Big Lychee, Various Sectors

Yesterday I wondered whether or how rents have reflected population changes in different Hong Kong districts over the last five years. Joel Chan comes up with the data.

Anything expensive (that’s all apartments in Hong Kong island, plus big ones in the New Territories) have fallen by around 5-8%; relatively cheap ones (small ones in NT and especially Kowloon) have risen by at least 4% (10% for the smallest Kowloon flats); the 500-1,000 sq ft units in Kowloon and NT are unchanged. Which seems to say, in short, that wealthier tenants have been leaving the city or trading down, while penny-pinching ones are coming in. Bear in mind that the number of small units city-wide is much larger than the number of really big ones.

More on statistics – the number of paper cups used at the Rugby 7s last weekend. Click here to find out. It’s about 10 times what I would have guessed.

The US imposes sanctions on six NatSec-related officials in Hong Kong, including Justice Secretary Paul Lam (doesn’t care) and several top police. 

Beijing’s Hong Kong Office for Safeguarding National Security, whose boss is among the sanctioned, dismisses the measure as ‘a piece of waste paper’.

The Hong Kong government issues a more splenetic statement…

The Government of the Hong Kong Special Administrative Region (HKSAR) today (April 1) strongly condemns the United States (US) for including six Central Authorities and HKSAR officials in a so-called “sanctions” list in an attempt to intimidate the relevant officials safeguarding national security. It, once again, clearly exposed the US’ barbarity under its hegemony, which is exactly the same as its recent tactics in bullying and coercing various countries and regions. The HKSAR despises such so-called “sanctions” and is not intimidated by such despicable behaviour.

If you like this sort of press release, there’s a giant one on the US’s latest HK Policy Act Report…

The Government of the Hong Kong Special Administrative Region (HKSAR) today (April 1) strongly disapproved of and rejected the untruthful remarks, slanders and smears against various aspects of the HKSAR in the United States (US)’s so-called 2025 Hong Kong Policy Act Report. It was apparent that the so-called report was compiled to serve the political purpose of maintaining US hegemony. It, once again, clearly exposed the US’s barbarity under its hegemony. By piling up false stories and narratives, they were clearly crafted to serve the political interest of the US in order to suppress the development rights and security interests of others.

…The US once again told fallacies about Hong Kong by replacing the rule of law with political manipulation and confounding right and wrong, and blatantly interfering in Hong Kong affairs which are entirely China’s internal affairs. The US’s attempt to undermine the stability and prosperity of Hong Kong will only expose its slyness and will never succeed.

The spokesman said, “The so-called ‘sanctions’ arbitrarily imposed against the officials of the HKSAR and the Central Authorities who perform their duties in accordance with the law by the US at the same time when publishing the so-called report smacks of despicable political manipulation to intimidate the relevant officials safeguarding national security. These grossly interfere in China’s internal affairs and Hong Kong affairs, and seriously violate the international law and the basic norms governing international relations. It, once again, clearly exposed the US’s barbarity under its hegemony, which is exactly the same as its recent tactics in bullying and coercing various countries and regions. The HKSAR despises such so-called ‘sanctions’ by the US and is not intimidated by such despicable behavior. The HKSAR will resolutely continue to discharge the duty of safeguarding national security. The HKSAR Government will make every effort to protect the legitimate rights and interests of all personnel.

…”The US Government had vilified the HKSAR’s legislative work, as well as law enforcement agencies, prosecutorial and judicial authorities, in claiming that fulfilment of their duties constituted an ‘erosion of rights and freedoms’. However, the fact is that the US has been ignoring the non-interference principle under international law, interfering with other countries’ internal affairs, grooming agents, instigating ‘colour revolutions’, and even creating social unrest and multiple humanitarian disasters through economic and military coercion, causing suffering to people in many countries. In the HKSAR, the ‘black-clad violence’ and the Hong Kong version of ‘colour revolution’ back in 2019 have severely damaged the social stability of Hong Kong. 

Etc.

If you thought we had heard the last of ‘soft resistance’, you were wrong. Security Secretary Chris Tang warns against the phenomenon ahead of the 10th National Security Education Day on April 15…

“Citizens must think critically and not be misled by the lies spread through soft resistance,” Tang said, calling on residents to cherish Hong Kong’s “hard-won” stability post-2019 unrest.

Tang said a series of events has been organized to mark the National Security Education Day, including a thematic exhibition at the National Security Exhibition Gallery at the Hong Kong Museum of History, featuring robot-guided tours.

