The Nobel dimension

The stock market leaps gracefully this morning as – Phew! – China and the US agree to end the massive world-shattering trade war before it has even begun. Both sides remove tariffs that they piled on in fits of righteous wrathful fury just days earlier, and everyone will now live peacefully and harmoniously ever after in mutual win-win friendship, with free-flowing soybeans, and new improved corporate governance at ZTE later.

Meanwhile, the rest of the planet beyond the stock market still doesn’t rule out unprecedented economic mayhem on the grounds that Trump and Xi (in their own ways) might just be overestimating their respective nations’ bargaining positions and cannot make pragmatic concessions for fear of face-loss.

There are all sorts of little details no-one wants to think about. Surely, if China lowers tariffs on US products, it must do the same for all other countries? How can the US increase exports of commodities when the producers are already operating at or near full capacity? What’s the point if the international flow of beans is simply redirected among markets – China buying more from the US, forcing everyone else to buy more from Brazil, leading to a net change of zero?

The answer to this last question is that to Trump’s infantile and superficial mind, the fall in the US trade deficit with China equals a Big Win. If Xi and his regime can restrain their own over-aggressive insecure instincts, it should be easy to fob Trump off.

Now a horrible complication enters the picture: Trump (says William Pesek) is factoring a Nobel Peace Prize into all this by way of Kim Jong-un under supposed guidance of Leninist uncle-substitute Xi (it all goes back ultimately to the Kenyan Nemesis who won the accolade, which has lost much of its integrity since the Scandinavian medal-bestowing sages got a Panda-mauling for honouring Liu Xiaobo – but of course Trump has trashy taste).

Pesek notes that this does not bode well for emerging markets. Does Trump playing four-dimensional chess over a delusional prize for a delusional deal with North Korea courtesy of delusional warm-and-fuzzy cooperation from Beijing bode well for anything?

Even more horrible thought: Xi senses a strategic opportunity, and gets what he wants out of Donald (US troops out of Asia, free soybeans for life) in return for persuading the Nobel bureaucrats (still guilt-stricken for hurting the Panda’s feelings over Liu Xiaobo) to give Trump his tacky prize. I mean – this is 2018.

 

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Some weekend reading…

Almost feeling sorry for China’s barbarian-handlers – how can they use their cold, calculating, cynical cunning to undermine the US-led rules-based international trade order when Trump’s negotiating team is a baboon show too incoherent to con?

Presumably the answer is: patience. Apart from a few jitters, the markets are plainly assuming that Trump will pathetically fold – give China’s state-owned tech giants access to any sensitive components or markets they want in return for shifting some soybeans or financing a family-branded Belt-and-Road golf course.

The result: an even more overweening sense of entitlement in Beijing, and real friction and shocks further ahead when China’s hubris eventually collides with reality. With that in mind, some CCP-baiting links for the weekend…

The re-education camps in Xinjiang have suddenly hit the mainstream press. Much more in this Jamestown Foundation paper, which suggests that Xinjiang’s core Belt-and-Road role has convinced Beijing to pursue a ‘definitive solution’ to the ‘Uighur question’.

(Update: the ever-so-convincing not-creepy soft-power machine swings into action.)

Two questions. One: the tactic of forcing hundreds of thousands of people to chant slogans they know are lies (or consider blasphemous) is up at the Pol Pot end of the subtlety scale. Can it not provoke a major backlash or uprising at some stage? Two: are any Muslim governments, societies or movements (outside the Turkestan region) taking notice? How do they feel this ranks as an atrocity alongside, say, Israel’s treatment of Gazans?

Meanwhile, in the South China Sea

China’s lack of real external threats requires it to push out until it comes into conflict with resisting powers. This might be termed a ‘search for enemies’ strategy, wherein the needs of domestic politics require an external military confrontation.

So far, it keeps the PLA happy. If the debt-fueled asset-bubble mega-crisis calamity ever materializes, Xi and the CCP will need overseas conflicts to stay in power.

