HK government panics at sight of Roach

Former Morgan Stanley boss Stephen Roach came back to Hong Kong a few weeks ago after a previous spat…

“There ain’t gonna be any resilience here if China continues to underperform, period,” he said, pointing to the parallel slowdown in growth rates for the city and country at large. “It’s not something that I think you can necessarily count on to persist and project into the future.”

Rather than ignore him, the government issues a lengthy statement that can best be summarized as ‘ growing steadily blah blah international financial centre blah blah NatSec blah Greater Bay Area blah green finance blah Belt and Road blah blah’.

Back home in Connecticut (we’re not worth a long stay), Roach says the Hong Kong government is in denial…

…Roach told the Post on Thursday morning he was delighted the government had heard his message, but was discouraged to see it had dismissed his “data, and analytical-based arguments”.

He said the authorities’ rejection of his message over the troubles ahead for the economy lacked an “analytical” angle, and he was worried by their decision to resolve “tough problems” with a “descriptive spin”.

…During his speech, Roach noted the premise of his argument was based on the close connections between the economies of Hong Kong and the mainland economies following greater cross-border integration through flows of trade and finance, as well as tourism.

“The Hong Kong economy has effectively been swallowed up by the mainland economy – hook, line and sinker. With the Chinese economy likely to underperform over the foreseeable future,” he said.

He concluded that Hong Kong was unlikely to “spring back to life on its own”.

…“I would welcome the government’s response to my core arguments rather than counter their seemingly desperate attempts to throw up a smokescreen and deflect attention elsewhere.”

He also said in his speech that it was important for the financial hub to continue to allow for constructive criticism.

…“Solutions come from solving tough problems, not from PR statements.”

Hypersensitive reactions suggest that the critic concerned has hit a sensitive nerve – or in plain words, is right. The huge uplift in Hong Kong’s economy over the last 40 years mirrored, and resulted from, that of the Mainland. The city was in a unique position to leverage China’s abandonment of Stalinist economics, and it was an amazing coattails-ride. That phase of history is over. Officials would show real confidence in Hong Kong’s future if they acknowledged that and let go of the old high-property-prices zillions-of-tourists model.

Timothy McClaughlin adds…

Hong Kong has some of the highest rents in the world but Stephen Roach lives in the government’s head for free.

After fretting about the exodus of shoppers to Shenzhen, officials claim it is a success story for the Greater Bay Area. Insofar as it’s a success story for market forces and lower prices for consumers, they’re right. 

Two British judges resign from the Hong Kong Court of Final Appeal, one citing the political situation in the city.- unless you read RTHK, in which case he doesn’t.

In case you haven’t seen it – CE John Lee congratulates Ronny Tong on his puberty, twice, in video and text. (I mean it’s nothing – my brother’s 21st birthday was 40 years ago, and I still haven’t sent him a card.)

Some weekend reading…

Atlantic on Beijing’s bid to out-tech the US…

Xi gambled that he could partner with Russia and Iran, undermine the U.S.-led global order, and build a military designed to challenge American power—do all that and still benefit from the U.S. technology the Chinese economy needs to advance his ambitions. Perhaps he believed that capitalist greed would override national-security concerns, or thought he could rely on inaction from a divided and preoccupied Washington. Perhaps, too, he underestimated the complexities of the semiconductor industry and what it would take to develop the chips China needs.

Whatever Xi’s assumptions, he picked a chip war with a superior power before he had the armory to wage it.

And Lowy Interpreter looks at China’s claims to own much of the Philippines’ exclusive economic zone waters.