HK officials get bored, play insurance salesmen

When it isn’t trying to mastermind the development of the city’s space-age whizz-bang IT-web-innovation-tech sector, the Hong Kong government and its numerous bureaucratic offshoots love to manage the growth and direction of the financial services industry. Among their many past obsessions are Islamic banking, Fintech (whatever it is), ‘green finance’ (ditto), and the endless Yuan offshore blah-blah stuff – all of a ‘hub’ nature, of course.

This hankering to out-do the private sector extends to offering actual retail investment products. Thus the (surplus-laden) Hong Kong government issues limited quantities of inflation-linked ‘iBonds’, giving lucky successful subscribers a higher yield than any bank deposit (or instant profit if they sell). The aim seems to be to make some small savers happy while spreading magic Asian Bond-Market Hub pixie-dust around the place.

Now, the government (in the guise of its HK Mortgage Corporation) is getting into the business of annuities. These are dreary retirement income products popular – I am guessing – among the sort of people who play golf. The benefit, presumably, is that they are easy to understand, at least as described by pushy insurance salesmen who make a ‘lifelong income’ sound somehow amazingly generous. In reality, since someone else is taking a cut, you would enjoy a better return if you invested the money yourself directly. Another drawback is that the lump sum is probably locked up.

As with the government’s iBonds, the HKMC annuities will be limited to a specific number of purchasers/amount of investment. The maximum investment would be HK$1 million, which would yield HK$5,800 a month – a big deal to those who can’t afford a million, but not worth bothering with for those who can. Still, the payout is 3-4%. If this is linked to inflation, it is a very good deal for the lucky subscribers, and bad for the rest of us who will no doubt subsidize it in some way. But it presumably is not index-linked, otherwise the officials unveiling the thing would mention it rather than refer to the returns as ‘fixed’ and ‘stable’.

By contrast, the Tracker Fund currently yields around 3%, which should more or less rise with inflation, and you can draw on the capital if you want, or leave it for your grasping heirs to enjoy after you go.

As with the iBonds, the initiative has no real purpose. It seems to be just another ‘thing’ for hyperactive, meddling bureaucrats to occupy themselves with while waiting for their handsome public-sector pensions.

In fairness to these particular officials, they can at least do their visionary work without launching real-estate projects. This contrasts with their colleagues’ efforts at the high-tech hub at Cyberport, with its special high-tech luxury apartments, the arts-and-culture hub at West Kowloon, with its (planned) special arts-and-culture luxury apartments, or the innovation-tech-Shenzhen-toxic-swamp hub planned for the Lok Ma Chau Loop, with, you can be sure, lots of special innovation-tech-toxic-Shenzhen-swamp luxury apartments.

For sparing us the Sukuk Bond Hub-Zone concept with special Islamic Banking luxury apartments, they deserve a bit of gratitude.

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Mrs Lam goes to Beijing

Hong Kong’s next Chief Executive, Carrie Lam, goes up to Beijing to meet some top national leaders. It will be a three-day visit, yet she doesn’t think there will be concrete discussion about a particular topic. So – hours upon hours of sitting and sipping tea, and awkward silences.

She will enjoy one interlude of stimulating conversation in a meeting with Hong Kong Affairs boss Wang Guangya, who apparently wants to hear (by which we mean hector her) about her team of senior officials.

Under this make-believe political structure with its rigged ‘election’ and the presence of a shadow power-centre in Beijing’s Liaison Office, citizens look to the choice of ministers for signs of what is really going to happen. (We are talking about policy secretaries or ‘ministers’, not the part-time amateurs given places on the Executive Council for symbolic head-patting purposes.)

The appointment or promotion of anyone known to have actual fresh ideas, or simply a personality, would raise hopes for some sort of ‘fresh start’ or reformism. A token open Beijing loyalist or ex-pro-democrat-turned-shoe-shiner may get one of the more lightweight positions in which to flounder. Most likely, Carrie will recruit mainly from among the civil service she comes from.