More on the Panda-skeptic front in the familiar form of Belt-and-Road problems, again, and the associated debt-trap gimmick, again.

And the US is starting to wake up to Beijing’s ideological activities in its midst, with United Front infiltration of a panel on United Front infiltration – here and here.

It’s not just China: I declare the weekend open with this alarming revelation of a new pernicious campaign of foreign influence over innocent citizens’ minds in Australia.

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Asia’s mumbling-inanities and hand-wringing hub

For the second time in a week, security men assault Hong Kong reporters covering sensitive stories on the Mainland. Outraged citizens imagine that the Hong Kong government will take a stand – but they should be thankful for a bit of pro-forma hand-wringing.

It’s like expecting Hong Kong leaders to indicate whether candidates calling for an end to one-party dictatorship in China will be barred from the ballot. Their response is essentially: don’t ask me, I’m only in charge of the office paper clips. In the background, behind a half-closed door, a Beijing official rants that China is not a one-party dictatorship and calling for an end to this non-existent regime is forbidden.

If you were representing Hong Kong’s puppet/doormat administration awaiting instructions, you would mumble inanities too.

The UK’s Benedict Rogers, chair of Hong Kong Watch, summarizes the ‘lawfare’ Beijing (in the guise of the Hong Kong authorities) is using against the city’s pro-democrat activists. It is a damning synopsis. The government, he notes, has prosecuted one in three pro-dem legislators since Occupy, often using desperate and archaic charges.

Unfortunately, Rogers’ proposed remedies are also unconvincing and stale (presumably influenced by our traditional mainstream pro-democrats).

He says the public prosecutions function should be transferred from the Beijing-approved Secretary for Justice to independent hands. This directly contradicts the Communist Party’s view of ‘seamless’ government – the reason police, electoral and other departments have lost their (relatively) impartial public-service character in the last four years and become political tools. He also hopes, or dreams, the international community will do something.

If it’s any consolation, Chief Executive Carrie Lam and her colleagues, grasping for something coherent to say while Beijing freaks out, can sympathize with such helplessness.

 

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Land cretins on rampage as usual

The Hong Kong government takes a break from bemoaning the shortage of land for affordable housing and auctions off a plot at a price equivalent to apartments costing HK$32,000 a square foot.

I think there are people out there who point out the contradiction. Maybe a few of them see the link between government revenues and housing prices. Perhaps one or two even turn the numbers round and perceive the budget surpluses actually causing the homes to be unaffordable. But these lateral thinkers are on the fringes, and possibly in lunatic asylums.

We will have another opportunity to question the bureaucracy’s robotic determination to maximize land revenues regardless of any wider social or economic cost – the Central waterfront. It could be a world-class harbour site, or it could be an ugly and oversized pile of glass boxes. Which will it be?

To put the questions a different way: Are the planning and lands bureaucrats cretins? For the answer, let’s look at their latest achievements over at the Urban Renewal Authority.

They have identified some dilapidated residential blocks in Sai Ying Pun to redevelop. The practice is to buy owners out in line with current prices in the locality – in this case HK$24,000 psf. The subsequent redevelopment would apparently comprise apartments going for HK$30,000 psf. Not only does the URA create unaffordable housing, it hikes the benchmark prices for old or new properties throughout the neighbourhood.

As an analyst points out, the public might ask what the point is – and will blame the URA not only if the eventual redevelopment sells for megabucks prices, but if the market falls in the meantime and the whole project makes a loss.

Is it beyond the wit of the officials to think of a different way?

One obvious course of action for the URA would be to not bother. If, owing to forces beyond human control, the only alternative is to replace old neighbourhoods with unaffordable luxury mega-towers – just leave the rat-infested slums, which at least serve a social purpose.

Or… dream up a solution that isn’t total crap. Off the top of my head, they could demolish the 100 crumbling units and build a bigger complex of (say) 400 no-frills flats. The 100 original owners each get one of these new units, and the remaining 300 are sold/rented at a price that covers the project’s costs. Duh.

