a New Territories village chief makes the complaint. The usual fine for failure to comply tends to be roughly in the HK$15,000-20,000 range. That’s a lot when you’re nine.

* I have only heard one side of the story. It could be that this latest outbreak of strife in the ethnic-cleansing, inter-tribal mayhem that is local politics in southern Lantau is the result of an unpardonable crime by evil, exploitative, grasping, mainly Western settlers against innocent, downtrodden, disadvantaged indigenous residents, with whom a noble and righteous Environmental Protection Department has gallantly sided.  Could be.

(It can only be an improvement.)

Is there any more interesting – as in cheap and easy – way to entertain a visitor to Hong Kong than show them around the neighbourhood?  When I moved into this slum area, it didn’t have a name.  It was a working-class buffer between the fast-sprouting fancy high-rises up the hill and the office blocks of the central business district lower down.  Old folks wandered around in their pajamas, traffic was so light that kids played badminton outside, and people would bring live or at least still-dripping chickens home from the market.  If there were any other non-Chinese in the street, I never saw them (this wasn’t so-called Marco Polo Syndrome on my part, just plain tight-fistedness).  Most of the local businesses were dingy, noisy print shops, dusty ceramics outlets – probably storage for galleries down on Hollywood Road – and mom-and-pop groceries with barrels of rice and shelves of faded soy sauce bottles.

Since then, the place has been gentrified out of all recognition.  After the Mid-Levels Escalator was built, Western-style restaurants started to open up, originally in search of low rents but increasingly in search of high-rent trendiness labeled ‘Soho’.  They took all the old folks and put ‘em in an old folks museum, and charged all the people a dollar and a half just to see ‘em.  Actually, many of the original residents were forced out after the government ordered them to remove all the illegal extensions that had made their apartments habitable for decades.  They sold to investors who converted the 400-square-foot places into studios and asked young, single financial types HK$25,000 a month for them. A Krispy Kreme Donuts succumbed to negative feng shui, but 7-Elevens are sprouting on every corner.

Walk a hundred yards west, however, and you step back in time.  This is the bit I show visitors, as I did on Saturday:

Clockwise from top: Museum of Medical Sciences, an art gallery window, a gentrified tung lau in Square Street, carnival time at the old police barracks.

This area was ground zero for Hong Kong’s bubonic plague outbreak in the 1890s, hence the medical facility (where they isolated the bacillus), the nearby Tung Wah hospital and the (still-thriving) coffin shops.  The old police married quarters, where chief executive Donald Tsang was raised, were due to be demolished so property developers could build high-rises full of exclusive-lifestyle rabbit hutches for the young, hip urban elite.  However, development secretary Carrie Lam last year decided to rescue them, along with several other older buildings in Central.  While not everyone likes her plans for these structures, the decision not to let the developers have them is little short of stunning.

Strolling up a bit from the old barracks, we came to Wing Lee Street.  I explained to the visitor that the old row of 1950s tenements recently hit the big time. It has appeared in an award-winning period film called Echoes of the Rainbow, but it is also being consigned to the wrecker by the Urban Renewal Authority – an organization that is about as popular as a government-run eviction agency answering to the property developers would be if such a thing existed.  The dilapidated spot has become a cause.  If we are lucky, I told my guest, we might see some examples of an interesting new phenomenon in the Big Lychee: young people who are into heritage.

I though there would be two or three.  In fact, the crumbling alleyway was full of teenagers and twenty-somethings who had come to photograph and experience the location.  Some of them were also handing out protest leaflets, signing a petition and tying yellow ribbons round railings to protest against the imminent demise of a bit of history they hadn’t known was there.

Could this be the spark that sets off another bout of youthful unrest, like the protests over the old Star Ferry terminal and Queen’s Pier in 2006-07 and the Express Rail Link in January?  This should set alarm bells off for any government official with an ounce of sense. Except, of course, they don’t have any. Do they?

Step forward again, Carrie Lam.  It is unlikely that, as a lifelong Hong Kong bureaucrat, Lam actually sees anything wrong with knocking down old neighbourhoods and letting developers turn them into high-density, airless, polluted, traffic-clogged monstrosities. But she is increasingly tipped as probable chief secretary to chief executive Henry Tang, should such a thing transpire (there are even murmurings about her getting the top job herself, but that’s stretching it). A proven ability to nip adolescent uprisings in the bud could come in handy.  Anyway, quicker than you can say “smart, if opportunistic” she’s in there, saying it might be possible to save all the tenements.

