Commentary

[SCMP Column] China's consumers

November 10, 2018
Away from the Shanghai headlines and Xi Jinping’s promises of intent, the World Bank last week quietly provided endorsement of China’s claim steadily to be opening up. In its annual Ease of Doing Business study – perhaps the world’s most comprehensive and rigorous assessment of the barriers that block access to the world’s markets – it reported that China now ranks 46th out of 190 economies worldwide.

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[SCMP Column] Chinese students abroad

August 27, 2018
Prof Kirby’s question on China’s politically illiberal regime as an incubator for innovation is nevertheless more easily asked than answered. Global educational performance measures like the Pisa tests suggest that China’s universities – indeed its whole education system - are today home to a large proportion of the most accomplished students on the planet. They are today being credited with an increasing share of leading research in many fields, in particular in the sciences.

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[SCMP Column] Confucius

August 20, 2018
Yes it is true that they are opaque and tiresomely uncommunicative, don’t include materials about Taiwan independence, Tibet, or Tiananmen in their lesson plans, and are paranoid about the Falun Gong, but in almost every way they are strikingly similar to the British Council, Alliance Francaise or the Goethe Institute.

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[SCMP Column] China's tech challenge

August 11, 2018
Already, China’s tech progress has challenged a long-held western view that no centralised command economy can be as innovative as one built on a vigorous, transparent and market-driven democracy. China’s success has not been that it spends lots of state money on innovation, but that it seems to have done so reasonably effectively. China’s challenge to the west is not that it has an industrial policy, but that its track record suggests it might actually succeed in achieving its ambitious goals.

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[SCMP Column] Upstart Shenzhen

July 30, 2018
What the Greater Bay Area will become is as yet unclear, but its potential, and Beijing’s vision for the future of southern China, are awesome. In place of counterproductive rivalries, there is the opportunity for each component part of the Pearl River Delta to play to its strengths, and to work closely with other parts of the region to counterbalance weaknesses. That applies as much to Hong Kong and Guangzhou as it does to Shenzhen – but as the dynamic upstart of the region, it is the opportunities for Shenzhen that gleam out most clearly.

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[SCMP Column] Industry policies

June 18, 2018
The base US case is made clearly by a research assistant at the New York-based Council on Foreign Relations, Lorand Laskai. Laskai starts from the US government’s huge report justifying the Section 301 initiatives against China, calling it “a searing indictment of China’s disregard for intellectual property, discrimination against foreign firms, and use of preferential industrial policies to unfairly bolster Chinese firms.”

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[SCMP Column] Deep Ocean Mining

May 05, 2018
For decades, the quest for riches scoured from our oceans has been the stuff of fiction. Back in 1974, the CIA hoaxed the world by saying they were launching Project Azorian, a Pacific Ocean search for mineral-rich manganese nodules 4,900m deep. In fact, they were secretly looking for – and indeed found – the sunken Soviet submarine K-129.

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[SCMP Column] Caveat Emptor

April 07, 2018
This attitude also probably explains a massive difference between shopping on Tao Bao and shopping on Amazon: Amazon agrees to accept returns and refund dissatisfied shoppers. Tao Bao offers no such service, and Hong Kong’s online shoppers seem OK with the deal: I am buying super-cheap, so if the product turns out to be faulty, I will just throw it, and pray for better luck next time.

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[SCMP Column] China's futures

March 31, 2018
While, as with the rest of the world, traditional trading in equities products, interest rate contracts, and oil and natural gas contracts, a lot of China’s commodities trading activity has developed to be very specific to China’s own economy, and its trading needs.

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[SCMP Column] Chinese travellers in Hobbiton

February 12, 2018
As in other areas, China’s laws of big numbers are transforming the world of tourism, and not just in New Zealand. The Germany-based China Outbound Research Institute calculates that over 150m Mainland Chinese travellers ventured overseas last year – the largest number from any nation. And this is predicted to grow beyond 200m in the next five years. Admittedly, 68m of the present total were travelling  to Hong Kong and Taiwan, but that still meant 83m travelled more intrepidly – outnumbering the 83m German overseas travellers, and the 68m from the US.
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[SCMP Column] China's Mushroom Explosion

December 08, 2017
According to the Food and Agriculture Organisation (FAO), China in 2014 produced more than 7.6 million tonnes of mushrooms of one kind or another – three quarters of total world production amounting to 10.3 million tonnes. [ Read More ]

[SCMP Column] A Democratic Challenge

October 28, 2017

But most awkward of all, I am finding it increasingly difficult to defend democratic politics in terms of delivering superior economic or social progress for our democratic citizens. It has become clear over the decade since the global financial crash in 2008 that in the absence of economic growth, democratic systems perform very eccentrically. It seems candidates for political office in a democracy need to be able to promise superior performance to their rivals, in terms of stronger economic growth, more spending power, well-paid employment, better security and care for our elderly, and so on. Recession and contraction, which involves spending cuts, unemployment, or insecure, ill-paid employment, sells very badly. A politician cannot easily win voter support on the basis of selling “less pain” than a rival.