No doubt I am missing dozens of zoning/land-premium/lack-of-consensus/Town Planning Board/how-would-the-tycoons-eat? insurmountable barriers that would make this utterly impossible.

 

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Integrating softly

Is Beijing softening its tone towards Hong Kong? The South China Morning Post believes it might be, judging by remarks from China’s Hong Kong and Macau Affairs Office boss Zhang Xiaoming. (Incidentally, the column is an interesting example of the challenges of churning out loyalist drivel: the writer must explain and fawn over official pronouncements without being totally sure what they mean, other than being slogan-laden and vague.)

Zhang seems to suggest that Beijing should phrase its threats, menaces and rants to appear more acceptable to locals. Why not? Worth a try! He also seems to recognize that overt intervention by central government may be counterproductive, proposing that:

…when it comes to economic integration with the mainland, including development of the Greater Bay Area, Hong Kong proposals will be preferred over those from the mainland; the chief executive will be given more opportunities to announce on Beijing’s behalf beneficial policies from the central government…

So the substance of ‘integration’ is a given, but the presentation should be better. This is important, because ‘integration’ means the scrapping of ‘One Country Two Systems’ and the absorption and subsuming of the city by something larger, both geographically and psychologically. ‘Bay Area’ is a replacement buzzword.

Since the mid-19th century, Hong Kong has thrived by being different and separate from China. It was the place where you could do things that you could not do in the rest of the country. It did not compete with the Mainland, and conversely it did not cooperate with it. Whether the relationship was mutually advantageous or parasitic, the city and the hinterland were apart, while interacting intensely.

The Communist Party detests the symbolism of this, and the separate identity of the population, and it must make Hong Kong less ‘Hong Kong’ and more ‘China/Mainland’. The process is going on all around us in infrastructure projects, migration patterns, how Boy Scouts march, the anthem laws, and so on. Diminishing Hong Kong’s supplementary-but-autonomous economic role is a major part of it (though please keep the CCP elites’ money-laundering channels).

Today’s minor example: national-level research grants being extended to (patriotic) Hong Kong scientists, to nudge the city into overlap with tech-driven Shenzhen. (The stress on ‘tech’ is not just trendy: Hong Kong has little comparative advantage in the area so must play a subservient role.) Meanwhile, Fitch Ratings warns that Mainlandization is exposing the banking sector to weaker corporate governance and property-inflation risk.

There’s a lot to do, and we can see why Beijing might feel that softening its tone will help the forced transition.

Then along comes former Chief Executive CY Leung, who obviously didn’t get the ‘softer tone’ memo. This man openly hates Hong Kong and can’t wait to eradicate it as an idea or a feeling. You should all stop identifying as Hong Kong people, he says. From now on we are all happy smiling ‘Bay Area’ folk.

CY is jumping the gun. We will see how Zhang Xiaoming’s touchy-feely lovey-dovey approach works. Then, if necessary, we can use the Xinjiang/Ningxia no-nonsense Sinicizing solution.

 

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Well, that’s one way to start a Monday morning…

Donald Trump prepares a love-in with nuke-rattling North Korean dictator and hostage-releaser Kim Jong-un, pulls out of the years-in-negotiating multilateral Iran nuclear deal and potentially freezing Western economic relations with that country, then offers a lifeline for China’s ZTE – a state-linked company punished by the US for busting North Korea/Iran sanctions, whose technology in any case poses a national-security risk to Western countries – citing oh-so tragic job-losses in China.

Brains seize up in an attempt to explain. (Best advice: don’t bother trying.) If we find this warped inside-out quasi-diplomacy perturbing, think how freaked out coldly rational autocrat Xi Jinping – to take but one example – must be.