We will hear some agonizing over the difficulties of finding ‘talent’ – especially how successful people don’t want to join the administration. But the pool is artificially narrow and shallow. Only Chinese citizens are eligible, ruling out large numbers of foreign passport-holders. And, as Wang Guangya will surely remind Carrie, candidates must be acceptable to the paranoid and insecure Communist Party, so forget anyone with originality and flair.

The real problem is that Hong Kong does not have a governmental structure in which parties nurture politicians through free elections to local and higher-level legislative and executive offices. And Beijing’s clear intention is that the city has no such thing in future. Note how talk of political reform refers to ‘universal suffrage’ rather than, say, ‘democracy’. At best, the aim is for everyone to take part in a rigged election.

Carrie’s mission for the next five years will be to deliver more-of-the-same blandness and inertia on issues that people care about, while continuing to divert resources into cronies’ pockets – and keeping the kids happy and avoiding any of that Umbrella/independence stuff. With a cabinet full of out-of-touch bureaucrats.

On the subject of hiring members of a new administration, behold some of the magnificently cruelest satire I’ve enjoyed in a while.



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HK government spreads mirth city-wide

Hong Kong lawmakers criticize officials for the hastily patched-together, half-hearted series of events designed to celebrate the 20th anniversary of the handover. This is unfair. The object of the exercise is to spread happiness throughout the city. And what can possibly be more amusing and enjoyable than hapless Home Affairs Secretary Lau Kong-wah spouting humiliatingly poor excuses for his bureaucrats’ laughable efforts? Mission accomplished, surely.

Further down the HKFP article, pro-democrat legislator Tanya Chan asks why the government reappoints people like Martin Lee Ka-shing – son of Henderson Land patriarch Lee Shau-kee – to something called the Commission on Youth, when such individuals never show up to meetings?

Lau’s responses are, again, pretty funny. But perhaps Tanya misunderstands the purpose of the Commission. A glance at the membership list shows that it is headed up by another son of a property tycoon, and at least a few other appointees seem to be from privileged backgrounds. So by ‘Commission’ we probably mean ‘Informal Social Club’, and by ‘Youth’ we mean ‘Rich Kids’. (One name that stands out is Vivek Mahbubani, noted stand-up comedian and just the sort of person young wealthy elites would bring along to their gatherings.)

I declare the weekend open with a challenge: under slightly sub-optimal lighting conditions, can you tell Tanya Chan apart from a Korean boy band star?

Left: Civic Party lawmaker complaining about government; Right: drippy Korean boy band singer.

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Inevitable ‘crying over spilt milk’ pun makes appearance

In case you missed them, some interesting commentary on Huishan Dairy’s contribution to the sterling reputation of Mainland corporate governance. Fraser Howie puts the affair in the bigger context of private sector-bank-political links in the country where ‘the disappearance of company executives is so common now, it barely warrants news reports’. And Shirley Yam presents the confessions of a Chinese tycoon – any resemblance to actual characters living or dead is purely a coincidence.

The trick – and it really is conjuring and sleight-of-hand – is to combine elaborate multiple ever-ballooning financial deals with proportionate showmanship, pizzazz, facades and apparent connections. Good to see that Hong Kong hasn’t lost its longstanding competitiveness as Asia’s Super Hub for this sort of thing.

On a brighter note, a South China Morning Post column assures us that if the US preemptively whacks North Korea, it’ll barely produce a blip on your investment portfolio, let alone the world at large…

If you are less sure, and want to take precautions against World War III breaking out, you might be interested in these items, which I found while searching unsuccessfully for a crock (for pickling)…

Carrie Lam has already bought several, to practice wearing round her neck. I was tempted, but they are seriously heavy. The vast Hing Gei hardware store, 71 Wanchai Road – it has everything. Except crocks.