Welcome to Hong Kong, where the government gets pushed around by teenagers with cameras.

“Please avoid prolonged exposure to wintry winds,” says the Cold Weather Warning issued by the Hong Kong Observatory.  This is a bitter blow for those of us who were planning to go down to the waterfront this morning, throw a towel on a concrete bench near the ferry terminals, strip off our clothes and stretch out for a long, relaxing day basking in the northeast monsoon rolling through town on its long journey down from the Siberian uplands.  Interestingly, we also have a Red Fire Warning (not to be confused with a Red Fire Ants Warning – pay attention!) to remind us that, though chilly, the dry hills are just a spark away from furnace-like conflagration.

But wait!  There’s more!  A Frost Warning, applicable only to New Territories mountain vegetable growers who still haven’t heard that World War II has ended, was up overnight, but has now come down.  And we have a Red Flag Warning alerting us to the possibility that Big Wave Bay wasn’t called that just for fun.  Meanwhile, the roadside Air Pollution Index in Central today is Very High, which means ‘mostly nitrogen oxide, some oxygen’.

The big excitement for government officials whose duty it is to raise alarms is the first-ever Red Outbound Travel Alert, advising Hong Kong people to avoid prolonged exposure to Thailand on account – as it happens – of matching Red Shirts, the supporters of deposed Prime Minister Thaksin, who are planning a major march in Bangkok in the next few days.

The OTA system was introduced in October 2009 in response to widespread public whining after Hong Kong tourists suffered inconvenience when protests, also in Bangkok, shut down airports (Yellow Shirts on that occasion).  It covers the 50 countries Hong Kong people are most likely to visit, which is why the likes of Afghanistan and Somalia do not appear.

Under the easy-to-remember system, an Amber Warning (currently applying to five countries with predominant or large Muslim populations but obviously that’s just a coincidence) means ‘Everything is cool, you can probably relax, but don’t blame the Security Bureau if you get shot or kidnapped because we issued an Amber Warning’.

The Red Warning is a much bigger deal, causing in this instance the cancellation of package tours to the Land of Smiles, and therefore inflicting commercial costs on travel companies and airlines (though only outbound operators – it’s not like it affects our precious mainland tourist trade).  It essentially means ‘We wouldn’t go there ourselves, but then we’re Hong Kong bureaucrats who fall sick after touching handrails and won’t let our kids play on grass, so everything’s probably fine, but you can’t say we didn’t put up a Red Warning’.

The Black Warning will probably rarely or never happen, because it could cost other businesses money.  Some corporate HR departments and travel insurance policies undertake to evacuate people if it is raised.  It means ‘We’re going to freeeeeak out even if you don’t, and why didn’t you listen to us when we issued the Red Warning. And please pass the antibacterial hand gel’.

Bloomberg report that the GDP of Shanghai has overtaken that of the Big Lychee for the first time “in at least three decades.”  What they mean is that they can’t find any pre-1980 data for the mainland metropolis.  The last time it surpassed the then-British colony was probably back in the 1930s, when Shanghai had the factories, department stores, night life, film studios and money, and Hong Kong was a sleepy trading backwater.

As Bloomberg point out, mainland GDP figures are still not especially reliable; local government officials have an interest in exaggerating results and exceeding targets – though some, notably in the south, are rumoured to under-report in order to pay less tax to the centre.

The Shanghai of this story, however accurate, comprises the city with the ugly skyscrapers we all know and love, plus a large rural hinterland.  It adds up to 2,500 square miles in size, versus the Big Lychee’s humble 425, and its population is 19 million to Hong Kong’s 7 million.  So people there are still significantly less productive, creating barely a third the amount of wealth per person than Hongkongers.  It was only two years ago that Shanghai proudly announced to the world that its farmers’ annual disposable income had exceeded the grand sum of US$1,400.

The ‘Shanghai faction’ who graduated from running the municipality to the nation in the 1990s under Jiang Zemin lavished their favourite city with resources.  This led to heavy subsidies for foreign investment, generous land and other aid for favoured local companies and a more state-planned economy than in many other parts of China.  As a result, it is less accomplished than it likes to think in comparison with other regions, with low levels of rural entrepreneurship, self-employment and patent applications, and low average size of private-sector companies.

