Category Archives: GBA View

Hong Kong as regional HQ: time to move?

For those who care to look, the Hong Kong protests are exposing flaws in many assumptions about Hong Kong’s competitiveness. This is not only a short-term concern, either. As revenues come under pressure, partly due to the protests, partly due to a slowing Chinese economy, operating costs are inevitably being looked at more carefully by companies based in “Asia’s World City”. It would be surprising if only a few were considering moving or scaling back their operations here.

The question is: Can other cities in the Greater Bay Area offer compelling alternatives?

The short answer would be: Yes. But do some homework first.

Continue reading Hong Kong as regional HQ: time to move?

New direction set for Hong Kong

It is fitting that Fintech Week took place at the same time as Carrie Lam’s duty visit to Beijing last week. The three-day event, held at the AsiaWorld Expo Center, provided a reminder of Hong Kong’s enduring value for the Greater Bay Area. As the city’s tourism industry withers after 15-plus years of rich yields, Hong Kong needs a new Chinese export to sell. Financial technology is one of the most promising, and Fintech Week was done well. Its success supported the Chief Executive’s declaration, at the end of her Beijing trip, that Hong Kong’s role within the GBA was “completely unchanged”.

She is right. Selling Chinese goods and services to the world has always been Hong Kong’s strength. From textiles, to toys, to computers, and, yes, to the spending power of mainland tourists, Hong Kong has, to date, been the best place to get a deal done. Until China completely liberalizes the Renminbi, it will remain so. This is a major reason why the Greater Bay Area masterplan was drawn up in 2017 and launched in February of this year: the region needs Hong Kong to put its companies on the world stage. International marketing is Hong Kong’s forté.

Until Lam’s trip to Beijing this week, it had appeared that Hong Kong was playing another, unspoken role within the Greater Bay Area (and the country): as a salon for debating ideas about the future, and as a laboratory for testing their applications. This premise was established by the late Deng Xiaoping in his prescient 1984 agreement with the late Margaret Thatcher, which laid the foundation for the “One Country, Two Systems” principle that underpins the Basic Law. He clearly wanted to see what China could learn from a melting pot of East and West on its doorstep.

Continue reading New direction set for Hong Kong

Looking for excuses: deadlock in Hong Kong

Just when it looked like Hong Kong was starting to cool – not only thanks to autumn breezes, but falling political temperatures, too – the government’s clumsy handling of a political timebomb looks likely to heat it all up again. 

Joshua Wong, the kid who has become a poster child for the protests, was today prevented from running for a seat on the District Council after the conclusion of a farcical application process in which his returning officer was replaced at the eleventh hour. Read the full story on SCMP.

Continue reading Looking for excuses: deadlock in Hong Kong

Hurun report shows tech driving wealth creation

The rich got richer over the past year in China, despite the slowing economy. According to the latest edition of the Hurun Report, this was partly because of the rise of tech entrepreneurs, particularly in the Greater Bay Area. 

Although the Hurun Report counted 4% fewer “double billionaires” (those with at least RMB 2 billion in assets), more than half of the 1,819 people on the list saw their assets grow over the past year, while the average wealth increased by 10% to ¥9.8bn, the highest on record.

Moreover, in the 12 months up to August 15, the report shows those at the very top doing well: seven people joined the ranks of those with more than ¥100bn, taking their total to 19. The top 50 jumped by a combined ¥100bn.

Continue reading Hurun report shows tech driving wealth creation

In HK, ‘the brink’ has been passed

Reaction to Carrie Lam’s Policy Address has been largely predictable. In general, it has been called “too little” by a wide cross-section of the political spectrum, even supposedly staunch pro-establishment figures. 

Most of this criticism is fair. Aside from the rabid yelps of legislators who think Lam only needs to step down and all will be well, and the mindless provocations of journalists, thoughtful commentators have put up plenty of logical objections. It isn’t only protesters who are angry, disappointed that Lam didn’t hand over a roadmap for the resumption of the political reform process. Plenty of others are miffed by her proposed solutions to economic challenges, too.

The Hong Kong Chief Executive’s speech was, indeed, underwhelming. Yet too much of the criticism has been focused on the details. That is not the speech’s biggest shortcoming.