By way of badly needed distraction, a couple of worthwhile HKFP stories from the weekend, in case you missed them: Cardinal Joseph Chan-spelt-Zen on the Catholic Church’s China delusion, and the ongoing (and inevitable) transformation of the Hong Kong Legislative Council into a Mainland-style rubber-stamp. And to really get away from it all (plus a chance to brush up on your French), the last living black survivor of the Nazi labour camps.

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Marketing-speak to enrich life’s defining moments

A letter from HSBC. The first sentence starts with a dangling participle, drops the word ‘enhancements’ – a sure sign of impending crap – and makes the guru-cult-like promise of ‘deeper inspiration’. Then it gets bad…

‘Going forward’, the letter advises that they are ditching the bizarre ‘Jade by HSBC Premier’ name for the product/service/thing in question. (Heard of this before… Yes – I hate to say I told you so, but I did. All you had to do was listen.)

The tone shifts from inane to creepy, as the letter informs me that HSBC will ‘build a deeper and more considered understanding’ of my personal tastes, which frankly are none of their damn business.

It then seems to offer some sort of help with regard to ‘dining’ and ‘enriching life’s defining moments’. Could this mean they send someone over to do the washing up? If so, I could get excited. That’s what this bank client would call ‘adding value’, assuming they can’t (say) raise interest rates on time deposits.

(Wearing my HSBC shareholder hat, I must say fatter margins and miserable benefits for customers suit me fine. Not sure I should be complaining. But does the marketing have to be such drivel?)

Further down, the letter mentions the word ‘bespoke’, but I will spare everyone because it’s a Friday.

I declare the weekend open with a couple of eye-raising charts, which are of course connected. This one shows Hong Kong housing prices versus other cities since 2005 (see also this one, and full FT article on our aging tycoons and their scions). And this seriously freaky one shows private credit growth in China versus the rest of the world – spot when the Communist Party ran out of ideas.

 

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‘They help us compete with other bay areas’

It’s all relative. Malaysian leader Najib Razak was so bad that the country is celebrating the return of 92-year-old dissent-crushing, courts-rigging, rival-framing Mahathir Mohamad as a victory for fresh, clean, decent governance. And by the standards of the Philippines, Thailand, Burma and the rest of Southeast Asia, if you aggregate out sleaze, despotism, carnage and basic administrative incompetence, Najib’s leadership scored no worse than maybe a 5.

While Malaysians wait for the truth about whether Najib pocketed US$600mn/700mn/ whatever from the national development fund, Hongkongers wonder what they will get for the money they poured into the Zhuhai Bridge and High-Speed Rail white elephants. A quick back-of-envelope calculation suggests the two projects will set us back a good US$15 billion-plus-plus in construction, plus the ongoing running costs and maintenance.

The recent inspection tour of Macau yielded hazy views of the Giant Concrete Worm from Hell in the distance from the ferry windows. You can also see a huge border-crossing/parking complex taking shape on reclamation northeast of the Macau ferry terminal. The completion date is too uninteresting to look up, and subject to technical-bizarreness delays, but close enough for the bureaucrats to start inviting media over to do PR-puff stories.

It is still unclear who will actually use the thing. Cross-border private-car permits are scarce and inflexible, so not many people will whizz back and forth in their SUVs. The CNN story quotes some blather about Zhuhai factories’ goods being trucked to Hong Kong for shipping – which all sounds rather 1990s, though maybe Trump’s trade war will result in China importing cheap American T-shirts. That leaves passenger buses linking Zhuhai’s hinterland with Hong Kong. We are told the existence of the bridge will make Zhuhai a really groovy place for us to live, work and play in, but population distribution suggests that in practice it all means packing more Mainland tourists into Hong Kong.

The high-speed rail link looks slightly less pointless in that it can transport you to a far larger number of places that you don’t want to visit/will remain obvious plane routes. From the Chinese Communist Party’s point of view, it at least serves as a precedent for the extension of Beijing law enforcement across the border to the station in Kowloon.

