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The thoughts of an American expat in Hong Kong living on an "underlying island"

I haven't written in a long time, so I decided to rewrite this Wall Street Journal article Look Elsewhere for Chinese Shoppers, Political Tensions Are Bad News for Hong Kong Retailers because it's clear from the actual body of the article that if there are political tensions causing problems for HK retailers, it's tension on the other side of the border with Xi Jin-ping's purges.

So here goes my rewrite:

Many of the Chambers of Commerce in HK as well as members of the Chinese Communist Party's United Front in HK and Western media have said that HK's 'chauvinist fringe' have or will have a negative impact on HK's economy. The statistics on actual visitors from the mainland to Hong Kong paint a different picture. Actual arrival numbers from the mainland continue to rise. (Please remember arrival numbers include tourists, personal tax arbitrage shoppers, and possible multiple daily entries by parallel goods traders tolerated by the CCP due to low-quality low-confidence goods on the mainland.) There are some negative numbers involved though. Sales of high-ticket ostentatious items fell by 24.5%: gold, luxury watches and other items associated with bribes/laundering corrupt cash.

This drop in sales has been associated by many observers with the arrest of party members on charges of corruption. (Be aware Xi Jin-ping has also convicted many anti-corruption citizens for demonstrating that the current 'anti-corruption program' is another big wind from the center to allow factional purges.) Another possible explanation is cash tightening on the other side of the border due to a pause in the property bubble causing a ripple effect in 'shadow banking' products. On the other hand no one beyond the looniest of United Front spokespersons has suggested the drop is due to HK's 'chauvinist fringe' calling anyone a locust.

Of course no one has suggested that the drop in mainland purchases due to anti-corruption purges on the mainland might actually support some of the contentions by HK's 'chauvinist fringe', for example that cash pouring into HK's retail and residential property markets wasn't legitimate and that the economic dislocations on commercial property rents and occupancy were harmful and unsustainable. As they say in San Francisco, eviction is death, push out mom & pop shops for big chains selling products unwanted by locals and you're exchanging family livelihoods for some minimum wage retail jobs and diverting the profits to the tycoons owning the chains. This is further supported by the drop in the stock prices of retailers that sell a huge proportion of their goods to mainlanders, when it was floated to curb mainland visits by 20%.

As for buying HK stocks, my advice is simple. HK's government has designed the economy around 2 pillar industries: labour exploitation and skim. If CCP continues their recent push of ongoing near-permanent stimulus cash injections and Team CronY continues to walk back limitations on corrupt money flooding HK's residential property markets, then HK's stocks will almost surely be stable at worst. If the US economy rebounds and provides a market for HK businesses to skim a percentage on goods trans-shipped via HK, it's a short-term buy and don't ask about the long-term, because you don't want to worry about missing out on those stock profits NOW NOW NOW!

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In the book Edge of Empires, John M Carroll, makes clear that Hong Kong's politics have always been neatly linked with the socio-economic myth-making of the ruling class. From the time British tycoons were taking credit for the economic activity of Chinese merchants to the time of Chinese elites becoming incorporated into the elite social structure. It's even continued in post-handover Hong Kong as the economic elite state HK success is as an entrepot in order to forget the role of manufacturing in Hong Kong's economic success as Hong Kong's manufacturing was shipped north by the economic elite.

So it shouldn't be surprising to informed observers of Hong Kong's politics to see pro-Team CronY elite wrapping their anti-democratic propaganda in socio-economic myth-making. SCMP featured an op-ed from Andrew Leung on Saturday April 11 and an op-ed from Regina Ip on Sunday April 12 that both wrap Hong Kong's economic success in the mantle of Hong Kong's elite. Andrew Leung stated Hong Kong's economic success was because of the current unrepresentative CE Election Committee and argued that the future Nomination Committee needed to be just as unrepresentative in order to maintain Hong Kong's wealth. Regina Ip on the other hand stated that Hong Kong's economic success was dependent upon the combination of the anti-democratic colonial rule and Hong Kong's elite and suggests that Hong Kong's future wealth depends on leaving Hong Kong's political power with them for the future. Given that Hong Kong's current elite's wealth and power stems from inclusion in Team CronY, it's cannot be surprising that they see their continued power and wealth as being dependent upon Team CronY retaining its stranglehold on Hong Kong's political and economic system.