A territory-wide interschool national security knowledge challenge is ongoing to enhance recognition of national security among primary and secondary students.

Educational comics and animations featuring characters “Andy” and “Security Bear” produced by the bureau were also launched to illustrate national security concepts, he said.

…Tang criticized Hans Yeung Wing-yu, a former Hong Kong Examinations and Assessment Authority history manager, for allegedly exploiting a student’s suicide during a mainland exchange to incite anti-government sentiment.

Yeung, who had fled to the United Kingdom, previously sparked outrage with an exam question framing Japan’s 1900-45 invasion of China as having “more benefits than harms.”

“He is anti-China, humiliates the nation, and panders to Japan – his actions endanger national security,” Tang said.

He also accused Chung Kim-wah, ex-deputy head of the Hong Kong Public Opinion Research Institute, and commentator Stephen Shiu Yeuk-yuen of similar tactics.

I am guessing that’s Security Bear up there on the right (the one in blue), though it could be Andy, or one of the robot exhibition-guides. Seen here, anyway. 

From the census officials via stats guru Joel Chan – changes in population in Hong Kong by district, at year-end 2024 compared with end-2023 and end-2019. In part…

Parts of the New Territories have gone the opposite way…

For the city as a whole, the changes are very small…

Hong Kong 7,432,500 ↓0.2% / ↑0.1%

Not sure how the government manages to track the number of residents in each district to the nearest 100 year by year. But if they say Wanchai District has lost nearly one in ten of its population, who are we to doubt it? Though not exact, there is noticeable correlation between population changes and median household income by district (2023 figures here). Wanchai (which includes Happy Valley, Tai Hang and Causeway Bay) and Central and Western are the wealthiest areas, while Tuen Mun and Yuen Long among the least well-off.

Simple predictable explanation: expat and local middle class leaving, Mainlanders arriving.

It would be interesting to see data for residential property prices. Have they fallen more on northern Hong Kong island than in NT? What about rents? 

The Diplomat has a Hong Kong-centric take on the CK Hutchison ports saga. There are some debatable points (for example, whether the company sought Beijing’s approval). But it poses some interesting questions…

This backlash reflects Beijing’s increasingly uneasy relationship with Hong Kong’s business elites. Despite the waves of [Natsec] securitization in recent years, the Chinese party-state still lacks formal channels of influence vis-a-vis Hong Kong businesses, and the port sale has only deepened the Chinese Communist Party (CCP)’s suspicion toward Hong Kong’s capitalist class. While Beijing has long co-opted local businesses to govern Hong Kong – a strategy pioneered by the British colonial government – it has become increasingly distrustful of their autonomy, profit-driven motives, and lack of patriotism. Beijing’s public pressure campaign against CK Hutchison portends a growing effort by the CCP to direct Hong Kong’s independent business interests.

As the article notes, Hong Kong companies do not (yet) have CCP committees attached to them.

Transcript (audio available) of an interview with Mark Simon on the Jimmy Lai trial… 

“What really shocked me was here is an English laws educated judge wearing a funny wig, basically stealing another culture you could say, you know, the British culture. And she’s up there telling a guy you’re Chinese. She’s parroting a line of the CCP, which they tell Chinese all over the world: You’re Chinese. We own you.”

…”I’ve always believed that they know they have nothing on Jimmy. Jimmy Lai has basically been tried on two things: tweets and what he said in terms of on-air comments or something like that, the whole collusion thing is pretty much collapsed. Because the fact of the matter is, Jimmy really in an overall sense did not meet with many people in eight years. He went to Washington DC twice largely because he wanted people to understand about press freedom. Press freedom was really the driving force early on with Jimmy. He’s always been a democracy activist. He’s always been pro-democracy.”

But Lai’s lifelong advocacy for democracy clearly irked the authority in Beijing, and they were determined to silence him – so much that they locked the 77-year-old diabetic in solitary confinement inside Stanley Prison, a pre-World War II maximum-security facility known for housing Hong Kong’s most dangerous criminals.

Throughout his imprisonment, Lai has steadfastly maintained his innocence, insisting that the charges against him are politically motivated attempts to suppress press freedom and democracy. But even he may not have anticipated that his skin color –  “yellow” – would be invoked in a court of law, as Judge Esther Toh Lye-ping suggested it as a condition of his alleged offense.