But it works hard on its image. During a visit in the mid-90s, I saw a checklist of grand vanity projects, described as ‘pearls’ if I remember rightly.  They included the grotesque TV tower, which had just opened (you had to wade through mud to get to it), the impressive museum with galleries named for Hong Kong tycoons, and the yet-to-be-built opera house.  Some schemes, like many of the skyscrapers and the maglev train from the new airport to a suburb, were plain tacky.  Like Singapore, Shanghai seems to believe its own PR.

(Beijing’s decision a year ago that Shanghai will be the PRC’s official, number-one, oh-so-important international financial and (for some reason) shipping hub by 2020 looks like a pat on the head for Jiang’s old clique in retreat. One particularly desperate policy would be to subsidize private equity managers’ salaries if they set up shop in Pudong – why didn’t Lee Kwan Yew think of it first?)

The Shanghai-will-take-over-from-Hong Kong idea took off after the Big Lychee’s handover to China in 1997.  So traumatic was Hong Kong’s shock after the city’s bubble burst – five years’ deflation interspersed with suicides and SARS – that some impressionable local folk saw it as a deliberate policy of Beijing’s.  Jiang Zemin, the theory went, had ordered chief executive Tung Chee-hwa to wreck Hong Kong in order to create the space for their Yangtze Delta homeland to rise in its place. (Maybe a few even pondered Shanghai’s fate after the communists took power in 1949 and downgraded its economic role to cleanse it of capitalist, foreign decadence.)

If there was a plot to undermine the Big Lychee it was opportunistic and aimed at local morale and self-confidence. Official reassurances that Shanghai was a partner and not a rival and talk of the need for integration grew more insistent, as if to sow the seeds of doubt – especially combined with Shanghai’s leering hubris as it became the world’s top container port and won silly prizes like the Expo.  Then came the Great 2006 Marginalization Scare kicked off by chief secretary Rafael Hui and picked up with glee by pro-Beijing ranters eager to frighten disloyal fellow Hongkongers into toeing the line.  Horseshit about how grateful pitiful Hong Kong should be for the mainland’s supposedly generous support is now swallowed without question (as yesterday by the South China Morning Post’s Alice Wu, on the right).

The Big Lychee’s leaders remain patriotically silent about Shanghai’s numerous shortcomings and inadequacies as even a junior international financial hub.  Even when reminding the world that Hong Kong has no capital controls, an independent judiciary and a free press, they will never add “unlike Shanghai, which has corruption, protectionism, covered-up scandals, IP rip-offs, investor rip-offs, not to mention thugs that smash up migrant labourers’ kids’ schools, hospitals that dump the poor in the street to die and a government obsessed with the banning of pajamas in public.”

One last thing: when did anyone last see a Hong Kong hooker in Shanghai?

The news this morning comprises a long parade of people saying, alternately, “Hong Kong must abide by the Basic Law, which does not provide for referendums,” and “Under our system anything not expressly prohibited is permitted.”  A fascinating debate in which both sides are pretending that we’re about to have a referendum, even though both know that we’re not.

The confusion arises from Beijing’s hasty and slightly hysterical reaction when the five pro-democracy legislators resigned and thus triggered the five by-elections that they fancifully declared to be a poll on the single proposition of universal suffrage.  Since the Big Lychee’s pro-Beijing camp cannot adopt a public position at odds with that of the central authorities, they have to join in and loudly denounce as unconstitutional referendums that aren’t going to happen, even while our local leaders go about organizing the perfectly legal by-elections that will.

The local leadership of Chief Executive Donald Tsang and his senior officials are the most prominent victims of this illogicality.  Not only must they organize the five by-elections for May while reciting the mantra that the Basic Law doesn’t allow for referendums, they must try to conform with Beijing’s order that loyalists boycott the exercise, which in their case means not voting.  Yet abstaining on polling day presents its own problems.

After encouraging people for years to take part in, and therefore legitimize, our rigged election system, it would look odd for Sir Bow-Tie and his colleagues to implicitly urge us all to stay away.  It would raise concerns that civil servants of all levels, who are sworn to implement government policy, could be pressurized into not voting or penalized if they exercise their right to do so.  Most of all, how many of us will be tempted to go along to the polling station if Donald indicates that he would prefer us not to?

