Big Lychee, Various Sectors

HKFP lists retailers who have recently downsized or pulled out of Hong Kong. The article blames the 2019 protests and Covid, which spurred middle-class emigration and changed consumer habits – including a trend of leisure spending in far more affordable Shenzhen. Some F&B and other sectors have never recovered.

But will the victims be missed? Among them are the somewhat grotty supermarket chain DCH Food Mart, which I occasionally (as in maybe twice) bought things from. Then there is the MCL Plaza Hollywood cinema, Outback Steakhouse restaurants and CR Care health products stores, which were all places I vaguely knew of but never set foot in (NOKD). And then we bid farewell to Eggslut sandwiches, Flash Coffee, Garrett Popcorn and clothing/cosmetics outlet Paul & Joe – none of which I had ever even heard of. They sound trashy or at least ill-advised. The market is saturated with coffee and fashion brands. Anything called ‘Eggslut’ deserves to die. And how do you pay Hong Kong rents selling popcorn?

Former Transport and Housing Minister Anthony Cheung calls for a civil service pay freeze to help solve the government’s budget deficit. He notes that fiscal reserves of HK$1.1 trillion in 2018 are now at HK$570 billion. Much of that went to make up the shortfall during the economic shock of Covid – the ‘rainy day’ scenario officials have always used to justify the accumulation/hoarding of surpluses in the past. But with the economy now probably stuck with slower growth (basically a reflection of China’s own post-bubble slowdown), the deficits look structural.

Officials obviously hope to find new ways to boost growth. But all they can think of is more and more tourists, plus fanciful ideas for tech/bio/whatever hubs. Ultimately, Hong Kong needs to make some big adjustments. Assuming the currency peg will remain, the whole city needs to re-price itself. That means accepting lower housing and business rents as a good thing that will boost economic activity. And it means reducing the cost of government, most of which is salaries (and redundant infrastructure projects).

(Cheung warns that actual cuts to civil service pay would undermine consumption. Actually, a pay freeze is a cut, over time. But this is an old argument. If the economy is so dependent on public-sector employees’ household spending, that’s all the more reason to bring things back into balance.)

Easing into Snake Year gradually. Yesterday’s Standard reports Financial Secretary Paul Chan’s suggestions for tackling the government’s budget deficit…

Financial Secretary Paul Chan Mo-po has put forward potential areas for cost-cutting within education and health care and says adjustments will be made to the HK$2 fare scheme for the elderly and disabled in response to the fiscal deficit.

…He said the HK$2 fare scheme for the elderly cannot remain unchanged indefinitely as its current model is not financially sustainable.

…Regarding proposals to reduce or freeze civil servant salaries, Chan highlighted the importance of considering their impact on the private sector, particularly given the low unemployment rate.

With declining student numbers, maybe there are ways to trim education expenditure. But how can he cut health spending when public hospitals are already under-resourced? 

Assuming big tax hikes are out of the question, the only real options are: axing big infrastructure projects; and reducing civil service costs. 

Any justification for the huge Lantau reclamation went out the window when officials found that there is in fact space for several hundred thousand apartments in the New Territories (thanks to the miraculous disappearance of land ownership and other problems). And a public-sector pay freeze to bring government salaries into line with the private sector is long overdue.

Chan’s reported comments that lower civil service salaries would ‘impact the private sector, particularly given the low unemployment rate’ are puzzling. A tight supply of manpower will prevent private-sector employers from using government pay cuts as a pretext to reduce their workers’ pay (if that’s the undesirable impact he claims to foresee). Conversely, a mass exodus of government staff would prove that public-sector pay levels are in fact as low as they can get.

The real problem is that civil servants would whine like crazy. Maybe a threat to bring in Elon Musk would focus their minds.