Beijing issues new measures against foreign sanctions…

Article 7 of the Regulations specifically allows for the seizure of intellectual property of those that “directly or indirectly participate in the drafting, decision-making, or implementation of the discriminatory restrictive measures in Article 3 of Anti-Foreign Sanctions Law.”  Paragraph 2, Article 3 of the Law reads, “Where foreign nations violate international law and basic norms of international relations to contain or suppress our nation under any kind of pretext or based on the laws of those nations to employ discriminatory restrictive measures against our nation’s citizens or interfere with our nation’s internal affairs, our nation has the right to employ corresponding countermeasures.” 

A BBC China story – even a non-soccer fan can’t help but read on…

With a minute left on the clock and trailing Japan 6-0, Chinese defenders were likely wishing for the sweet relief of the final whistle.

But Japan’s Takefusa Kubo was not feeling charitable. After watching his team-mates toy with their opponents for a while, he received a pass on the edge of the Chinese box and rammed home Japan’s seventh goal.

The ball rocketed into the roof of the net, and the man known as “Japanese Messi” condemned China to their worst-ever defeat in a World Cup qualifier.

The 7-0 spanking in September – described as “rock-bottom” by a Shanghai-based newspaper – followed a year-long line of humiliating defeats which included losses to Oman, Uzbekistan and Hong Kong.

But worse was to come.

Corruption and authoritarian rule, no less.

Back to the Diplomat – a Beijing-funded trip to China for Taiwanese…

While participants signed up to visit Hainan, expecting beaches and tropical landscapes, the actual itinerary was shrouded in secrecy. Each evening,we received details for the following day’s schedule, which differed drastically from expectations. Instead of leisure time on Sanya’s beaches, the group was subjected to propagandistic programming.

…Through subtle manipulations, the CCP turns unsuspecting participants in these supposed tourist trips into ambassadors for its narrative. These travel groups, though varied in size and theme, all serve one purpose: to propagate China’s vision of cross-strait unity. By having the tour guides or CCP officials showcasing urbanization and military power, they promote an image of a modern and unified China.

Without realizing the risks, these Taiwanese tourists become pawns in a larger geopolitical game. The CCP’s infiltration into the Taiwanese understanding operates incrementally, one tour group at a time, eroding the boundaries that separate Taiwan from China.

Want ‘the latest society scoop, royal news, and style inspiration’? Of course you don’t. But anyway, here’s Town and Country magazine’s Snob’s Guide to Hong Kong…

When it comes to shopping, Hong Kong has no small number of great options. We always get a charge from visiting the K11 Art Mall in Tsim Sha Tsui, which is home to fashion and jewelry boutiques, restaurants, and live events. Other high-end destinations around town include shopping centers like Pacific Place (don’t forget to stop at Shanghai Tang), Landmark, The Peak Galleria, and Russell Street in Causeway Bay, which was once home to the world’s most expensive retail real estate and still draws crowds thanks to shops like the locally legendary Lane Crawford.

But not all your shopping needs to be done this way. 

Well, that’s true.

Secretary for Security Chris Tang issues a response to Ming Pao‘s response to his earlier response after a reporter asked him a question he didn’t like. Details at HKFP, which adds…

Over the past two years, the Hong Kong government has lashed out at Ming Pao over news reports, opinion pieces, and satirical cartoons.

On March 5, Tang warned the paper not to be “exploited by people with ulterior motives” as he condemned legal scholar Johannes Chan for “undermining the rule of law” in a Ming Pao opinion piece criticising a court ruling.

In January, the newspaper defended its journalism after the government described one of its reports on a cybersecurity bill as “biased and misleading.”

In August, Ming Pao urged its columnists to be “prudent” and “law-abiding” when penning for the newspaper, saying “crisis may come” if they were not compliant.

He is not the only government minister having problems with the media asking questions. Starting around five minutes into this Bloomberg vid, Financial Services Secretary Christopher Hui gets a reasonable question about the possible impact of the CK Hutchison ports deal drama on the financial sector. He reels off a list of barely relevant reasons why Hong Kong is an anchor of stability and top financial hub. The interviewer asks the question again, only to get pretty much the same non-answer. A second interviewer comes in and asks specifically whether he thinks the deal will go through. For a third time, he recites press-release jargon.

The word is that he stormed out of the studios without getting his make-up removed.

If he was really unprepared, it would have been better to just say it’s a sensitive issue and I can’t discuss details.

Why were the reporters’ questions about the repercussions of the port deal perfectly valid? Look no further than two more stories.

A report (by Bloomberg) says that Beijing is telling state-owned companies not to start any new business with firms linked to Li Ka-shing…

China has told state-owned firms to hold off on any new collaboration with businesses linked to Li Ka-shing and his family, according to people familiar with the matter, after the Hong Kong billionaire irked Beijing with his plan to sell two Panama ports to a global consortium.