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Your tax dollars at work

The Hong Kong government announces that it will spend HK$640 million on celebrating the 20th anniversary of the handover of the city from the UK to China. Some opportunistic griping ensues, and largely misses its mark…

The budget is far larger than that for the 10th anniversary. This makes sense: the less there is to celebrate, the more you need to spend on festivities – economists would call it counter-cyclical demand stimulus.

The South China Morning Post quotes detractor Kwok Ka-ki as complaining that the events are not really related to the handover. Indeed, many of them don’t even seem to be about Hong Kong – like an exhibition on ancient Egypt co-organized by the Louvre.

Seasoned observers of the city’s bureaucracy will immediately spot what is happening. The word has come down from the manically pro-Communist Chief Executive CY Leung that we must make a Huge Patriotic Deal of the anniversary. Civil servants, not only indolent but aware that CY is leaving office on the date in question and is widely detested, have responded with a box-ticking and label-sticking exercise.

Thus the (no doubt already-arranged) display of some pharaoh’s artefacts becomes an Exciting French-linked Cultural Contribution to the Great 1997-2017 Patriotic We-Love-the-Motherland Hoo-hah. ‘Mega’ sports events include such mind-numbing pastimes as snooker and cycling (though the Swedish cars-driving-over-the-sea thing sounds vaguely interesting). There will be the inevitable, dreaded ‘youth activities’, guaranteed to be embarrassingly tedious and uncool. To cap it all, we must have a slogan-theme-concept that is a sick joke – cue ‘Together, Progress, Opportunity’.

With 55 temporary civil servants working overtime on them, how can the celebration activities fail to be cringe-making and blatantly idiotic?  Chinese national pride demands events that are stirring, joyous, dignified and full of patriotic passion. Instead, guerrilla-saboteur-officials are planning (to quote Kwok Ka-ki) ‘Hong Kong Tourism Board-style promotions’ – and it doesn’t get any more insulting than that. Let the rest of the community be similarly inspired in preparing to mark the occasion.


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‘Regina was robbed’ shock

You would have thought that anyone who took an interest realized long ago (say, late 1996) that Hong Kong’s Chief Executive ‘elections’ are a scripted charade – the outcomes being pre-determined in Beijing. The alternative, after all, is to imagine that the Chinese Communist Party leadership leaves the selection of a senior colonial/regional official to chance, or (even more unlikely) to a bunch of other people to decide for themselves.

But it seems that no-one told Mark Pinkerton, a member of failed candidate Regina Ip’s campaign. He is now denouncing the process as ‘a farce … all controlled by the Liaison Office of the Central People’s Government’. His HK Free Press article describes the process in illuminating detail.

While no surprise to most of us, it seems to have been a bitter shock to Mr Pinkerton. He had previously written in the South China Morning Post that ‘the belief that the Election Committee is a small circle of pro-Beijing patriots is a myth promulgated by the democratic camp’, and that the Committee ‘will nominate and endorse a candidate they think is best suited for the top job’.

Anyone watching events unfold in the months leading up to the last quasi-election could have seen what was happening. For example, when Regina launched her campaign last December, mega-landlord Allen Zeman and various other members of Hong Kong’s tycoon-bureaucrat caste supported her. And yet Regina mysteriously failed to win enough nominations to get on the ballot, and by the time of the joke-poll on March 26, her supposed friends were endorsing Carrie Lam, Beijing’s pre-arranged ‘winner’.

People who despise Regina Ip for her no-nonsense (or arrogant, obnoxious, etc) style might see this as just deserts. But the point is that the Communist Party wanted/needed her out of the way precisely because she has her own mind and ideas. Only a docile nonentity could appear on the ballot alongside Carrie – and Beijing’s officials considered even an unremarkable nice-guy like John Tsang alarmingly uncontrollable.

John attempted to cast himself as an outsider to win public support and nominations from the pan-democrats. Regina genuinely wanted to be the Communist Party’s chosen one, even founding a bizarre Maritime Silk Road Blah Blah Society to prove her loyalty. Kowtow. Do whatever it takes. Suck the Panda’s toes. Which is, of course, what her supporters were doing when they followed United Front orders to abandon her for Carrie. (The alternative in this Leninist system is to be a non-person in the regime’s eyes. Sadly, there are so many non-people, Carrie can’t find ministers for her administration.)