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[SCMP Column] Change of Fortune Looms

October 03, 2017

He forgets that the world’s trade rules – and the architecture of most other international institutions created from the ruins of the second world war – were set largely by the US, underpinned by the US legal system, and forged with US business interests at heart. He forgets that for most economies worldwide gigantic US corporations have over the past six decades built a dominant – even impregnable – position in global markets confident of protection in a home market that remains the largest and richest in the world.

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[SCMP Column] Keeping the Trade Doors Open

July 16, 2017

In short “one third of China’s GDP in recent years has been generated by the investments, operations and supply chains of foreign invested companies”. Impacts are higher still when you use economic impact tools to calculate the cascading benefits to the economy – by modernising China’s industries, introducing supplier and distributor networks, research and development impacts, introduction of modern business practices, management training and education, legal and regulatory reform. A company like P&G, for example, is calculated to contribute US$11bn a year to China’s GDP, and over 610,000 jobs.

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[SCMP Column] Harnessing the ocean wealth

May 22, 2017

Laminaria – or brown sea kelp – may not be a deep ocean resource, but is a good example of the still-underdeveloped economic potential of our maritime resources. It is noteworthy that in English, we call kelp seaweed – yes weed. But in the Chinese and Japanese languages the word for seaweed is “hai cai” – literally sea vegetables. Therein lies a deep cultural difference in our perception of the value of this critically important maritime resource.

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[SCMP Column] Price of misjudgment

May 20, 2017

It is not yet too late for the US to reverse Obama’s diplomatic misjudgment. A welcome mat remains in place whenever it decides to join either the Belt and Road, or the AIIB as they begin to gain importance in coming years. But I sense our American Apprentice may not be the man willing to knock at the door. On the contrary, if his over-hasty withdrawal from the 12-economy Trans-Pacific Partnership (TPP) is any guide, he seems inclined to repeat Obama’s mistakes rather than to learn from them. If the “TPP 11” economies, meeting this weekend in Hanoi alongside the APEC Trade Ministers meeting, can salvage a deal in spite of US withdrawal, he will be left to repent at leisure. American companies – and America’s diplomatic standing in Asia – will be the victims.

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[SCMP Column] Technology Quest

March 25, 2017

China’s engineers – whoops, party officials – have not simply been driven by the quest for technology leadership, or fear of reliance on technology from overseas. They hate its gigantic deficit in royalty and licence fees to foreign technology-holders. From zero payments for IP in 2000, China today pays royalty and licence fees of almost US$20bn. Since its companies currently earn a meager $1bn a year in such payments from foreign companies, that means an IP deficit of over $18bn.

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[SCMP Column] Wages Up for All

March 04, 2017

First, and most important, China’s economic planners recognized that the era of cheap contract labour for export manufacturing operations must inevitably come to an end. As company value chains were broken down – as with Apple, which manufactures all of its iPhones in the Mainland – economic planners realized that China was earning just US$7 per iPhone for its humble, labour intensive assembly role, out of a total sales value of US$500-600. This was a mug’s place in the value chain which simply immiserated the millions of contract migrant labour that filled export manufacturers’ production lines.

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[SCMP Column] Ruling the waves

February 06, 2017

China has similarly for many years dominated global fishing – both marine fishing, and inshore aquaculture. Out of a total world marine fish catch of 93.4m tonnes a year, China accounts for nearly 15m tonnes. Of 56m people employed worldwide in fisheries, China accounts for around 14m – 9m at sea and 5m fish farming inside China. Of a total world fishing fleet of 4.6m vessels, China accounts for an estimated 700,000 – around twice the total of the world’s second largest fishing fleet in Japan. But before anyone breaks into a sweat, we should remember that more than two thirds of these vessels are less than 10m long, and only one third have engines.

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[SCMP Column] Movie Magic Still Elusive

December 31, 2016

While China may have more cinema screens than anyone else, and a bigger population, this does not directly or automatically point to global box office dominance. China may have boasted 1.26bn cinema ticket sales in 2015, but the fact that American’s watch at least four times as many films every year means that US box office admissions still outrank China (1.36bn admissions last year). And of course India and Bollywood put both the US and China in the shade, selling more than 9bn admissions last year.

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[SCMP Column] Shaping Future Trade Patterns

October 31, 2016

The new production chains constructed around China allowed manufacturers radically to lower their production costs, giving to the world for 20 years or more what I call “China’s deflationary gift”. This once-off structural lowering of costs drove massive trade growth, and massive wealth dividends to the advanced economies where most high-value-adding activity remained. But by the early 2000s most of this dividend had been reaped.

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[SCMP Column] A Show of ‘Soft Diplomacy’

October 17, 2016

In one respect, China has no choice but to embrace the Lusophone world: the preposterous decision to base Macau’s legal system on the Portugese legal system means it is almost wholly dependent on legal professionals flown in from Portugal (undoubtedly a large proportion of the 8,100 Portugese living in Macau). There was some modest sense in retaining the British Common Law legal system in Hong Kong given the pervasiveness of common law contracts in international business, but contracts built upon Portugese Law? Surely this is not much of a competitive advantage in terms of international business connectivity.