The directive was issued to state-owned enterprises last week at the behest of senior officials, the people said, asking not to be identified discussing private matters. Existing tie-ups are not affected, they added.

Under the directive, state enterprises wouldn’t immediately get approval for business activities linked to the tycoon. The regulators are also reviewing what investments the family has in China and abroad in a bid to better understand the breadth of their business dealings, the people said.

…The order to pause new dealings doesn’t necessarily mean Beijing will bar state firms from working with businesses linked to Li. But it does ratchet up pressure on the 96-year-old billionaire after CK Hutchison’s deal with a BlackRock Inc.-led consortium to sell ports in Panama and elsewhere put his conglomerate’s flagship entity in the crosshairs of US-China tensions.

(HKFP/AP story here.)

How much does this ‘ratchet up the pressure’? Is that a veiled threat in the last sentence of the second para? What sort of message does it send the foreign investors Beijing wants to attract? Is Li Ka-shing, looking at a US$19 billion deal, going to pay any attention?

A local spin from the SCMP, which in which the Hong Kong government feels a need to get involved…

Tycoon Li Ka-shing’s CK Hutchison Holdings and the Hong Kong government are discussing “a reasonable way out” with a week to go until the deadline for sealing a controversial deal to sell its two Panama ports to a consortium led by US investment firm BlackRock, the Post has learned.

Sources said on Wednesday that the government had approached Hutchison immediately after learning from its surprise announcement on March 4 that it was selling all its overseas port operations to a group led by the US firm.

…“Both sides have since been in contact, trying to look for a reasonable way out,” a government source said.

Other sources said the options were limited as pulling out of the sale was likely to be costly and carried serious political implications while pressing ahead with it would exact a toll on both the company and the country.

RTHK reports yet another Ta Kung Pao piece on the issue…

The article by the Ta Kung Pao newspaper quoted business experts who questioned whether the Li Ka-shing-owned conglomerate had gotten the best deal it could have, stressing that businesses should “stand with the nation in the face of hegemonic bullying.”

The article noted that public opinions that the sale did not appear to conform to the business logic of maximising profits.

“Not only is the valuation of the assets low, but the decision was made very quickly, without adopting the ‘highest-bidder wins principle,” the article said.

“Western media reports have also pointed out that the US consortium had gotten a bargain.”

The apparently gravely concerned, warm-and-fuzzy but never quite convincing argument that your foe is picking up a stone only to drop it on his foot. Nice of the writer to care so much for CK Hutchison’s welfare, but if anyone wanted to bid more for the ports, they are (or were) free to do so. Many people would say that, with the world turning protectionist, US$19 billion was pretty rich for a bunch of cranes and wharfs.

Some weekend reading – the Hong Kong government’s anguished statement on the UK’s latest six-monthly survey of the city…

 The Government of the Hong Kong Special Administrative Region (HKSAR) strongly disapproved of and must resolutely refute the untruthful remarks, slanders and smears against various aspects of the HKSAR in the so-called six-monthly report on Hong Kong: July to December 2024 of the United Kingdom (UK) today (March 27).

(Continued for 18 paras.)

The Standard reports that Hong Kong Talent Engage (it’s a thing) is posting a video on China’s Little Red Book social media platform warning would-be skilled Mainland migrants of the dangers of scams when they get a visa to work in the city…

The initiative offers mainlanders the latest updates on Hong Kong’s talent policies, employment and lifestyle, while also addressing anti-fraud measures, warning against black market traps and policy rumors, and assisting with residency issues to help them kickstart their careers in the city.

To mark the occasion, HKTE invited [Labour and Welfare Secretary Chris] Sun to star in a short video, where he led a talent team to introduce “T Sir” and “E sister” to hundreds of millions of Xiaohongshu users in the mainland.

In the video, Sun takes on the role of a talent team convener, skillfully using electronic devices to summon the two characters while outlining their important missions.

“This mission has two main objectives: first, to raise awareness about fraud among talent and to avoid believing in false information. Second, to promote our talent services,” he emphasizes.

An HKTE spokesperson said “T” stands for “Talent” and “E” represents “Engage.” And “T Sir” will focus on sharing official information and debunking rumors, while “E sister” will offer practical and valuable insights into living in Hong Kong.

The spokesperson said the goal is to effectively attract and support talent in settling down in Hong Kong, ensuring a seamless transition as they begin a new chapter in their lives.