For the umpteenth time: He who lives by the shoe-shine, dies by the shoe-shine.


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HK mourns for landlords by being rude to tourists

Mixed reports on Hong Kong’s counter-tourism measures, today…

The good news is that retail sales continue to fall. By ‘retail sales’, we mean the peddling of overpriced crap to dimwitted tourists – which by extension means rents for stores in tacky malls and once-pleasant residential neighbourhoods. The South China Moaning Post writes of the 24th straight month of misery for landlords as if we are all supposed to burst into tears. Right-thinking people will only say: more please.

The bad news is that this encouraging trend is under threat. Hong Kong has slipped down the Not Smiling At Dimwitted Tourists Global Charts, losing its magnificent top place to Macau. In fairness, Former Portuguese Enclave City has even more reason to give invading hordes the Hostile Scowling ‘Go Home’ treatment than Hongkongers do. But God forbid that we are seeing the start of a drop in standards – if we’re not careful, overseas visitors might start feeling welcome. We all shudder at the thought.

Meanwhile, our Chief Executive-to-be Carrie Lam is repeating earlier comments about how God told her to take the job. Indeed, it seems that the invisible Supreme Being was quite insistent, even though Carrie herself didn’t want to do it. Sounds like a pretty definitive way for her to shift the blame later if and when everything collapses around her.

An almost-apocalyptic analysis of the challenge she faces comes from the SCMP’s Peter Guy, who sees Hong Kong’s pyramid-scheme property market eventually squeezing all other life out of the city. As he points out, spiraling housing prices reduce purchasing power for much of the population, ultimately leading to ‘permanent secular stagnation or chronic lack of demand’.

This of course brings us rather neatly back to where we came in – the plight of our retail sector. Local people spend so much on accommodation that they can’t afford to spend much in the stores. The landlords want to have their cake and eat it by filling the shops full of tourists instead. The local people take revenge by being rude to tourists. Can God help Carrie find a way out of this conundrum? He wasn’t there for her when she went through her toilet paper agonies, which raises the distinct possibility that He steers clear of retail/shopping and indeed commercial matters in general. As indeed He should.

I declare the weekend open with an even more cosmic revelation: China has solved the dilemma known to economists as the ‘impossible trinity’. The theory is that a country may have two out of three of: a free flow of capital, a fixed exchange rate, and control of its own interest rates. The SCMP reports that Chinese bankers claim to have cracked it – which is the equivalent of physicists devising a perpetual-motion machine.

‘Ah’ – you say – ‘but China does not have a free flow of capital’.

Hmmm… OK. Slight change in headline needed…

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HK property market – a bottom-up view

People bought multiple units at the token ‘Hong Kong Property for Hong Kong People’ housing development at Kai Tak (including an official at China’s local Liaison Office). This makes a mockery of the supposed intention of the project – but so do the high prices, anyway. A modest amount of mouth-frothing ensues.

In beautiful downtown exotic Tsuen Wan, a developer is offering new (well, half-built) one-bedroom apartments for HK$10 million each. A real-estate agent, who has an interest in selling the things, estimates a rental yield of 2.2-2.4% (half the dividend yield of, say, HSBC shares). Down in Sham Shui Po, a family of three paid HK$200 million for nine apartments at another new development. At least, this is what the developers want us to believe – they are not above exaggerating sales volume, demand and prices, even by arranging fictitious transactions.

Over in sunny Soho, just up the hill from the Central Business District on Hong Kong Island, the tables are turned.