The problem with myth-making is that it doesn't stand up to scrutiny of facts. Much like Team CronY's team studying Hong Kong's financial future made up all sorts of crappy assumptions about growth in government infrastructure spending in order to justify Hong Kong going broke in the future (is this disclosure the cause of Tom Holland's disappearance from SCMP?), the more you look at the foundational premises of Team CronY's myths and you see they are built on crap. For example Li Ka-shing's success depended upon the pre-DAB creating a violent disturbance large enough to allow him entrance to Hong Kong's property market. Sun Hung Kai's foundation is linked to the squatter clearances, New Town development plans and reservoir formation with their attendant resettlement property and vouchers of the late 50s and early 60s. Both of these firms survived the economic downturns in the post-bubble and SARS-era due to government policy interventions by Tung Chee-hwa in the property market in order to ensure property did not drop far enough that Li Ka-shing's late 60s success could be repeated by a new challenger.

Would Hong Kong have been more successful if the property market had been allowed to collapse further? Such a collapse would have made commercial rents more amenable for new start-ups (and not just tech start-ups at the beginning of the tech bubble) that would have broadened Hong Kong's tax and employment base, but threatened the economic and political stranglehold the current elite still enjoy, so Hong Kong as a whole and the mass of Hong Kongers have ended up much worse off, as demonstrated by one of the worst Gini co-efficients in the world, due to the continued stranglehold.

In addition to the crap foundations of the elite's economic myth-making, their anti-democratic drumbeat relies on lies of omission and misdefinition of the most basic terms in Hong Kong's Basic Law. For example Regina Ip failed to explain what were the polarising forces the colonial government feared. I guess she doesn't like pointing out that Hong Kong doesn't have and will never have universal suffrage under democratic principles due to 70+ years of meddling by the Communist Party of China in Hong Kong's affairs and that the polarising forces were the CPC and KMT. At least Ms Ip has learned not to bite the hand that feeds her. On the other hand Andrew Leung starts swapping 'representation' with 'representative'. As anyone who studied basic statistics or polling theory, which the DAB has great interest in given their harrassment of HKUPOP, one group is representative of another if their respective proportions are 'similar', a maths concept taught in Hong Kong in the lower secondary forms. Since Hong Kong's Basic Law mentions democratic forms, we know the similarity should be along the lines of population democgraphics. The current Election Committee has lots of groups represented, but their proportions are not similar to Hong Kong's demographics unless you re-weight the greater population by making Party loyalty and wealth outweigh concepts of one man, one vote. Why would you do that? In order to ensure that your place as one of Hong Kong's elite at the pinnacle of the Gini co-efficient is never threatened by the groundlings that want to change the system they know is designed to exploit their labour (HK's 1st pillar industry) and skim their salaries directly into the pockets of HK's tycoons (HK's 2nd pillar industry).

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Upon assuming office Xi Jinping told his cadres to cut the bullshit and speak plainly. Unfortunately that command has not trickled across the border to The Party's cadres in Hong Kong. But let me talk plainly about Article 45 of HK's Basic Law and provide a modest proposal that is the only way forward.

The Chief Executive of the Hong Kong Special Administrative Region shall be selected by election or through consultations held locally and be appointed by the Central People's Government.

"The method for selecting the Chief Executive shall be specified in the light of the actual situation in the Hong Kong Special Administrative Region and in accordance with the principle of gradual and orderly progress. The ultimate aim is the selection of the Chief Executive by universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.