Conveniently, the paper reports just such a scam over the page.The conmen call the victim and claim to be Mainland police investigating money-laundering. They prey on ignorance and gullibility, but also fear: the trick works best if the victims have (or think they have) indeed infringed Chinese capital controls when moving cash across the border. Either way, what does it say about the quality of the ‘talent’?

And what will skilled Mainlanders make of ‘T Sir’ and ‘E Sister’?

HKTE’s English page on scams. An entire Anti-Deception Coordination Centre is out there, producing videos on every ripoff imaginable, including the Romance cum Investment Scam.

New Bloom describes how China’s ‘soft power’ has failed to work in Taiwan. Essentially: Chinese popular culture has become politicized and alienating to Taiwanese; punishment of Taiwan companies that fail to endorse Beijing’s line has similarly alienated public opinion; and Taiwan’s sense of identity has strengthened…

The 2019 crackdown on Hong Kong was a turning point. Many in Taiwan had once considered China’s “One Country, Two Systems” model. But after seeing Hong Kong’s freedoms stripped away, support for that idea collapsed. China’s promise of peaceful coexistence lost credibility. Unification with China now looks like a direct threat to Taiwan’s democracy…

…China’s failure in Taiwan exposes a deeper flaw in its approach. Soft power is about attraction, not coercion. Unless China dramatically rethinks its approach, reunification will remain as distant as ever.

China File looks at Taiwanese people’s view of themselves as non-Chinese as the KMT increasingly sees the CCP as an ally…

In a recent interview with Japanese media, senior KMT legislator Weng Hsiao-ling was frank about her party’s objectives. She told Nikkei Asia that “the peaceful unification of this country is of course our ultimate goal.” Even though there “may be no way to achieve this immediately,” she continued, “cross-strait communication and interaction” can help achieve this objective.

In her interview, Weng asserted that all Taiwanese people are Chinese. Yet poll after poll by National Chengchi University (NCCU) in Taiwan, originally founded in China a century ago as the KMT’s party school, show that Taiwanese respondents see things differently. In the university’s most recent survey, 94.4 percent of respondents said they identified as either Taiwanese or Taiwanese and Chinese. Of that supermajority, nearly two-thirds said they viewed themselves as Taiwanese exclusively. Only 2.4 percent of respondents said they felt they were Chinese only, with 3.2 percent declining to answer.

NCCU polling has also found that Taiwanese overwhelmingly reject unification with the PRC. Only 1.1 percent of respondents to a similar poll from late last year sought unification as soon as possible, with 5.8 percent favoring maintaining the status quo and moving towards eventual unification. On the other side of the lopsided spectrum, 34.1 percent favored maintaining the status quo—effective independence—indefinitely. Another 26.4 preferred keeping the status quo and deciding later, while 22.5 percent said they wanted to keep things as they are for now, with the eventual goal of doing away with the ROC and establishing a Taiwanese state.

Recall that the bulk of Taiwanese are descended from Fujianese who started settling on the island around the same time the English began colonizing Massachusetts and Virginia. It’s not as if there was even much of a window of opportunity in the 1980s-90s, when it seemed 1C2S could work in Hong Kong and even encourage liberalization in China. Prior to democratization in the 80s, the KMT denounced China’s government as ‘communist bandits’. Following democratization, Taiwan people became free to openly reject the KMT line that they are Chinese. 

As these articles suggest, there is no way Taiwan will accept Chinese rule peacefully. That leaves Beijing with two choices: use violence – which would prompt global sanctions and crash China’s economy – or just forget it.

The SCMP reports on the office glut…

How do you solve a 15-million-sq-ft empty office space problem in Hong Kong, a size larger than all the space in existing prime office buildings in the city’s main business district in Central?

This is the dilemma facing Hong Kong office landlords and asset managers, given the current vacancy rates and future supply of new buildings.

Given the long-term trend, it is likely to take at least seven years for the demand to catch up with the supply, according to property consultancy CBRE. Office landlords would thus struggle to fill the void, it added.

“By the end of this decade, the vacancy pressure is likely going to be very similar to what we are seeing in the market today,” said Marcos Chan, executive director and head of research at CBRE Hong Kong. “That is on an assumption that the market demand will be quite similar to what we used to have, before the market experienced a downturn a couple of years ago.”

The seven-year estimate appears to be on the optimistic side. If the current net annual demand for prime office space stagnates at 1 million sq ft, it could take 15 years to fill these vacant offices with tenants, according to data cited by Edward Chan, director of S&P Global Ratings.