The year ends with a strong smell of NatSec. A Twitter post…

Hong Kong pro-democracy politician / activist Lee Cheuk-yan (李卓人) — who’s being jailed for organizing protests/ rallies in 2019 — was seen restrained in chains like a felon and boxed in by at least 6 correctional officers in Queen Mary Hospital…

What a performance. (How many feet of chain did they bring?) If he was really a dangerous criminal – a murderer, say – he would not be seated among the rest of the public in a hospital waiting area.

And PORI pollster Robert Chung is (reportedly) taken in for questioning again in connection with ‘absconder’ Chung Kim-wah …

…Chung Kim-wah’s wife and son, his three siblings, and at least two PORI staff members had also been questioned by national security police.

…Police have issued a HK$1 million bounty for information leading to the arrest of Chung Kim-wah, as well as [18] others on the wanted list.

Bloomberg reports that Hong Kong bans are feeling the effects of the fall in prices of commercial property…

Average prices of office buildings, shopping malls and other properties have fallen more than 40% from their highs in 2018, eroding the value of the collateral backing many bank loans. Defaults are also rising as more property owners and developers run into cash flow difficulties.

Banks with soured loans and mortgages have been reluctant to sell the underlying real estate assets at a loss — but that is changing…

“Banks are realizing that if they don’t sell their commercial properties, the values will go lower and lower,” said James Mak, chief sales director at Midland Commercial Realty Ltd., a property brokerage. 

…Close to 40% of the HK$34 billion in Hong Kong commercial real estate transactions in 2024 were distressed sales or capital loss deals, where owners — including banks — sold properties for less than what they originally paid, according to data from Colliers International.

…The November sale of Cheung Kei Center caused seven lenders, including two Chinese banks and Hang Seng Bank, to realize a total of HK$2 billion in losses on a HK$4.6 billion mortgage they made in 2019, according to land records. 

I remember three or four guys who were pooling their money to buy one floor of an office building in Central. They mentioned the sum of roughly HK$100 million. That was around, um, 2018. 

Some other reading for anyone at a loss for something to do as Snake Year slithers in…

HKFP op-ed on the Hong Kong government’s obsession with appealing against court decisions recognizing same-sex marriage in overseas jurisdictions.

Is this fundamentalist Christians in the bureaucracy at work, or Beijing loyalists guessing this is what pro-natalist Mainland policy requires?

From ChinaFile, why US law firms are leaving China…

A big [risk] is that of data security. Global law firms like to have their offices interconnected so that staff in one office can access digital records in another. What happens if the gentlemen from the Ministry of State Security come to your Beijing (or Hong Kong) office and demands access to your computers so he can access your files in New York? “No, thank you. We’d rather not” and “See you in court!” are not going to cut it. This concern led Latham & Watkins last February to cut its Hong Kong office off from unfettered data access—a measure it had already taken with its Beijing office. And concerns about data security were also a reason behind the Dentons-Dacheng breakup in 2023.

In addition, communications may not be secure. While firms may use VPNs, they must be from government-approved VPN providers, raising the very security concerns that VPNs are supposed to mitigate.

A second risk is that of attorney-client confidentiality. Chinese law does not recognize any attorney-client privilege. If an attorney possesses information about a client the state wishes to know about, they are under the same obligation as anyone else on Chinese territory—citizen or foreigner—to reveal it. The fact that doing so might violate a foreign attorney’s legal or ethical obligations in their home jurisdiction is irrelevant.

As are other firms – from the FT…

The annual survey by the American Chamber of Commerce in China found 30 per cent of respondents were exploring alternative sources for goods and relocating manufacturing out of the country last year, or had already done so — double the percentage in 2020. 

Michael Hart, AmCham China president, said that while the majority of US companies were not moving, the trend towards relocation was unmistakable. 

“I don’t see any reason to think that bilateral investment will increase in the next couple of years,” said Hart. “Companies [are] pivoting or bolstering their supply chain by making investments somewhere else.

“Definitely . . . I would be concerned if I was in charge of Chinese investment policy,” he said.