The chances are that they will wriggle out of it by saying it is a matter of individual judgement and of course you can’t vote if you don’t support any of the candidates.  It would be convenient if only the name of the resigned lawmaker appears on each ballot, thus winning by default with no contest, but this won’t happen.  First, the League of Social Democrats have vowed, if necessary, to run against themselves by putting a second candidate forward to ensure that the actual voting – this is on Planet Referendum, remember – takes place.  Beijing does not have a monopoly of irrationality. Second, as in every Legislative Council election, you can be sure that in every constituency some spotty, inadequate  truck driver, socialite, or fanatic will get him or herself nominated as candidates.  Several, probably.

Most likely outcome: everything will backfire against everyone, with the net result that nothing noticeable actually happens.

The people of Hong Kong wake to the news that HSBC’s CEO Michael Geoghegan is to be paid an extra GBP300,000 – HK$3.5 million – a year as a cost-of-living adjustment following his move here from London.

The Big Lychee is not necessarily pricier than the UK capital.  For example, the lowest fare on the London Underground is HK$46 (cash) or HK$21 (stored value card), while the Hong Kong MTR charges HK$4 and HK$3.6 respectively.  The longest journey you can do on the MTR, the 80 minutes from Chai Wan to Lo Wu, still costs only HK$44.  The UK minimum hourly wage for someone aged over 21 is GBP5.80, or HK$68, around three times what our local employers’ groups are proposing for our own version.

Hong Kong rents are at least as extreme as London’s, but Mr Geohgegan’s housing is provided for separately; let us assume that health coverage is, too.  So we are naturally curious: what will he spend the money on?

We are told that family comes into the equation, the implication being that Mr Goehgegan’s wife and two sons have balked at the prospect of congee for breakfast every day and stayed put in Britain.  This means heartbreak, homesickness and travel costs.  Let’s say each family member makes six return trips a year in first class at HK$50,000.  That’s knocked HK$1.2 million off that HK$3.5 million allowance.

(That exceptionally pitiful variant of real estate agent known as headhunters would hold their hands up here and yell “stop!”  Travel should be part of the basic package, they would insist, along with housing, car, driver, air-conditioning bills and quarantine costs for Toby the schnauzer.  To which we can only say, “We’ve got over three million to get through; go away.”)

So we have HK$2.3 million left.  One very efficient way for a senior new arrival in town to burn a bit of money is Contemporary Chinese Art.  Indeed, the sum of GBP300,000 was also the estimated price for Yue Minjun’s idiotic cartoon of grinning men and birds when it was auctioned last year, and it fetched over GBP450,000.   So let’s assume Mr Goehgagan takes a stroll along Hollywood Road and snaps up a few of the cynical derivative daubs by lesser-known mainland brush-wielders on the make.  Let’s say, owing perhaps to colour-blindness, a couple of these really ugly hair-salon things by one Jiang Congyi and some of the weighty metal figurines expat bankers seem to like – or anything, really. Bye-bye, another million.

Now we’re down to just HK$1.3 million, and there is light at the end of the tunnel.  And against the beckoning glow, what do we see but the silhouette of Allan Zeman, landlord of Lan Kwai Fong and purveyor of food and beverage to legions of well-paid, wife-less Western men unable to rustle up much more than Heinz baked beans on toast.  Eager to know more about the cultural background of emerging-markets Asia, Mr Goehaggan will start to explore the many varied Oriental cuisines on offer in user-friendly D’Aguilar Street.

From the fake-bamboo Thai place in California Tower, to the fake-bamboo Korean place in The Plaza LKF, to the fake-bamboo Japanese place in the Ho Lee Building, to the fake-bamboo Vietnamese place back in California Tower, he will dine in style, tipping the Filipino waitresses well and wondering why all these different countries’ foods essentially taste so similar.  Dragging a few buddies along for company and quaffing a generous amount of high-quality bottled water and fine imported wines and beers, that irritating HK$0.3 million will be gone within 12 months.

Just HK$1 million to go.  And go it does.  A few trips to Dymocks for books; to Olivers/Great/City Super for Marmite, HP sauce, toad in the hole and other gastronomic essentials for Brits; regular replenishments of underwear at the Marks and Spencer just along Queens Road; some badly needed weekends away at Aman resorts in Phuket, Bali and Bhutan; an inadvisable trip to Macau, maybe; a donation, in response to begging letters from expat housewives, to HK Newt and Pangolin Rescue; a few silk numbers from the famous IFC Mall scarf shop to send home in a fit of guilt after a slightly raunchy night with a few of the fellows down in Wanchai.

