Some reading from the weekend

HKFP looks at the massive shift since November 2019 in the official line on District Councils. After the landslide pro-dem victory in the 2019 polls, Carrie Lam took a conciliatory (as in shell-shocked) stance…

“We were aware of the large number of voters coming out to cast their vote [partly due to] “deficiencies in governance… unhappiness with the time taken to deal with the current unstable environment and to end violence”…

That has since changed…

Xia Baolong, the then-director of China’s Hong Kong and Macau Affairs Office, told a seminar in February 2021 that “radical separatist forces” had entered bodies such as the Legislative Council and District Councils through elections. 

And more recently…

Secretary for Constitutional and Mainland Affairs Erick Tsang, during the second reading of the District Council overhaul bill, said those elements had “swindled” a large number of votes in the 2019 election.

Fresh DC elections will take place in December. Only pro-Beijing candidates will be on the ballot (and small local constituencies will be merged, etc). The remnants of the Democratic Party are, incredibly, agonizing over whether to run.  It will be illegal to ‘incite’ voters to boycott the election. Make a date in your diary.

(Reminds me of a story about the late, great Peter Cook. A media celebrity/bore’s secretary phoned him and asked if he would be available for a dinner party the star was planning. Cook asked the secretary to wait a minute, and then came back with the response: ‘Ah – I’m afraid, on consulting my diary, I see that I’m staying at home and watching TV that night’.)

Hong Kong’s health minister worries that more public hospital doctors are leaving for the private sector. Is net emigration of medical staff a factor here? Otherwise, how can the private hospital sector – which caters to a fairly small portion of the population – absorb an ever-rising number of docs?

For a change – someone arguing that China’s economy might be in OK shape after all. Nicholas Lardy bases much of his analysis on Beijing’s official stats.

The Guardian has a more conventional take, starting with this as a sort of straw man…

China’s economic miracle is over. What’s been happening in the past week – the weakness of the currency, the fall in prices, the financial stress evident in the residential housing sector – are all signs of a deeper malaise that will require the ruling Communist party to undertake structural economic changes that will demand a loosening of rigid political control. China’s leader, Xi Jinping, is a self-styled strongman who will not be prepared to make any concessions to freedom and democracy. Sooner or later, China will go the way of the Soviet Union.

The article says it probably won’t. Or if it does, it will impact the whole world.

A snippet from Michael Pettis, referring to a WSJ article on the subject…

But while most analysts now recognize that China must urgently raise the role of consumption in generating demand, and an increasing number recognize the institutional constraints in doing so, the real shocking imbalance, as this article notes, is China’s extraordinarily high investment share of GDP – now 44% of GDP – for which there is no remotely comparable historical precedent.

And a fascinating screenshot from that ultra-paywalled article. This consumption-is-decadence idea joins mercantilism and Juche-lite to form an economic trinity for a new era. Contrast with the Locke/Jefferson idea of liberty being rooted in the pursuit of happiness.

Academic Huang Yasheng argues that China’s post-reform entrepreneurship would have been impossible without Hong Kong…

…there is a deeply rooted view that China has discovered and crafted “a third way” to foster dynamic innovation: a development model that harnesses the efficiency of the market economy and the power of the state without having to rely on the institutional prerequisites of capitalism, such as rule of law and market finance. I disagree. 

…Hong Kong, at least until very recently, functioned as a hidden-in-plain-sight source of rule of law and market finance for many high-tech entrepreneurs in China…

Though mainland China does not have rule of law and market finance, it effectively outsourced those functions to Hong Kong after Deng Xiaoping succeeded Mao Zedong and launched China’s reform era.

…Hong Kong has been dragged away from the rule of law toward China’s “rule by law” – and this at a time of geopolitical tensions, deglobalization, and increasing economic insularity. New safe harbors have emerged, such as Singapore, but this time they are hosting economic refugees from China rather than performing the institutional functions that previously powered China’s high-tech entrepreneurship.

Michael Pettis (again) adds that Huang…

…distinguishes between the ability to develop advanced technology and the ability to benefit economically from its development. I would add that this ultimately determines whether or not technological advances are sustainable.

This would perhaps also apply to Beijing’s efforts to bring more of its science/tech diaspora back to China (as a – paywalled – FT piece argues).