On other matters, a great read (if you find this stuff interesting) on Donald Trump’s pre-inauguration venture into crypto scamming. Especially read the footnotes (scroll over the little number). EG…

If you put on your tinfoil hat though… it kinda looks like TikTok just paid Trump a massive bribe by buying up his memecoin in exchange for getting the ban lifted. It looks kind of a lot like that, actually.

Of the suckers who buy Trump, Melania etc memecoins and lost their savings, he says…

You should never feel bad for these people. What happened to them is exactly the thing they were hoping to do to someone else. Just laugh at them and move on with your day

Is it just me or is the world is going totally nuts. People are ‘investing’ real money in fake currencies, from Bitcoin to Melania-coin. People with no medical qualifications think they know better than experts and are avoiding vaccines and drinking unpasteurized milk. Leading figures in and around the US government are openly siding with Russia, the CCP and Nazis. Grifters, bots and cranks, egged on by algorithms, peddle deranged conspiracy theories on social media to millions of inadequate young men who believe it all. Communications cables around the Baltic and Taiwan are mysteriously being cut. I could go on, but Gung Hei Faat Choi!

Getting Covid shot number 8, and hoping that Snake Year will bring good health to all…

We need something relaxing and wholesome. Just a quick link to a Zolina City Mag guide to all the places in Tai O where you can see whale bones. That village is just packed with them.

If you insist on serious nastiness… I am distressed to hear that people clicking on the recent link to see the Lego (or whatever) models of a doctor lancing a boil on Regina Ip’s inner thigh (never thought I’d string those four words together), only to find the post removed or on a site they can’t see. And they are sorely vexed. The content is still sitting in my cache. So do I upload it, or let the whole thing pass? The answer is here. As a public service, in the interests of art. (Warning: this is nightmarishly repulsive and hard to forget. It is to scenes using dolls what the late David Lynch’s Eraserhead is to Disney.) 

Hong Kong officials respond to former US VP Mike Pence’s comments about Jimmy Lai at a business summit in the city…

A government spokesperson said Pence’s comments were intended “to influence the fairness of the trial with malicious intent”.

This was “a shameless interference with the course of justice and on Hong Kong’s righteous efforts in safeguarding national security”.

US politicians should not “make use of business activities for political manipulation in a vain attempt to challenge the rule of law in Hong Kong”, the spokesperson said.

The government wants Hong Kong to be a ‘hub’ for conferences and other events – until a participant says something disagreeable.

Is malicious intent in the eye of the beholder?

A little flurry of pre-Chinese New Year NatSec activity…

A man is arrested on suspicion of posting ‘seditious’ items on social media – ‘knowingly publishing publications that had a seditious intention’…

According to a legal document, the defendant is a bus technician named Li Chun-kit. The defence did not apply for bail. He will be detained in custody until his case is next scheduled to be mentioned in court on March 3.

Li was accused of “publishing statements, photos, and/or pictures on Facebook with an intent to bring people into hatred, contempt or disaffection against” Hong Kong, and inciting violence or unlawful acts between March 29 last year and January 21.

Two brothers and a sister of wanted former pollster Chung Kim-wah are taken in for questioning…

Tuesday morning’s questioning comes after Chung’s wife and son were last Tuesday taken to police stations. The previous day, PORI CEO Robert Chung was questioned and the pollster’s office was searched.

And Lam Cheuk-ting’s lawyer pleads for a shorter prison term after being found guilty of trying to help victims of a mob attack – aka ‘riot’…

At the District Court on Wednesday, defence counsel Catherine Wong asked district judge Stanley Chan to consider that Lam believed he had a duty to de-escalate tensions at the Yuen Long MTR station on July 21, 2019, when more than a hundred men dressed in white stormed the station.

The attack left 45 people injured, including journalists, protesters, and commuters, as well as Lam, who was last month found guilty of rioting alongside six others after Chan ruled that he had tried to take advantage of the attack to benefit politically.

…At Wednesday’s mitigation hearing, Wong said the fact that Lam was a known public figure did not have anything to do with the rioting case and should not have any bearing on his sentence.