And boom – that’s it.  Forget the Porsche.  It’s late August, and the poor guy’s already down to his last 200 grand.

Update: the family, apparently, will be with him, and – as our friendly and wise local headhunters predicted – all travel and education costs are already built into the basic package.  So what will he spend it all on?  The answer: public relations advice on how not to infuriate shareholders.

The Standard quotes a “wide range of reactions” to the Hong Kong Monetary Authority’s introduction of minimum mortgage rates, essentially forbidding banks to make less than 0.7% interest for themselves when lending to homebuyers.  The HKMA’s aim is to prevent institutions from undermining the Big Lychee’s stable and secure financial system the way their counterparts (or branches) in the US and UK did by throwing cheap loans at low-earners to buy overpriced houses with.  The reactions all come from people who profit from what our bureaucrats like to call a “healthy” property market, in which people confidently buy and sell concrete boxes to each other day after day, putting bigger and bigger price tags on them each time, and everyone’s happy.

• HSBC’s Vincent Cheng Hoi-chuen says: “It is impossible for rates to go too low, since banks cannot lend money in return for nothing.”  Except they can, for a certain amount of time, in order to attract suckers (‘expand market share’).  Having lured the borrowers, they then force pricy insurance packages on them, add hidden fees, and, a year or two down the road, jack up mortgage interest rates well into positive territory when the credit cycle turns.
• Hang Seng Bank’s Margaret Leung Ko May-yee chips in to say, in effect, that she is glad to see the HKMA’s top priority is ensuring the profitability of businesses in her industry.
• Standard Chartered’s Benjamin Hung Pi-cheng declares: “The market will determine an appropriate level of price in the long run.”  He presumably means prices of mortgages rather than property (but there is of course a link, and since Hong Kong’s land and property system is controlled by heavy government intervention and a developers’ cartel, ‘market’ forces don’t necessarily determine much).  Both global interest rates and local housing supply are being kept artificially low; we’re up to our waists in mainland stimulus money.  Where is this heading?
• Wong Leung-sing of Centaline Property Agency complains: “It is a very brutish way to intervene in pricing.”  The newspaper adds that he thinks banks should be free to lose money if they want and their shareholders can always sell their stakes.  Yes, banks can ‘lose’ money for a year on a 20-year mortgage with no problem, but Wong is a real estate agent and has a slightly different agenda from the other three.  The financial system is just a financial system, but a ‘healthy’ property market is everything.

Some say that Hong Kong is always experiencing a property bubble.  It might be expanding, it might be just bursting, it might have splattered a while ago and left foul-looking globules of gooey stuff festering all over the carpet and the windows; it is always there.  They complain that pushing prices up though keeping housing scarce is the only trick people like Chief Executive Donald Tsang know.

Others are made of tougher stuff.  Interest rates are low, liquidity is high, supply is tight; therefore there is no bubble, just a rational explanation.  Nobody here but us fundamentals. The HK Trade Development Council (run by a property tycoon) says so (using Hang Seng Bank research, so it must be true).  HK$12,000 a square foot, HK$24,000 a square foot, HK$71,280 a square foot – such prices are all caused by these hard, sound, undeniable factors.  Rental yields mean nothing; just check out that affordability.  And prices are still only barely back to where they were at the market peak in 1997.  Still only barely!

The chart on the right, while devoid of any statistical integrity whatsoever, rather elegantly illustrates a fascinating phenomenon: the correlation between growth in seasonally adjusted HK dollar M1 (the money supply) and the increase in the number of bores, columnists, pontificators, officials, analysts, tycoons and people who bought apartments at the wrong time, assuring everyone that there is not a bubble.  Owing to slightly sloppy methods of accumulating data, some of these may have been referring to mainland property – but I think the picture is clear.  The number of people saying this is not a bubble is rising all the time.  This surely means only one thing: we can relax.

Meanwhile, I can’t resist cutting out and keeping this delightful picture of an absolutely charming young lady in today’s Standard, on page 7, just opposite the above story.  It’s an advertisement from a subsidiary of real estate giant Cheung Kong Holdings: