Hemlock's Diary
7-13 December, 2008
Mon, 8 Dec
Members of China’s latest space mission do the usual high-profile whirlwind tour of the Big Lychee, appearing before crowds of patriotic children to sing
Descendents of the Dragon and otherwise bask in the glory of everyone’s “Black eyes, black hair, yellow skin,” as the lyrics put it.

The Shenzhou 7 flight last September was noteworthy for the fact that it included a spacewalk, a feat first accomplished by the USSR’s Voskhod 2 in March 1965, followed by the USA’s Gemini 4 three months later.  In a country where, beyond the bright lights of the coastal cities, millions of children cannot afford schooling, does it make sense to replicate 43-year-old vanity-driven technological achievements?  Some would say not, but they are ignoring the invaluable spin-offs of China’s multi-billion yuan space programme.

During their unfortunately short time in Hong Kong (next stop, Macau), the three astronauts expressed a belief that the Fragrant Harbour would be able to overcome its economic problems, a bold pronouncement on the part of people not paid to specialize in dreary economics, and which deservedly made the front page of the
South China Morning Post.  As one of the men pointed out, the city’s predicament is startlingly evocative of opening a troublesome door in an orbital module – an inspired and apt comparison for a community adrift in a policy vacuum and governed by people who do not seem to be living on this planet. 

In uttering these few words of confidence, the trio of senior Air Force officers gave Hong Kong a glimpse of something we see more rarely than the transit of Venus – leadership.

And the benefits don’t stop there.  It is possible, we are told, that
a seat can be found on a future mission for someone from Hong Kong.  While they didn’t spell it out, I get the distinct impression that they are willing to entertain suggestions.  Can we think of anyone who could best serve Hong Kong by being strapped into a rocket and propelled into the distant darkness?  I am sure we can.
Tue, 9 Dec
Global stock markets surge, with the Hang Seng Index closing yesterday up 8.66 percent as investors greet the US and other countries’ visionary and decisive fiscal stimulus plans with optimism and relief.  Thus the Great Crash of 2008 finally comes to an end.  China can go back to producing and exporting billions of metric tons of extruded plastic electronic children’s clothing and sending its vast surplus savings to the US.  And the Americans can go back to lending this inward flood of capital to their label- and gadget-addicted, sub-prime un-creditworthy retail gluttons, to buy ever-more pricy houses, gas-guzzling SUV-Panzers and all the Nikes, iPods and Barbie dolls – Guangdong Made With Pride – Wal-Mart can carry.  Firms across the world will soon return to borrowing from obliging banks and adding employees to expanding payrolls.  Still, it looked bad there for a moment.
Not wishing to be left behind, the Hong Kong Government unveils its own economic rescue package.  After years of accumulating bloated and unnecessary levels of reserves, our officials are now determined to chuck it down the toilet.  Or at least appear to be.  It is almost impossible to tell what this gang of losers really has in mind as it withdraws deeper into siege mode, dazed by a barrage of criticism after slipping into a bizarre pattern of making the wrong decision on everything, always.  So methodical is this behaviour that perhaps it is not incompetence so much as willful self-harm.  A cry for help. 

The package includes the 73rd announcement since September about speeding up pointless infrastructure projects, and the hiring of equally superfluous civil servants, some of whom will be only temporary burdens on the productive part of the population.  What will all this cost compared with simply sending the unemployed a cheque for HK$10,000 a month for a year or two with a request to shut up?  Two times as much?  Five?  Ten?  A useful question for a pro-democracy legislator to ask, should any have the brain cells.

The scariest part of the package – and the bit that raises suspicions that this is more PR exercise than substance – is the plan to offer a gargantuan HK$100 billion in loan guarantees to small and medium enterprises.  In theory, any grubby boss of a little backstreet firm will be able to borrow up to HK$6 million on the strength of this, provided he can come up with a vaguely convincing sob-story about otherwise having to lay off dozens of people with families to feed.  Anyone happy with the simple comforts of life can easily retire on the Mainland with such a sum.  Not that such a thing would ever occur to our quick-witted, fast-acting entrepreneurs, of course.  Even so, it is hard to imagine that our policy-making geniuses, however punch-drunk and traumatized, have lapsed into such a state of collective lunacy that they would imperil the equivalent of three years’ health care expenditure this way.   In practice, taxpayers will pray, the strings attached will keep the money safe.

With the Great Global Economic Crisis of 2008-2012 soon to be a distant memory, the whole rescue deal will presumably not be needed anyway.  Some of the participants in
a long-running conversation on Big Lychee property prices will surely feel this way.  Reading through the last few weeks’ comments right at the bottom of the page on the AsiaXPAT thread, two competing philosophies emerge.  One – the ‘macro’ approach – looks at the global trade and capital flow imbalances, the mountains of deleveraging still to come and the apparent mismatch between the price of concrete boxes in Hong Kong and the true market value of anything else you care to mention on the planet.  According to this line of thought, patient folk will be able to pick up apartments at half their current price or less by 2010 or so.  The ‘micro’ opposition, who tend to take a more Hong Kong-centric view, see markets bottoming out and cash-rich Hongkongers chomping at the bit to buy already cheap units.  All I know is that there is money to be made from man’s limitless capacity for self-delusion.
Wed, 10 Dec
The US stock market plunges overnight, as investors mull over the possibility that borrowing some
US$8 trillion – over 50 percent of the USA’s 2007 GDP – in order to stimulate more borrowing in a society crushed by US$51 trillion of debt is… well, different.  US household debt stands at 98 percent of GDP – it works out at something like US$118,000 of debt and US$300 in savings for the average family.  If only the country’s financiers and Government could be so prudent.

Meanwhile, Beijing tweaks the Yuan down a bit, Guangdong Province goes easy on enforcing factory environmental rules, and in Hong Kong Sir Bow-Tie offers to guarantee loans for the front-end of the Pearl River Delta’s export manufacturing base.  If that doesn’t get 300 million heavily indebted Americans fearing joblessness storming Wal-Mart with their credit cards, what will?

On my desk in S-Meg Tower this morning I find a curious reminder that even the most financially ruined inhabitant of the profligate West still needs at least a few cheap plastic consumer items.  Yesterday was Love Teeth Day, and every employee of this company received a yellow bag containing a toothbrush, toothpaste, floss and mouthwash, plus a leaflet from the Hong Kong Government’s highly dedicated Condescending Oral Hygiene Advice Unit. 

The mouthwash, interestingly, is made in Thailand – the land of mint-smelling smiles.  And the floss is, of course, a product of Ireland, where, thanks to the peaty soil and plentiful Atlantic rain, the stuff sprouts out of the ground.  But everything else in the bag, right down to the feudalistic and totalitarian tones underlying the official ministrations on avoiding gum disease, is from China. 

After consulting with Ms Fang the hunter-killer secretary and two of the three Stanleys from the Mailroom, I find that Hong Kong’s 32nd most dynamic conglomerate received the oral hygiene kits in return for a donation to a Community Chest
fund that pays for the Big Lychee’s indigent elderly to get their teeth fixed.  Inspired by this act of charity and good corporate citizenship, we resolve to send our Love Teeth Day bags to an equally needy and deserving cause – the Americans.
Thurs, 11 Dec
After encountering one or two slight hiccups in the last few months, the Hong Kong Government suddenly finds itself basking in two glorious successes. 

The first was the prompt machine-gunning to death of more than 90,000
chickens.  Ostensibly this was to ward off the threat of avian flu, but the real aim was quite possibly to send an unequivocal warning to the city’s 7 million monkeys, who have been showing increasing signs of misbehaviour recently, parking taxis on the airport expressway, whining about Lehman minibonds and generally expecting too much.

As if to prove the point, our leaders swiftly followed through by exerting their full executive might to
vanquish treacherous legislators threatening to abolish the infamous levy on foreign maids.  This triumph came thanks to the Legislative Council members who represent tycoon-dominated business sectors.  Officials armed with thumbscrews and probably promises of finely targeted ‘job creation’ measures, convinced these lawmakers that it was essential to a) impose a tax on the middle class to pay for training the unskilled and b) suspend the tax for five years.  The noes in the left-hand column have it. 

It takes an unusual genius to relieve the bourgeoisie of a much-detested fiscal burden and have them hate you for it, but nothing is too difficult for Chief Executive Donald Tsang and his dazzlingly logical Secretary for Labour Matthew Cheung when a rare and apparently engrossing opportunity to save face presents itself.
Outside the comfort of our giant, lychee-shaped bubble, a vast shadow spreads ever-widening gloom over the whole planet.  Mainland China’s exports fell 2 percent in the year to November, and imports over 17 percent.  After two decades in which double-digit growth has come to appear normal, a sudden 2 percent contraction is going to come as a shock to someone.  What do you do when, almost overnight, the American consumer decides to stop buying Tommy Hilfiger underpants, Sony PlayStations and antifreeze-flavoured toothpaste?  But that’s on the other side of the border, and the other side of the Pacific Ocean.  Thank God we are safely in Hong Kong with its resurgent, no-nonsense Government, and all we need to do is pause for breath for a while before going back to selling each other 500 sq ft concrete boxes for ever-rising millions of dollars after next June.
Fri, 12 Dec
At the morning meeting on the top floor of S-Meg Tower, in the heart of Asia’s international financial centre, the word of the day is ‘inventories’.  The company economist explains that China’s exports could fall 10, even 20 percent year-on-year sometime in 2009 because retailers in the US have warehouses bursting at the seams with gadgets, clothing, toys and knickknacks assembled by the Pearl River Delta’s nimble-fingered, now-idle, factory workers.  Even when the backlog is cleared, he says, orders will not go back to the levels we saw earlier this year.  It could be many years before American consumers go back to buying every latest gizmo whether they need it or not.

The Big Boss carefully moves the three-legged toad with the coin in its mouth so it can get a better view of the proceedings.  Dutifully and patiently facing north from its perch on the vast conference room table, year after year, the ceramic creature has largely performed as the feng-shui voodoo scamster promised, attracting a healthy stream of riches into the conglomerate’s coffers.  But there is only so much the mutant amphibian can handle.  As our in-house diviner of burnt turtle shells starts pontificating about China’s imports (same story in reverse about raw materials), our Chairman assumes that look of miserable irritation that strongly suggests a change of subject.  With the firm’s trading activities grinding into slow-motion, he does not need an academic lecture on inventories.

Help is at hand, however, as pro-active and dynamic Chief Executive
Donald Tsang and five lucky hangers-on prepare for a Big Important Visit to the Central People’s Government in Beijing.  In Zhongnanhai, senior users of black hair dye must be muttering with each other about the imminent arrival of that tiresome little man Zhang bowing and scraping and groveling for economic help.  “Promise to send another few million tourists,” they will be saying, “that usually shuts him up.  That and a pat on the head.”

Out of the mouths of babes, innocents and puffed-up inheritors of second-tier bits of the Big Lychee’s property cartel – exasperation with the Hong Kong Government’s embarrassing habit of begging the Mainland for ‘win-win’ free lunches.  Ronnie Chan, bumptious boss of Hang Lung, utters
words of uncharacteristic profundity when he protests aloud at the fragrant harbour’s constant kowtowing to the imperial throne. 

Yes, it is unseemly.  But, as our tireless officials will discreetly point out, this is actually the Mainland way of doing things.  Bristly chinned, chain-smoking, greasy haired cadres from huge but obscure cities routinely lobby for some privilege or other for their regions.  In some cases, they are driven by an urge to bite into Hong Kong’s traditional business.  That should be a reason for the nation’s richest city to let that business go and move on, but since the British departed in 1997 – apparently taking the municipal three-legged toad with them – the future has become something to fear, and we must cling to yesterday’s industries at all costs. 

Then there is the subtext to the whole thing.  Beijing doesn’t want a proud, confident and assertive Hong Kong that can look after itself – they might declare independence, or invite American and British China-haters in to overthrow the Communist Party.  It wants a self-pitying, scared, helpless community that looks to the Motherland as its only hope for continued material gain.  The former colonial running dogs must be brought to heel and made obedient, loyal and reverential.  The constant begging for goodies is partly about conditioning the population.  The relative incompetence of the local administration versus the far slicker and more capable Hu-Wen double act further encourages us to be thankful for a place in the PRC.  Someone needs to explain all this to Ronnie Chan.  Shoe-shining and screwing-up come naturally to Sir Bow-Tie – but perhaps it’s also what he’s paid to do.