Lam had ‘tried to take advantage of the attack politically’. What exactly does that mean?

Government inspectors testing foodstuffs imported from Japan find no evidence of dangerous levels of radiation – for the 18th month running. They have processed over 111,000 samples, the majority seafood, since August 2023, and found that every single one was ‘satisfactory’. (Not to say delicious. Some inspectors were caught eating the samples rather than throwing them away.) The Geiger counter does report high levels of anti-Japanese political charade.

Analysts are already expecting US President Trump to shy off from imposing high tariffs on Chinese exports. From a Bloomberg story…

Some people familiar with the decision cautioned that Trump often quickly changes his mind on strategy and could decide again to push forward with his original plans to target China. Still, Monday’s actions suggest a more deliberate approach than the fiery rhetoric about tariffs Trump offered during his campaign last year.

One bright side to Trump’s backtracking on campaign promises: he presumably won’t order the Treasury to buy Bitcoin, $Melania and other cryptocurrency for the US reserves. The Russians and Chinese would be wetting themselves laughing if the world’s number-one economy started buying worthless digital fake money.

Yippee, can’t wait: The Chief Executive forecasts 1.4 million Mainland arrivals over Lunar New Year. The Guardian looks at the impact of tourism on housing, retail and quality of life in Spain…

Cities across Spain tell a similar story of slow transformation at the hands of property speculation and a boom in tourist flats – of high rents driving out residents and traditional businesses, and of neighbourhood stalwarts ceding to global chains, souvenir shops, burger joints and nail bars.

The statistics that explain Spain’s housing crisis are equally jarring. Rents rose by 80% over the past decade, outpacing wage increases, and a recent Bank of Spain report estimated that almost half of the Spain’s tenants spend 40% of their income on rent and utility bills, compared with an EU average of 27%.

The crisis – aggravated by the rising cost of living caused by property speculation and the boom in tourist flats – has become Spaniards’ biggest worry, and the focus of the latest policy duel between the governing socialists and their conservative opponents in the People’s party (PP).

You really, really do not want to see this: an AI/Lego/something portrayal of Regina Ip getting hospital treatment for her abscess. 

(I warned you.)

From HKFP – Chief Justice Andrew Cheung Kui-nung uses the ceremonial opening of the legal year to state that courts are not designed to serve political ends…

The chief justice said on Monday that national security cases, despite attracting attention due to their “political sensitivity,” were no different from other cases processed by the city’s courts.

“The same principles of law apply in national security cases as in others,” Cheung said. “Judges at all levels are expected to, and indeed do, adhere to them in the adjudication of cases.”

“Judges, far from being designed to serve political ends, are bound by legal principles. Courts are not arbiters of public opinion, nor are they an extension of the prosecution authority; they are, above all, guardians of the law,” he added.

Lots of things perform roles for which they were not designed. But why does he feel a need to say this? Is it because NatSec courts have specially chosen judges, do not have juries, and nearly always side with the prosecution – ie the government? Hence opposition politicians, wearers of T-shirts, posters on Facebook and others being convicted for things that were never considered crimes up until around five years ago.  

As if to pre-empt this point…

[The CJ] also warned against drawing “sweeping conclusions” about the rule of law or judicial independence based on a few high-profile national security cases.

Mark Clifford, former SCMP editor and Next board member, and author of a book on Jimmy Lai, does an interview with The Wire China. Includes some ‘sweeping conclusions’…

Jimmy Lai was put in jail four years ago. He and I had been doing a lot of weekly live stream events through the second half of 2020. I was angry and exasperated, but I was also in disbelief. I couldn’t understand how the [Hong Kong authorities] could throw this guy in jail for basically practicing journalism. 

…I don’t quite understand the charges honestly. They seem to be about collusion with foreign forces, because he had met people like John Lewis or former vice president Mike Pence, or former secretary of state Mike Pompeo, or national security advisor John Bolton or Nancy Pelosi when she was Speaker of the House … Tung Chee-hwa was in the White House a lot more than Jimmy Lai was. 