Here is the story so far. Late last year, I moved out of my aging, crumbling tong lau home of 25 years and rented a place nearby. The plan was to sell to an end-user or landlord – ‘rare’ old places next to the Mid-Levels Escalator are in demand. And then an assertive lady from Richfield, the (allegedly) disreputable buyers of slums for redevelopment, knocked on the door, airily offering HK$21,000 a square foot. This is a good 25% more than the going rate for these places. I said I would think about it.

As promised, the Richfield floozy got back in touch after Chinese New Year, mentioned her earlier offer (now mysteriously trimmed to HK$20,000) and asked me eagerly for my ‘counter-offer’. I took this as an invitation to up the price. After making her sweat for a few days, I put on my best casual ‘take it or leave it’ voice and told her I’d accept HK$24,000. Her response was “Wah – you are not greedy!” followed by much moaning about my grasping octogenarian neighbours who (bless them) are demanding HK$30,000 or more.

After consulting with her boss, she came back with an offer of HK$23,999.99 – or something microscopically less than I had asked. Maybe a face-gaining thing, or perhaps that’s how she makes her commission. She instantly emailed me a ‘provisional agreement for sale and purchase’ and badgered me about signing.

Some of us would get tough and insist on another 5% out of these unscrupulous rogues. (It’s not the principle – it’s the money!) Bearing in mind Carrie Lam’s advice to pocket it first, I am happy enough. I would make a terrible real-estate mogul. Mindful of the fact that these people are slime (the paperwork is in the name of a company called ‘Jumbo Honest’), I have tossed the whole thing over to my lawyer. He says it all seems OK.

I’ll rent for now and hope for a property correction-crash-bloodbath. Still, a quick search shows that the proceeds from the Soho hovel are more than enough to buy a larger, newer place in many decent districts – on the secondary market. That doesn’t mean such homes are widely affordable; Richfield’s offer is equivalent to eight times what I originally paid for my place in the early 90s, which is probably roughly in line with property-price rises in Hong Kong over that time. But it does suggest that the new projects in Kai Tak, Tsuen Wan, Sham Shui Po, etc are unreal, figuratively or literally.


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Just the tip of the milk-berg

Among the semi-obscure wackiness emanating from China these days is the Hanfu movement. On one level it romanticizes pre-Qing (or plain mythological) dress and culture, as seen on historic TV dramas. But it has murkier fringes bordering on racial supremacism. Some extreme adherents see the One-Child Policy as a Manchu plot to eradicate the Han from the face of the Earth.

Which bring us to goats.

Beijing has recently relaxed its population control measures to allow people to have two children. This is good news for a company called Ausnutria, which sells goats’ milk. The stuff leaves human babies deficient in Vitamin B12 and costs more than double the normal cows’ product – so obviously business is booming, and the profits are rolling in.

Naturally, it is imported. And while we wonder why Mainlanders don’t buy the cheaper local varieties, we see that Chinese prosecutors are currently dealing with yet another baby-milk scandal.

Small wonder that so many stores in Hong Kong still devote precious shelf-space to cans of infant formula. It is not a coincidence that, squeezed between these outlets, you will find currency-exchange agents who specialize in helping Mainlanders get their wealth out of the country. Alice of Shenzhen tells Bloomberg about her efforts to move money out

She plans to buy a home overseas, and probably move herself as well. The more the great rejuvenation of the glorious motherland continues, the more people are tiptoeing and slinking towards the exits.

Huishan Dairy’s director for treasury and model worker Ge Kun has gone, somewhere. (And yes, we’re on the subject of milk again.) The company’s shares plummeted by 85% last week. The big boss, and Ge’s husband, outstanding leading cadre Yang Kai has loaded up on debt. The company has previously used cows as collateral, and Yang seems to have used his own majority stake as security for loans to enable him to buy his own shares back, to prop up the price (or something that doesn’t sound hugely sustainable – Shirley Yam seems to understand).

Commentators tend to agree on two things when it comes to the Mainland’s debt situation. 1) It’s probably going to cause economic sluggishness as and when it corrects itself – no sudden horrible crash disaster mayhem looks likely. 2) All the figures are hidden and the whole picture is unquantifiable, and therefore 1) is a hope or a guess.