Hong Kong developers added 8.5 million sq ft of office space since mid-2019, failing to adjust for economic calamities. As anti-government protests and Covid-19 outbreaks sent the economy into a recession, the city’s grade A office market shrank by 1.3 million sq ft and rents slumped 40 per cent, according to data tracked by CBRE.

What level of incompetence does it take for planners and policymakers to bring about a massive glut of offices and a simultaneous shortage of affordable housing? Why did bureaucrats decree over a decade ago that Kowloon Bay would become an office hub like Central when they could have earmarked the space for homes?

The article adds…

…[CBRE] estimates that 186 premium office buildings with 8 million sq ft of vacant space could be suitable for conversion into accommodation.

The paper is drawing on a CBRE report, which cleverly uses the word ‘hub’ a lot in proposing government flexibility on repurposing older and smaller office blocks…

CBRE’s research identifies emerging sectors such as education, innovation and technology (I&T), healthcare and wellness, and creative and cultural industries as key drivers of growth in Hong Kong’s economy due to demographic changes and supportive government policies. These sectors require a different type of office space, one that combines living, working, and social elements to foster collaboration and innovation. 

The government anticipates a shortage of 180,000 workers across various sectors in the next five years, highlighting the need to recruit labor and tertiary students from overseas. Coupled with policy measures to attract high-calibre students and skilled professionals to Hong Kong, the demand for accommodation is expected to surge. 

Ada Fung, Executive Director, Head of Advisory & Transaction Services, CBRE Hong Kong said: “With demand for buildings that combine living, working, and social elements continuing to grow, the trend of living and working under the same roof will likely become more common in the coming years. We recommend landlords to adopt a hub-based commercial buildings with accommodation provided within a specific industry ecosystem. This can create synergy among occupants, enhance management and collaboration, and ultimately increase occupancy rates “

…landlords may need to fully or partially convert buildings to include accommodation or other non-domestic uses within traditional commercial space to achieve a round-the-clock ecosystem in commercial buildings.

Another real-estate consultant is pushing for offices to be converted into student housing, in particular.

Main problems: bureaucrats who have a longstanding aversion to changes in land/building use (unless a hefty lease conversion premium makes it unviable), and to the idea of more housing.

Also in the SCMP, Mike Rowse recommends a broad-based consumption tax to fix Hong Kong’s budget deficit…

[I suggest] we make a start on preparations for some form of a goods and services tax. I realise it will not be popular and will require very careful presentation and explanation. But we are kidding ourselves if we think the debate can be deferred indefinitely. It is inevitable and we should begin the conversation immediately.

My suggestion is to start small and gradually increase the range of goods and services covered. How about starting with something simple like utility bills such as gas, water, electricity and telecommunications? Eventually, we could also tax restaurant bills and luxury goods. As much as possible, we should keep collection at the wholesale level to simplify administration.

There will undoubtedly be pleas for exemptions. There is bound to be opposition to imposing the tax on kindergarten and school fees or medical expenses for example. It will take a strong financial secretary with the support of a disciplined legislature to resist. But the general aim should be to include everything eventually.

We can also set the tax at a low percentage initially – 3 or 5 per cent – and increase it later as necessary. Singapore followed this route, increasing its sales tax to 9 per cent last year without a noticeable loss of competitiveness.

We must borrow very large sums to finance essential capital expenditure. We can do so – and we must. Yet to maintain our reputation for fiscal prudence, and keep borrowing costs low, we must show capital markets that we have a credible plan to achieve fiscal surpluses and repay whatever we borrow. That means a goods and services tax.

Of course, such a tax is regressive. A 5% tax on electricity hurts the poor far more than the wealthy. It’s as unfair as charging below-average earners a higher salaries tax rate than millionaires. At the very least you would have to raise welfare payments and the minimum wage to compensate. 

It might be better to start with higher taxes on luxuries such as designer label shoes and handbags, ugly watches, tacky diamond necklaces – the entire inventory of high-end malls. Plus bigger/flashier models of cars. Why not additional stamp duty/capital gains tax on apartments over (say) HK$25 million? But here we run into vested interests: vendors of overpriced crap (and their landlords) will whine that it could deter tourist expenditure. Civil servants and their buddies buy big cars and apartments.

And then there’s the option of cutting bloated civil service salaries. Which would have to include retired bureaucrats’ pensions, on which subject former Administrative Officer Rowse is curiously silent. But in order to get the wider public to accept a GST, you would have to tackle that as well.

From HKFP – Security Secretary Chris Tang waxes wrathful about the Guardian’s piece on Jimmy Lai being denied his right to choose his own legal representation. 