Beyond Article 45 of the Basic Law, we must also accept the Communist Party of China's definition of 3 words: representative, democratic and balanced. No, you won't find balanced in the Basic Law, but it's been a key word uttered by the faithful to guide HK's ongoing 'consultation' on the 2017 CE Election. You also won't find the method the nominating committee should use stated in the Basic Law, but you can be sure the DAB/Communist Party meant that nominating committee isn't supposed to be a rubber stamp for civic nomination but only rubber stamp the DAB/Communist Party/tycoon choices for CE.

The CPC and friends have clearly stated that the existing Election Committee is 'representative', perhaps in the way that a committee of 10 whites, 9 blacks, 4 Arabs, 5 South Asians, 2 Parsees and a Chinese would be representative of the population of Hong Kong, since many groups are 'represented' without concern if their proportions are actually 'reprentative'.

'Democratic' here is like the Democratic People's Republic of Korea or perhaps the elections held by the late Saddam Hussein. There was voting. The people made their choice and that provides the chosen with legitimacy. End of discussion.

'Balanced' means that the will of the people shall always be countered by the will of The Party. The people's will cannot provide the choices of the nominating committee.

The level of protests from the Democratic Party/Civic Party/the Front for Hong Kong People's Liberation Power/the People's Liberation of HK Power Front/etc. reminds us that the base problem is that the Communist Party will not allow a Chief Executive for Hong Kong that stands up for Hong Kong. Stop imports of diseased chickens? Maybe if the chickens are Vietnamese or American, but never good Chinese Communist chickens.

Given that the CE must be acceptable to the CPC, let's identify what the CPC wants from HK: money. The CPC comes to HK to raise money, goes to Beijing to decide where the money will be spent, and Shanghai to spend it on projects. What's given to HK? Lots of poor Chinese, whose welfare will be left to HK taxpayers, and petty cross-border arbitrage experts with suitcases unburdened by 20% tariffs unlike the legitimate foreign imports with which they compete.

So given this basis, it's clear that only a candidate chosen by the Liaison Office or HK's tycoons will be allowed on the ballot. So the only practical solution to this situation is obviously a nominating committe with 2 people that broadly represents 'the only opinions of any value'. First, the head of the Liaison Office as Xi said to cut out the bullshit, which means dropping the pretense that local shoeshiners on the current nominating committee are independent thinkers and don't rubber stamp the choice provided them by the Liaison Office. Also since everyone knows The Party represents the will of the people, the protests from the pan-dems about unrepresented are clearly untrue. The second member will be a champion appointed by the tycoon godfathers.

And with these two candidates on the ballot, the loyal HK press can salivate and push their horse race coverage of this 'election campaign' to new heights. And The Party can rest easy in their delusions that given an opportunity to rubber stamp their choice via an election, their HK CE choice will never be as unpopular and loathed as Tung/The Donald/Team CronY and will be internationally acclaimed for their progressive implementation of democratic reforms from all corners of the globe.

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During CY Leung's "election campaign", he boosted his popularity by saying he would take on HK's vested tycoon interests. Since then he's foot-dragged on competition laws that might crimp the tycoons' style and handed them big profit gains on re-raising plot densities, eliminating triggering minimum prices for land sales and introducing negotiated land use fees. The feud between Team CronY and the tycoons resembles a professional wrestling feud. Lots of hot air to drive positive press for folks wanting to see that sort of feud.

With Team CronY's ratings scraping the bottom of the bucket, I'm sure the PR spin team are looking for ways to boost his popularity. A public feud with an unpopular ally might be just the thing and the boys from the Heung Yee Kuk step up for Team CronY. And in some of the same circles that cheered Team CronY's hot air about taking on the tycoons, you'll hear cheering that someone's about to get tough with the folks holding HK's future development hostage.