Hong Kong’s exposure to this sort of Mainland bizarreness goes beyond all those cans of formula in the stores. Huishan Dairy is listed on Hong Kong’s Stock Exchange, and short-sellers Muddy Waters are hunting for others, while people are starting to mutter about ‘moral hazard’. Where does this end? The Hanfu movement seems normal by comparison.

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The uncommon bad luck never ends

Ironic Understatement of the Week Award goes to Asia Sentinel, writing a few days before the recent Chief Executive quasi-election, for referring to China’s ‘uncommon bad luck’ in consistently choosing dismal failures to lead Hong Kong…

While Hong Kong itself is the main victim of this misfortune, maybe we should spare a thought for the gullible or grasping idiots who took on the job.

There was avuncular bumbler Tung Chee-hwa (1997-2005) whom fate pummeled so mercilessly most of us had to look away. Then Donald Tsang (2005-2012), an arrogant bureaucrat with no policy ideas (hold that thought). And CY Leung (2012-2017), who, apparently out of some misguided hyper-loyalty to the Communist cause, tried to unleash a mini-Cultural Revolution on the city and managed to start a pro-independence movement.

Although different in style, their administrations had three themes in common: struggling to reconcile Beijing’s neuroses and local expectations; obsessively propping/pushing up housing costs; and floundering in all other respects.

Now it is the turn of Carrie Lam-to-the-slaughter. After three failures, China’s leaders have decided they might get lucky at last by picking someone who combines Donald’s haughtiness and lack of ideas with CY’s mindless obedience – perhaps in the hope that a feminine touch might also yield a dash of Tung-like geniality. Carrie has been frequently stressing her wish to heal divisions, which is a coded way for her (and the puppet-masters in Beijing) to step back from CY Leung’s clumsy Leninist/United Front clampdown on dissent as counterproductive, which presumably prompted his departure after just one term.

And within hours of the pseudo-election, the government arrests pro-democracy figures on charges like ‘inciting people to incite people to incite people to incite others to commit public nuisance’ dating from the 2014 Occupy Movement. The timing is so obviously linked to the ‘election’ that the authorities have to insist it isn’t via the traditional whiny defensive press release.

Conspiracy Theory 1 is that this is Carrie’s doing, as she didn’t want to spoil her quasi-election but now can’t wait to continue CY’s rabid persecution of opponents. Conspiracy Theory 2 is that CY and his Liaison Office United Front comrades are desperate to get on with their ideological rectification campaign after holding back during the quasi-election campaign out of deference to Beijing’s wishes to minimize public support for John Tsang. Conspiracy Theory 3 is that CY and buddies are deliberately trying to undermine Carrie. Conspiracy Theory 4 is that they are all in it together, and the plan is to make Carrie look good by taking office on July 1 amid a sudden end to psychopathic Communist mouth-frothing and an instantaneous wave of peace, goodwill and unity spreading over the city. You can think up Conspiracy Theories 5, 6, 7, etc yourself.

Carrie seems vaguely uneasy with the arrests, as does Legislative Council president Andrew Leung, who as a clueless, taken-for-granted shoe-shiner and bystander has no special axe to grind here.

To complicate things, the authorities are also arresting (now ex-) cop Franklin Chu on charges of assaulting someone in 2014. This comes after the alleged victim threatened a private prosecution. And these all follow the convictions of Ken Tsang, and of his seven police assailants (by evil foreign judge etc), also dating from Occupy.

If current and future CEs and Beijing’s officials are organizing and coordinating a fiendish strategy here, they are being immensely incompetent. It looks more as if petrified Justice/prosecutions officials are trying to toss pieces of meat at growling pro-Communist and human-rights lobbies while tiptoeing through the minefield of a quasi-election and uncertainty about life post-CY. But immense incompetence from on high is perfectly believable.

Whatever it is – Carrie’s uncommon bad luck begins already.


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