Mark Simon on the CK Hutchison ports drama…

If they come for Li, they will come for anyone.  It is impossible to state that Hong Kong is a safe investor environment, when even Li is defenseless. If the largest, most successful businessman in its history is under threat for actions that are completely legal, everyone will be.

…No news organization anywhere in the world has covered Li Ka Shing in greater depth or more extensively than Next Magazine and Apple Daily; the publications of now jailed news media owner, Jimmy Lai.  

Without being too snarky, there’s a lot of people out there, giving their opinion on this deal. I’m sorry, but nobody knows Li better than the former journalists of our organization.  

We are 100% certain that Li would never do this port deal if he did not think he had approval from Beijing.  It would defy every action of his entire career that he would proceed to sell an asset when he understands the strategic implications for China without having a green light..

So what happened? Why now the attacks on Li’s port sale?

Donald Trump was able to claim victory in kicking out a Chinese linked company from Panama.  Trump’s victory was Xi Jinping’s loss. Xi doesn’t take losses.  

So just as they always have, the CCP with the assistance of the Hong Kong government is doing a little historical rewriting.  Li will be the bad guy.  Hong Kong chief executive John Lee will be the incompetent dupe. Hong Kong’s financial system will be the victim.

First they came for Jimmy Lai, now they come from Li Ka Shing. The irony is, the one company that would’ve said something, would have stood for the Hong Kong financial system, and Li, was Jimmy Lai‘s Apple Daily.

And from the (paywalled) Economist…

Mr Xi’s reported displeasure is understandable, given his image as a muscular leader capable of challenging America and defending China’s global interests. Chinese officials thus worry about appearing weak or unresponsive, says Zongyuan Zoe Liu of the Council on Foreign Relations, a think-tank in New York. Mr Xi also wants private Chinese companies to be more “patriotic” without government intervention.

Still, his current priority is to avert a full-scale trade war with America, since its impact on China could be more damaging for him. He may hope to reach an accommodation over Taiwan, too. Seeing Mr Trump’s preoccupation with Panama, there could also be leeway to carve out some ports from the deal during the 145-day window for exclusive negotiations. Conceding will be painful for Mr Xi. But resistance, in this case, could be more so.

Both these pieces suggest performative outrage to cover embarrassment rather than a vociferous determination to force CK Hutchison to abandon the deal.

Meanwhile, the company has offered shareholders HK$25 a share to approve the deal – 65% of its Friday closing price of HK$43.25.

Perhaps there’s a case for owning shares in legacy Hong Kong stocks like Cheung Kong, HSBC, Swire, Cathay, utilities, etc: potential dismemberment/sequestration break-up value when geopolitical tensions/Beijing pressure make it pointless to carry on. 

Further to Jimmy Lai – the Guardian explains the Court of Final Appeal’s recent rejection of his appeal against the barring of his British lawyer…

This week, an obscure legal development has, in the eyes of some legal experts, inflicted another cut on the city’s once revered legal system.

…The details of the saga date back to 2022, when [Tim Owen KC] was first approved to represent Lai. The Hong Kong government objected to Owen’s admission, but lost multiple appeals to have him blocked. So John Lee, the chief executive, turned to Beijing. In December 2022, the Chinese government issued an interpretation of the national security law, which had been imposed on the city in June 2020 to quell months of pro-democracy protests. The interpretation stated that the courts needed approval from the chief executive to admit foreign lawyers in national security cases.

Although Owen had been admitted to represent Lai before the interpretation was issued, Hong Kong’s national security committee nonetheless instructed the immigration department to deny him a work permit.

“It’s pretty well unheard of for somebody who is entitled to represent a client not to receive a work permit,” says Jonathan Sumption, a former supreme court judge who quit the CFA last year, warning that the rule of law was “profoundly compromised” in Hong Kong. “I think it tells us quite a lot about the view of the rule of law taken by the executive”. Sumption said that blocking Owen via a visa refusal was “a subterfuge” on the part of the government.

But the issue at the heart of Lai’s appeal was not the visa – but the fact decisions made by the national security committee cannot be legally challenged, a principle that has caused alarm in some legal circles.

Paul Harris SC, a former chairperson of the Hong Kong Bar Association, who fled the city in 2022 after being warned by the national security police that they were considering charging him with sedition, said that the principle “effectively gives the committee the powers of a police state”.

In case you haven’t seen it. Includes gloriously bad-taste reference to RFK Jnr at end…

…Not with a bang, but yacht tourism.

