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
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.
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
Hong Kong remains China’s key gateway for foreign investment despite the protests, according to the latest data from Beijing. As SCMP reports, China received US$62.9 billion in foreign direct investment via Hong Kong in the first eight months of this year, accounting for 70 per cent of total inflows. The rise was even sharper once the monthly number for August was calculated: US$7.53 billion, up 29.2% from the same month last year.
It’s hard to blame or credit these flows on anything Hong Kong is doing, as Investment decisions into China are often months, if not years, in the planning. Still, the numbers might bring some comfort at a time when the tourism pillar of the economy is crumbling.
According to this SCMP report, Causeway Bay is struggling, with one in ten shops standing empty and thousands of staff facing job losses. We think a very painful withdrawal experience lies ahead as the city is forced off the drug that it has been hooked on since 2003. Mainland tourists have other options, including Macau, and once mainland tariffs on imported goods start being completely repealed, they will likely have little reason to come back – even if the protests somehow start to subside.
Across the city, the hotel industry is reeling. But landlords appear to be doing what they do best: forcing management companies to let go of staff while they figure out the best way to reconvert the buildings into office space. And they are in the meantime looking to move their real-estate projects as fast as possible before prices start to fall off a cliff as the government strong-arms them into offering below-market discounts.
Hong Kong needs a big, new vision for its future.
“For the sake of public interest, and for the sake of people’s livelihoods, it is time developers show their utmost sincerity instead of minding their own business, hoarding land for profit and earning the last penny.”
So reads a “commentary” in the official People’s Daily newspaper, as reported by SCMP, calling on the Hong Kong government to take back land parcels that have been lying dormant in the city while developers force people into ever-smaller apartments at the world’s most expensive prices.
Gosh, whatever could this mean?
Is there a madman out there who has randomly been allowed to vent on the opinion pages of the Party’s official mouthpiece, in the never-ending quest for diversity of views that the leadership encourages? Or is it possible that a well-thought-out plan is under way to break the oligarchy that has dominated this city’s economy for decades?
Our money is on the latter. Here is the “nutgraf,” as they call it in the media business:
“What is being responsible to Hong Kong’s future? What is showing humanity and providing a way out to the young people? This is the way.”
Take that, Superman.
SCMP has the details on this, as well as Carrie Lam’s much less-aggressive plan to tax vacant plots. Our money is on the more-aggressive plan becoming reality. Soon.
The American Chamber of Commerce has released a thoughtful, in-depth position paper on the situation in Hong Kong, which it has presented for CE Carrie Lam’s consideration, ahead of her Policy Speech, scheduled for next month.
At 16 pages, in small type, it’s not a quick read. Nevertheless, its detail is impressive, with concrete, specific recommendations across many sectors of the economy and society.
Continue reading Amcham weighs in on Hong Kong
While Hong Kong gears up for another day, another protest, the provincial capital is building a tech park to cement ties between the two cities. Yesterday saw the Guangzhou-Hong Kong Science and Technology Cooperation Park launch 13 major projects, unveil five innovative platforms, and sign 18 industrial projects.
How much is all this worth, you may ask? Try RMB152.3 billion.
The park is being jointly developed by Guangzhou’s Huangpu district government, the Guangzhou Hi-Tech Park, and the Hong Kong government. Located in the Guangzhou Development Zone, the park covers an area of 14.5 sqkm. The 13 major projects include strategic emerging industries such as hydrogen energy, AI, and smart wearables, with many funded by Hong Kong companies or joint ventures between Hong Kong and Guangzhou enterprises.
One of the key projects is the Beijing-Guangzhou Collaborative Innovation Center. It is the first collaboration between two national-level development zones, which formed a strategic cooperation relationship in July. The project aims to promote technology and industry partnerships among the cities of Beijing, Guangzhou, Hong Kong and Macau.
There is seemingly no stopping Hong Kong’s more extreme protesters. After a weekend that saw water cannons deployed and police firing live-round warning shots, questions are being asked across the city about how far these protests will go.
Continue reading Hong Kong crisis enters a new dimension
Economic news today is not all about resilience in the GBA. Hong Kong’s exports are way down in July, despite those from its GBA counterparts being mostly up. We don’t know why; we need someone from the TDC to explain it. Anyway, here is the SCMP’s article on it.
The SCMP also has some interesting analysis today on economic conditions in Hong Kong, China and the US that are worth reading. Tom Holland’s column today is important for anyone who questions the dollar peg; Andy Xie, meanwhile, takes a hard look at the US, where he sees President Trump deciding policy based on what is good for the stock market, and little else; and David Brown argues that what the world needs more of is less neoliberalism. Which is what China has been focused on over the past decade, we would argue, and is clearly prepared to continue doing for the foreseeable future.
Caixin Global has a series of charts taking a deeper look at how intertwined Hong Kong’s economy is with the mainland. They are well worth a look. Highlights:
Continue reading Hong Kong and the mainland’s intertwined economies
Shenzhen has been tapped to be a pioneer of “socialism with Chinese characteristics”. Which basically means it will be allowed to experiment with reforms while the rest of the country watches from a safe distance before deciding to follow suit. Commentators have seized on this announcement to foresee Hong Kong’s doom – finally – as its neighbour erodes its remaining competitive advantages. Parent-child metaphors are all the rage again, as commentators with little grasp of history or experience of policymaking portray Beijing’s decision as having been driven purely by exasperation at the audacity of Hong Kong’s youthful protesters. Others say that Hong Kong, “as we know it”, is over.
Perhaps perversely, such commentary is helping to achieve what Hong Kong’s bureaucrats have been unable to. It is necessarily dampening investor sentiment. This is reining in housing prices and releasing air from the stock market. So thank you, doomsayers. Much appreciated. Expectations for never-ending growth in asset prices had gotten out of whack. Now, Hong Kong stock valuations are among the cheapest in the region, and absurdly high property prices are wobbling. Some see this as cause for gloom, because IPOs are being delayed. It’s not. It’s a health check. Continue reading Hong KONG and Shenzhen: better together