Once again it's best to watch the actions and not the hot air the press reports. For example check out Team CronY's appointees to the 10 Best Ways to Pave Over Paradise advisory panel. Beyond the usual One Country, Two Systems communist-party mouthpiece shoe-shiners and Team CronY surveying colleagues, there's the NT/Islands members. Zero members from Islands/NT independent NGOs. Independent in the sense that they don't provide a pro-government echo chamber like the NT Association of Societies, whose Chairman is also a local NPC delegate. There's also the Chair and Vice-chair of the Islands District Coucil (the chair is an Election Commitee member for the HYK and the other is a lady, so ineligible for the HYK, but is chair of the OIWA. In addition to the Islands District Chair, there is another HYK Election Committee rep on the panel: Randy Yu Hon-kwan. As David Webb points out, he's a senior manager for Sino Land and an appointed member of the Islands District Council (though his listed address isn't actually in the Islands). One thing Webb doesn't mention is that Yu is Lau Wong-fat's son-in-law. Ya know? Lau Wong-fat? Heung Yee Kuk chair and part of Team CronY's ExCo? Sound like the two sides are feuding to you? Me neither.

And if you don't believe it should be Team CronY, notice the name Franklin Lam on the panel. He was last seen resigning from ExCo due to profiting on property deals prior to ExCo information on said property becoming public knowledge. So of course the CronY thing to do is put him on a panel handling private information on future government property development deals.

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I'm sure there were those that thought I was crazy and extreme using the term Bushevik on this blog so many years ago to describe the authoritarian/hegemonic tendencies of the Presidency of GW Bush. In the latest sign I wasn't barking up the wrong tree comes news of the Chinese Communist Party's latest hire: Erik Prince.

It may be a HK-listed company, but it's still an CCP SoE and Erik Prince's "most respected partners" are folks seeking 21st-century banana republics in Africa that can be looted of natural resources in exchange for some infrastructure like white elephant soccer stadiums and Chinese-controlled ports on the Indian Ocean.

In an amazingly blunt and honest statement, the U.S. conservative glibertarian think-tank Heritage Foundation has come out as being opposed to the ideals laid out by Abraham Lincoln at Gettysburg. It's hardly surprising to anyone that the current GOP is closer in spirit to the Confederates than they are the Party of Lincoln, but it's amazing that one of them would come out and admit it.

In the Heritage Foundation's latest throwaway publication on global 'economic freedom', they say that:

the introduction of democracy to Hong Kong could result in more populist measures that in turn could raise government spending and affect the territory's economic freedom.

...

the Foundation's Director of the Centre for International Trade and Economics, Terry Miller, says the Chief Executive Election of 2017 could see the government spending more to curry favour with the electorate.

Is there a clearer statement that the Heritage Foundation opposes government of the people, by the people and most especially for the people?

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The blog may be dead but some stories still bring on a rant when I have time to type. This story by Tim Sullivan of AP entitled A MISTREATED MAID? OR A PROFOUND INSULT? is today's joy and double rainbow.

Tim Sullivan pulls out all sorts of clever sleights-of-hand to normalize the US as a security state.

As for the arrest itself: Only the powerless and poor would face arrest for lying on a government form. For someone in the educated elite, a strip search would be unthinkable.

...

Americans are raised to view elitism with distaste, or at least to pay lip service to the everyman ideal.

...

In explaining the arrest, U.S. Attorney Preet Bharara — who was born in India but raised in the United States — highlighted that difference.

The "sole motivation in this case, as in all cases, is to uphold the rule of law, protect victims, and hold accountable anyone who breaks the law - no matter what their societal status and no matter how powerful, rich or connected they are," he said in a statement.

The fact that a U.S. attorney and a U.S. reporter show an expectation that all folks arrested in the U.S. should be subject to strip searches as a matter of routine and a sense of egalitarianism is a sign of the times. It's a sign of a security state that has become desensitized to procedures which are designed to humiliate and subjugate the accused and not designed as a matter of actual public safety.