HKFP reports a Baptist U survey finding that low-income new Mainland immigrants in Hong Kong are earning less than they were in 2019…

It found that among those who were employed, 65 per cent earned a lower income last year compared with 2019. Their median income was 3 per cent below pre-pandemic levels, according to the report.

Meanwhile, among those who had lost their jobs in 2020, almost 60 per cent of them were still unemployed.

…Of those who found work after being unemployed in 2020, 15 per cent earned less than they did before.

Nothing on root causes. Are relatively new arrivals concentrated in those industries that never fully recovered from the impact of Covid? Are they particularly low-skilled? For context: Hong Kong’s unemployment rate is 3%.

From the SCMP – Ontario Teachers’ Pension Plan is moving its local office to Singapore…

…as it reduces its exposure to the region amid a dearth of deals and persistent political risks.

“We have made the difficult decision to close our Hong Kong office and plan to wind down on-the-ground operations over the coming 18+ months,” the fund’s spokesman said in a statement on Thursday.

“As part of this change, certain Hong Kong-based employees will be offered the opportunity to transfer to Singapore. Unfortunately, others will leave the organisation and we’re working to support each of them.”

Ontario Teachers’ managed C$255.8 billion (US$178.5 billion) as of mid-2024, making it the world’s 20th largest by assets under management. It manages funds for 340,000 retired and working teachers and invests in more than 50 countries.

The decision to close the office follows its move to step back from China deals and the departure of top regional executives.

The fund said in January 2023 that it would pause future direct investments in private assets in China while continuing to invest through fund partners. China accounted for about 2 per cent of its portfolio, or C$5 billion. Geopolitical risk was a key factor for the decision to pull back.

Taiwan comes in 27th in the latest World Happiness Report – and number-one in Asia…

Taiwan finished ahead of Singapore, South Korea, and Japan on a list dominated by Scandinavian and European countries. Finland finished first for the eighth year in a row, followed by Denmark, Iceland, Sweden, and the Netherlands.

The three East Asian countries ranked closest to Taiwan were Singapore at No. 34, Vietnam at No. 46, and Thailand at No. 49, per Liberty Times … Afghanistan closed off the list of 147 countries and territories.

Countries were rated based on factors including social support, gross domestic product per capita, healthy life expectancy, freedom, generosity, perceptions of corruption, positive and negative emotions.

The list was published by the Wellbeing Research Center at the University of Oxford in cooperation with pollster Gallup and the United Nations Sustainable Development Solutions Network.

A Rhodium Group paper on how China boosts investment/exports and minimizes consumption/imports in ways that framers of the WTO never thought of. Essentially, a wide range of state support for domestic companies, such as cheap capital and inputs, subsidized infrastructure and discriminatory regulations. The executive summary will suffice for most people.

Wondering about how the CK Hutchison-Beijing problem will be resolved. Over the years, CKH has invested more and more internationally, and now less than 15% of the company’s revenues come from China/Hong Kong. Maybe in another couple of years, we’ll wake up one morning and find the whole conglomerate has discarded its last remaining asset here and disappeared, leaving a message taped to the old head office door asking that any mail be sent to a tiny plastic flower factory in Tsuen Wan for forwarding. So long and thanks for all the fat margins.

The Hong Kong government announces that the Legislative Council election will take place on December 7…

All candidates will have to undergo vetting for patriotism and acquire nominations from a 1,500-strong Election Committee, which itself will also appoint 40 lawmakers from its own ranks.

Only 20 LegCo seats will be voted for democratically by the public, while the remaining 30 spots will be occupied by legislators from functional constituencies, mostly specific to particular industries, trades, or professions.

Lee also said on Tuesday that the Election Committee has 90 vacancies – a separate vote will be held on September 7 to fill the posts.

Members of the Election Committee, elected in a “small circle” vote, are considered to be Beijing loyalists. As of 2024, there were about 8,600 registered voters for the Election Committee, consisting of the city’s businesses, professionals, and delegates to China’s legislature, among others.

After pre-screening and nomination, all candidates for all 90 seats will in practice be filled by candidates who are hand-picked. Judging by the last exercise in 2021, even the 20 ‘democratically’ elected seats will have no genuinely independent – let alone opposition – candidates, leaving voters with no real choice. And thus no incentive to actually turn out. In an effort to get voting numbers up, the government might offer free public transport rides on the day, and will definitely remind everyone that it is illegal to urge others to boycott the poll. But it won’t be like the old days when voters could choose among well-known popular (or unpopular) personalities on the ballot. Officials will be keeping their fingers crossed that they can get the turnout above 30%.