…But the narrative seems to be that somehow he was this evil mastermind who got a couple of million Hong Kong people out to protest in 2019 and was convincing Hong Kong people that they should have something that, as far as Chinese are concerned, they don’t deserve and aren’t ready for. And that’s freedom. The Chinese authorities are really mad because they expected that Hong Kong people would buckle, that they could be bought off, bribed, bullied, controlled, and beaten…

…I think he’ll be found guilty. It’s a sham trial because the judges clearly are out to convict him, as they have convicted most national security law defendants. For a while the current Secretary of Security, Chris Tang, was able to boast of a 100 percent conviction rate, which is not really the kind of thing you usually like to boast about, because it only happens in a totalitarian society.

…It’s a reflection of how far Hong Kong has fallen. Instead of celebrating somebody like Jimmy, or the 45 civic leaders … you take your best and your brightest, whether they’re lawyers, journalists, professors or business people, and lock them up and deny society everything that they could create… 

The former US VP speaks at the UBS Wealth Insights summit in Hong Kong and calls for the release of Jimmy Lai…

One of the charges against Mr. Lai is an allegation that he met with the then-VP in 2019 to lobby for U.S. sanctions. Mr. Pence denies it. “Jimmy Lai did not ask for U.S. sanctions or any action against Hong Kong or China,” he recently told us. If Mr. Lai is being prosecuted for proximity to Mr. Pence, are the business leaders at this week’s summit at risk?

Marco Rubio, nominated to be the next Secretary of State, said in his confirmation hearings that Beijing has broken all the guarantees it made to Hong Kong. The big question for the city is how it can claim to be a global financial and trade center when it holds political prisoners and can confiscate a newspaper from its owner without so much as a court order.

The authorities encourage conferences to send a message of business as usual. They are helped by prominent speakers who show up, offer platitudes, and collect fat speaking fees. Mr. Pence opted instead to speak a hard truth on Hong Kong soil. The Chinese and Hong Kong governments would do well to put aside their irritation that he did so.

Pence follows with a stopover on the way home…

The news outlet cited a source familiar with the matter as saying that Pence decided to add the stop in Taipei to “see for himself.”

Pence also wants to remind Taiwanese that the US is an ally that “won’t allow what’s happened to Hong Kong to happen to Taiwan,” it added.

The Human Rights Watch 2025 report section on China contains quite a bit about Hong Kong…

After the SNSO came into effect, police arrested six people in May, including prominent activist Chow Hang-tung who is already imprisoned, for allegedly publishing “seditious” posts online to commemorate the 1989 Tiananmen Massacre. Three people were sentenced to between 10 and 14 months in prison for “sedition” for wearing a T-shirt, making online posts, and drawing pro-democracy graffiti on buses. The Hong Kong government used the new powers under the SNSO to revoke the Hong Kong passports of six exiled activists and to deny political prisoners early release for good behavior.

In May, three judges handpicked for national security cases convicted 14 activists and ex-Hong Kong lawmakers of “conspiracy to commit subversion” in the city’s largest national security trial to date, with 31 other defendants having earlier pleaded guilty. In November, the court sentenced all 45 to prison terms ranging from 4 years and 2 months to 10 years.

At least 304 people have been arrested for allegedly violating the National Security Law, the SNSO, and the now-revoked “sedition” law since 2020. Among the 176 individuals charged, 161 have been convicted. According to police figures, 10,279 people have been arrested in connection with the 2019 pro-democracy protests, among whom 2,328 “faced legal consequences” including conviction, many for non-violent crimes like “unlawful assembly.”

Press freedom declined further. Media tycoon Jimmy Lai’s national security trial, which began in December 2023, is ongoing. The 76-year-old Lai has been held in solitary confinement since December 2020. In September, two journalists of the now-defunct Stand News were sentenced to 21 and 11 months respectively for “sedition.” That month, the government denied work visa and entry into the city to an Associated Press photojournalist who took photos of Jimmy Lai in prison.