Stories like this and the NSA's routine collection of metadata remind of State's where the primary objective of the Security apparatus is not public safety, but the maintenance of the status quo's hold on authority via absolute control of the citizenry. That's not the American dream, but Xi Jinping's China dream.

Finally a news story pimping the notion that somehow U.S. legal enforcement is egalitarian in the same week that a rich boy in Texas got probation after killing 4 because he was rich is pathetic. Pathetic, like selling "duck and cover" is an effective public safety response to a nuclear attack.

HK's Chief Executive CY Leung yesterday told an audience at Tin Shui Wai yesterday that he loses sleep over the plight of HKers living in subdivided flats. He said housing was his major concern and priority since being handed the office by the CCP's local Liaison Office.

In contrast a Team CronY supporter wrote in Saturday's SCMP Letters to the Editor that subdivided flats were a fine small business opportunity and everybody should leave Team CronY Sec of Development Paul Chan alone for being a slumlord.

The fact that CY has only eliminated minimum bids on government property sales means that his only accomplishment has been dumping government property to developers for firesale prices. The results have been a sharp drop-off in actual housing starts and almost no movement in actual housing prices. The belief that a magic market fairy would solve HK's housing problems via more government property sales is a fairy tale for the dumbest of "free market religionists". Hong Kong does not have a property market and people who get paid to "analyse the HK property market" should be the first to lose their jobs and live in 100 sq. ft. flats.

Next the fact that CY has focused on creating new housing, while transferring government property close to employment to private developers while moving possible public housing developments far away from employment demonstrates that CY has no clue about what people living in subdivided flats or public housing need. Instead Team CronY looks at the subdivided flat problem in two ways. One, those people should be paying more overall (though possibly less per sq. ft.) to Team CronY property developers for legal flats. Two, those people are delaying the conversion of these old buildings into opportunities for Team CronY property developers to buy cheap, convert cheap and sell at an astronomical profit.

This is especially true as he's been recommending HK's youth to emigrate to find jobs as Team CronY insist on continuing to push policies to prop up commercial property rents paid to Team CronY property developers and wipe out local job and business opportunities.

FACV No. 19 of 2012

pp 4-5
7. Since the mid-1970s, with greater affluence and increasing numbers of households where both spouses go out to work, there has been a growing demand by Hong Kong families for domestic helpers. The local supply of such labour was scarce, so FDHs have been recruited from many countries including the Philippines, Indonesia, Nepal, India, Pakistan, Thailand and Sri Lanka to meet the demand. The number of such FDHs in Hong Kong grew from 881 in 1974, to 28,951 in 1986, to 70,335 in 1990, and stood at 285,681 on 31 December 2010. It is therefore plain that FDHs represent a highly valuable and indeed essential workforce. Many FDHs have had multiple renewals of their contracts with the same employer and have forged close personal ties with the families in which they work.

p14
(31. Re Ip Pui Man Nina) 31. Such a requirement – of ordinary residence of unspecified duration at any time during the preceding three years – obviously has a far lower threshold than Article 24(2)(4)’s requirement of a continuous seven year period of ordinary residence and reflects a statutory purpose wholly different from the purposes underlying the questions facing this Court.

pp 20-21
48. Leaving aside the detailed reasoning in those decisions, it is clear that a court’s orientation in construing a tax statute may be influenced by purposive considerations which are inapplicable in other contexts. Thus, the House of Lords was likely to have been anxious to avoid construing “ordinary residence” in a manner facilitating tax avoidance and for that reason gave the concept a wide meaning.

p. 25
59. The vital difference in Lord Scarman’s approach involved his Lordship’s decision that (except where presence in the country was unlawful) the immigration status of the students under the 1971 Immigration Act was irrelevant for the purposes of the Education Act.

p 28
67. A person may indeed be able to show that he or she had lived lawfully, voluntarily and for a settled purpose, as part of the regular order of life for the time being in the country over a given period of time, but questions are bound to arise in some cases as to whether qualitative aspects of all or part of that period of residence are of such a character as to render it other than “ordinary residence”. The qualitative aspects of FDHs’ residence in Hong Kong are obviously of potential relevance.