While the bridge suffers from breakwaters sliding around, the supersonic technological rail marvel has insurmountable problems with tickets. Rather than have a customer-friendly seamless one-stop booking system where operators split the revenues behind the scenes, different entities need to individually sell different tickets to particular destinations (except on weekends, when it’s the other way round). This sounds like a Mainland thing, but the Hong Kong side can’t say that, so they must take the blame. I weep. Even if you get a ticket you will have to cut 10cm off your luggage at the border, and people in wheelchairs will need to learn to walk…

…except for diplomats.

(Update: does “not considered baggage” = “allowed”? A thousand apologies if so.)

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Today’s box of op-ed chocolates

If you enjoy a non-stop sickly diet of Amazing Rising China and Decrepit Declining West, reading the South China Morning Post’s op-ed page is like gorging yourself on a 5lb box of chocolates.

In today’s…

A quasi-official ultra-nationalist commentator takes a break from scourging unpatriotic Hong Kong to spit venom at ‘the DPP government of Taiwan [which] has turned its back on being part of the Chinese nation [and] could be called a separatist regime’.

A Mainland think-tanky name-drop-Francis-Fukuyama type patiently enlightens us about how China’s ascent is unstoppable and no threat to the international order, provided the West humbly concedes the superiority of Beijing’s economic model.

And, for light relief, a ‘Belt and Road’/China-Pakistan Economic Corridor specialist foresees mutual warmth and affection blossoming between the Middle Kingdom and India on account of Bollywood displacing US movies in Mainland box offices.

Tian Feilong’s unhinged and insecure tirade about Asia’s ‘so-called beacon of democracy’ shriveling into nothing supports the impression that Beijing is on a completely different wavelength to Taiwanese, who don’t even think about unification/motherland/Chinese nation. His Hong Kong rants about common law, evil democrats and evil foreigners seem similarly removed from reality. For a wake-up, here’s Taiwan Sentinel on Beijing’s hard-headed and ruthless analysis – its only hope is to destroy Taiwan’s democracy from within through violence. (When reading this piece, insert ‘Hong Kong’ for ‘Taiwan’ to highlight similarities and differences.)

The Peking University think-tank guy pushes the far more cloying starry-eyed China-miracle ‘win-win’ story, as swallowed by optimists, the gullible and the hardcore Panda-huggers (in that order) over a couple of decades. It’s getting stale, and needs updating to allow for debt-based pretend-growth, ruination of water and soil, looming demographic crises and the counter-reformist dictatorship now steering it all.

The Bollywood article seems to propose a deal: Mainland movie audiences progress from Transformers to Hindi dance-dramas (fair enough), and in return Delhi hands the Himalayas back to PRC’s Tibet and agrees to turn India into another doormat for China so Pakistan looks less pathetic.

Another thing about the SCMP’s incessantly excessive Xi/China-boosting op-ed page – what’s with all the cogs artwork???

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Macau’s other fortress

What’s inside this impenetrable and spooky old Macau tower? It is part of a pawn shop business, so I would guess it’s full of vaults, safe-deposit boxes and strong rooms – or was in its glory days. The scale of the building gives you an idea of how many sour-faced misers who didn’t trust banks there used to be in Macau. (The city was the only open gold market for many years, so maybe that’s part of the story.) Probably just dust and cobwebs now. Suitable for renovation as luxury apartments for paranoid recluses.

Thanks for this on the over-hyping-for-mutual-convenience of Sun Yat Sen.

An update of Beijing’s purge against Hong Kong’s pro-democrats – a list that phone-snatcher Ted Hui may soon join. Barred Legislative Council candidate Agnes Chow is filing an election petition, while pro-dems still in office were carried out of the chamber yesterday. If lawmakers are convicted of the bizarre Occupy-related incitement charges, it would be the right time for the whole pro-democrat camp to quit Legco, assuming they could act in unison (and survive off the public payroll).

Remember the guys who found a system to win on the races from a computer-packed apartment overlooking Happy Valley? Bloomberg tracks a survivor down and goes over the whole weird tale.

 

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