Continue reading In HK, ‘the brink’ has been passed

HK shouldn’t scoff at Macau’s stock exchange plan

Reaction to news of Macau’s plan to open a new stock exchange has been predictable. Hong Kong commentators, accustomed to looking down their noses at the other SAR, have been mostly pointing out blindingly obvious reasons why it will be difficult for Macau to build a RMB-denominated stock exchange. What they are not prepared to consider is that Macau’s plan is unlikely to be for next year, or even the year after that, but is a long-term proposal that is designed to cater to a structural shift in the Chinese economy.

That shift is evident to anyone watching what is going on beyond the Lowu and Lok Ma Chau checkpoints. Or to anyone who may have read the speech by the key Guangdong official who let the cat out of the bag on Saturday. 

Continue reading HK shouldn’t scoff at Macau’s stock exchange plan

Bracing for a drop in Hong Kong

It’s hard to see where Hong Kong is headed, now that the government has decided to invoke emergency powers to ban the use of face masks at protests. There are at least two evident certainties: that protesters will be energized, leading to a rise in violence levels; and that arrest numbers will climb. Beyond that, however, it remains to be seen whether the announcement will hasten a decision in Washington to restrict financial flows through Hong Kong or result in any other damage to the city’s economy caused by a loss of investor confidence.

Key to monitor is whether the decision can be effective in quelling the protests. This, too, is hard to guess at the moment. It will likely embolden the more radical protesters, and radicalize others who had previously been hesitant to commit acts of violence. Yet it will also likely result in violent protesters being taken out of action quicker, blunting the protests as their more charismatic leadership is neutralized. Whether this turns out to be net positive or negative will take time to ascertain.

In the meantime, and apologies if this sounds Cyclopian, but the Greater Bay Area is not likely to be able to chug along as normal and pretend that what’s happening in Hong Kong won’t affect the rest. Putting aside the damage inflicted on the region by plunging international tourism – especially business tourism – it is important to be realistic about the effects of the Hong Kong crisis on the pace and scope of reforms being implemented in the GBA.

Continue reading Bracing for a drop in Hong Kong

Hong Kong gets reform agenda rolling

American scholar Andrew Nathan has an interesting piece in Foreign Affairs summarizing what “insiders” say is Beijing’s approach to the crisis in Hong Kong. Though the presentation of this analysis fits too neatly into a US-centric worldview, it helps explain why the Hong Kong government is moving quickly to address the city’s dire shortage of housing: Because the central government believes the protests are being driven primarily by intolerable socio-economic conditions. Fix those, and the rest will take care of itself.

The logic has appeal. While Nathan’s sources are almost certainly wrong to suggest that the country’s senior leadership isn’t worried about addressing the political dimension of the protests, it makes sense to train attention and resources on fixing first what can be fixed easiest. Any capable government would be taking this approach.

This doesn’t necessarily mean that Beijing misunderstands where the protesters’ rage is coming from. The country’s leadership probably knows all too well that the crisis is not going to be fixed with bread alone. But it also likely understands that without a commitment to deep socio-economic reform, no other grievances can be addressed in a sustainable way. Fixing the land issue is about much more than bringing down the cost of living. It’s about changing the way people live.

Continue reading Hong Kong gets reform agenda rolling

Fresh perspectives on the HK crisis

As Hong Kong counts down apprehensively to the October 1 National Day holidays, attention is focusing on how the government might address the underlying causes of the protests. As we wrote recently, CE Carrie Lam’s “Four Actions” are a decent game plan. But time is running out for specifics to be researched and decided ahead of the Policy Address at the end of October. The government cannot properly canvas public opinion by then. It is going to have to draft some measures on the fly, based on a less-than-perfect consultation mechanism. 

Continue reading Fresh perspectives on the HK crisis

Slowdown is real, but no time to panic

As US media outlets continue to heap public pressure on Hong Kong and China over the street protests, more worrying news about the state of the Chinese economy is piling up, too. The Wall Street Journal has an article today questioning whether official statistics are telling the true picture of the country’s economic health, based on research taken from other public sources. Bloomberg, meanwhile, has a report highlighting the sharp fall in outbound tourism from China to southeast Asia. And the SCMP goes into our backyard to look at how consumers are holding up, finding that many are fearful.

Continue reading Slowdown is real, but no time to panic