Missed one critical one on the judges adding their own presupposition to previous judgments. When I find the energy, I'll go back and find it.

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After spinning the Liaison Office's Scrooge McCY as a man of the people and someone to shake up HK's tycoons prior to taking office last July, the United Front is back with a vengeance on the day after his inaugural Policy Address.

Of course the actual Policy Address was a potpourri of goodies and subsidies for HK's tycoons with no asset checks, while the few benefits for the poor and middle-class individual were attached with massive strings and major asset checks.

Since housing is the major complaint of locals it's only natural to find Scrooge McCY addressing the problem. Of course his bosses at the Liaison Office and friends use Hong Kong property as a stable depository of questionable wealth, so this limits Scrooge McCY's options, but rest assured Scrooge McCY has maintained the belief system of property flipping as Hong Kong's primary personal economic ladder, which ensures HK's wealth will properly be diverted in to the pockets of the few HK and mainland developers that monopolise the market.

When faced with a problem of too much money (due to the CCP's binge spending on non-productive assets flooding Hong Kong with cheap cash) chasing a limited amount of assets, you either have to limit the cash or increase the amount of assets that can chased. Scrooge McCY diverted the cash from residential property at least temporarily in to parking spaces, commercial property, milk formula and the rest of Hong Kong life, while experts were figuring a way to work around the special stamp tax on mainland money. The real Hong Kong government way though is to create more opportunities for big profits for Hong Kong's tycoons. And Scrooge McCY's Policy Address delivered land, land, and more land for property development. Underground land to survey and turn into concrete. Sea to survey and turn into concrete. Greenspace to survey and turn into concrete. Must have MORE CONCRETE to sustain property developer's profits and provide places for the Liaison Office's friends to park their assets without creating an excessively bubblicious HK property market.

When faced with opposition from communities that would be destroyed by all of the concrete pouring, Scrooge McCY was resolute in his vow that divisions of opinion would not stop him screwing the communities. Of course Scrooge McCY was just as resolute in vowing to let community divisions stop him from considering whether to allow communities be treated equally based upon whom they screw. Never say Scrooge McCY isn't resolute in doing what his puppetmasters want him to do.

The most interesting part of the Policy Address reflected the financial backing of Civic Exchange. The bus companies have been lobbying hard the last few years to reduce their labour costs, since the primary driver of Hong Kong's corporate wealth is labour exploitation via pathetic wages and excessive hours. The easiest way to reduce labour costs would be to cut the salaries of C-level staff by two-thirds, but that would run counter to every MBA course and tycoon's dreams, which demand firing front-line staff instead. Time to make bus drivers redundant with a government directive. Thanks, Ms Loh. And if you have a pile of rusting depreciated assets on hand that need to be replaced, you can be sure Scrooge McCY will have a big handout for you under the principle of The Polluter Gets Paid with no asset checks. Of course Scrooge McCY and Christine Loh may get reduced API levels at the paltry few roadside pollution stations the government runs, but please remember Bow-tie trying to hype the air pollution benefits of LPG taxis as the sun sets in to another smog-filled sky. Also be sure to note there are no new tarriffs on CLP or HK Electric for generating power and particulates and SO2 and CO here to ship the power north of the border for big profits, while overpaying for clean nuclear power from a company in which they are a major shareholder.

But remember it is only pragmatic that Hong Kong's Chief Executive hand out wealth and assets to the richest while feeding the scraps to the wretched and poor. This is because CY Leung truly has his heart in the right place and helps those that are most deserving, which God and The Party have shown by making them the wealthiest (or at least wealthy enough they have an address on The Peak instead of in Kowloon Tong or God forbid the public housing that Long Hair was living in when he was elected to LegCo).

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