From HKFP, a good backgrounder on PORI – the polling group led by Robert Chung and recently raided by NatSec Police…

With dozens of civil society groups disbanded and large-scale protests [and, you could add, democratically elected lawmakers] disappearing since Beijing imposed a national security law, PORI’s polls are among the few remaining indicators of the public’s views on societal issues.

For example, a survey in October showed that those who did not want children cited the city’s education system, political environment and living space as the main reasons for remaining childless.

…State-backed media have long portrayed POP and PORI as an “anti-China” organisation that fabricates survey results to rally the opposition. One of the earliest criticisms of POP was that Robert Chung in 2004 received funding from the National Democratic Institute, an American NGO, to conduct a survey relating to the Legislative Council elections that year.

In 2015, an op-ed in Wen Wei Po suggested that POP’s survey outcome indicating that the majority of people supported the 2014 Occupy Central movement and wanted universal suffrage was false, and sought to doubt on how the research was carried out.

…Beijing-backed media have also been critical of the long-running PORI polls asking respondents about their sense of identity… In a Dot Dot News op-ed last year, the writer said PORI had used the question of asking people if they identified as Hongkonger and Chinese to promote Hong Kong independence.

“Naturally… people respond that they are a Hongkonger… PORI’s conclusion is that most people do not think they are Chinese, thereby openly supporting Hong Kong independence and localism,” the op-ed read.

Paul Krugman is pessimistic about China…

…China isn’t really retrogressing technologically; in fact, it has shown an impressive ability to compete on fairly advanced technologies. What these [total factor productivity] numbers probably reflect is a combination of massive amounts of wasted investment, especially in real estate, slowing progress in the economy outside sectors the government favors, and a general crackdown on the private sector.

…What’s remarkable is that China’s leadership seems completely unwilling to adjust to this changing reality.

As you can see from the chart above on investment shares, China hasn’t moved at all toward the kind of lower investment, higher consumption economy it needs to become. Instead, investment as a share of GDP has gone even higher, thanks to government policies that both fueled a monstrous real estate bubble and pushed investment in government-favored industries even when they already had excess capacity.

A recent report in the Wall Street Journal laid this failure to adjust squarely at the feet of Xi Jinping. Xi clearly distrusts the private sector and wants to strengthen central control; he also has views about consumption — which ultimately has to become the economy’s main support — that sound like a cross between German ordoliberalism and Tea Party conservatism:

…China may be only middling in terms of per capita income, but it has so many people that it’s an economic superpower — and by all accounts Xi is obsessed with expanding China’s power, economic and otherwise, in ways that would never occur to the leader of a smaller nation.

Former Jimmy Lai deputy Mark Simon thinks Trump will make life much harder for Beijing…

Maybe the CCP will continue on the same path they’re on now; belligerence, and a complete disregard for the interest of other nations.  I think Xi would like to continue on their destructive walkabout throughout the world.

But I don’t think that’s gonna be the case with Trump and a team of China Hawks now in the White House.

I fully expect Trump to drive the CCP crazy with his offers of great deals while at the same time smacking them around like a redheaded stepchild. I am convinced, after talking to many people over the past four years that Xi and his top folks loath Trump. That dislike of Trump is also probably what drove them in large part to their wishful thinking about a Harris victory.

There’s a lot of people making predictions about what China is gonna be doing in the next year. We are a few days away from a new president. My suggestion would be if you were making a prediction about what was gonna happen based on pre-election metrics, the Chinese thinking they would be opposite Harris, you might want to reconsider your conclusions.

We’ll see. I suspect the Chinese leadership will find it pretty easy to get Trump to give in on export controls, tariffs, TikTok, Taiwan, etc.

(Must say, I’m impressed by Trump’s pre-inauguration issuance of a cryptocurrency. Perhaps the most breathtakingly cynical of his scams yet. Are there people dumb enough to buy it and let the insiders cash out in a big way?)