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[SCMP Column] Unravelling the Myths

August 08, 2016

Significant and fast-growing as this economic relationship is, many myths confuse understanding of China’s economic relationship. Of course the first myth is that China and Chinese companies are “Johnny-come-latelies” in Africa. As my own China Daily memories confirm, China’s interest in building close economic ties with Africa was being forcefully pursued four decades ago. Not for nothing was a towering Mao Zedong so often depicted in paintings and ceramic tributes as a father to the world’s peoples, with men and women of all races clustered around him holding aloft Mao’s “Little Red Book”.

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[SCMP Column] Bargaining for advantage

July 18, 2016

Unlike the International Court, which is funded by the UN, the PCA to this day earns its living on the fees paid by arguing parties, not unlike Hong Kong’s own Arbitration Centre. It is unclear who paid for its year-long South China Sea deliberations. Definitely the Chinese paid nothing since they objected to the process from the outset. If all costs were met by the Philippine Government, what can we say about the PCA’s independence?

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[SCMP Column] Fragrant Success

July 02, 2016

By today, China’s perfume market seems as much to do with prestige and status as with any personal preference to smell nice over the day. Surveys suggest that just 1% of Chinese today use perfume – compared with around 60% in the US or the UK. Most sales are in a dozen or so first tier cities like Beijing, Shanghai or Chengdu, and over 70% of perfumes are bought as gifts, and 30% of the year’s business is concentrated on Valentines Day. Because they are bought as gifts, then brands and brand status are paramount – which is why two thirds of sales in the country are of foreign brands. The market leader by far is Chanel, whose Chance, Coco Madamoiselle and Chanel No 5 help to give the French group a 14% market share (similar to their dominant market share in Japan). Christian Dior captures 2% of the market and close behind are Lancome, and Calvin Klein.

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[SCMP Column]Tip of the Iceberg

May 07, 2016

China’s gamblers are expected soon to make China the world’s largest gambling market, overtaking the US. But numbers are patchy, unreliable, and almost certainly massive underestimates. What impact they will have in future is literally anyone’s guess. Richard Scudamore, chief executive of Britain’s Premier League, was talking about Leicester’s shock victory, but he could have been talking about China, when he said: “We have all become completely hopeless at predicting anything.. No-one saw this coming.” In Leicester this week, at least the snooker industry saw China coming.

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[SCMP Column] Chilling Effect

March 14, 2016

But it would perhaps be complacent and naïve to imagine that Wang Qishan’s anti-graft drive might not at some point reach more deeply into Hong Kong. Given the sheer size of Mainland corporate and private investment in Hong Kong over the past 30 years, it is surely inconceivable that corrupt money has not found its way here. Perhaps we should ask the City University researchers to interview a few 14K triads in Hong Kong.

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[SCMP Column] Dumping Grounds

January 11, 2016

When China joined the WTO in 2001, its understanding was that after 15 years of WTO membership (that is, the end of 2016) it would be allowed to “graduate” from non-market to market economy status. There have been recent indications from the European Union that they are agreeable. But guess who has thrown a spanner in the works? As a Financial Times article noted last week: “Beijing is an easy target in the crowded US presidential field.” A study by the Washington-based Economic Policy Institute concluded that giving China market economy status would result in a surge in Chinese exports, and a loss of 1.6 million jobs in the US: “China has extensively subsidized a range of industries and used currency manipulation to support production and exports, allowing it to accumulate widespread gluts of goods that it can export at discount prices.” Of course, the US’s plucky, honest and principled companies would expect nothing less from those conniving, untrustworthy foreign competitors. Always was it so.

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[SCMP Column] Time for Wimps to Lead

December 14, 2015

Since this discovery, China has moved hard and fast to build its services economy. Recent research driven by former WTO Chief Economist Patrick Low and a team in Hong Kong, along with researchers in APEC’s Policy Support Unit, has provided even more provocative food for thought. In researching over 40 manufacturing industry case studies, they have found consistently that even manufactured goods are mainly services. One fresh cherry exporter from Chile had 72 services embedded in its value chain. A Chilean wine exporter had 70. A Hong Kong watch exporter had 43. A Mexican company that made brake hose end fittings had 54 services in its value chain.

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[SCMP Column] The Two-for-One Trauma

November 09, 2015

None is willing to admit the uncounted billions that have been gouged from the country’s families in the name of the policy, but the sums are self evidently enormous. While the fees charged to obtain permission to have the first child have been cancelled, still the hassle and documentation tasks have remained onerous and resented. And the punishments that are now called “Social Fostering Fees” can be eye-watering. Responses from 17 provinces revealed fees in 2012 totaling RMB16.5 billion for that year alone – with no information on how the money was used.  It was not uncommon for a family to be “fined” over RMB200,000 for the sin of bearing an unpermitted child. Famously, the film-maker Zhang Yimou was fined a total of RMB7.48 million for defiantly fathering four children.

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[SCMP Column] China's painful restructuring couldn't come at a worse time

September 24, 2015

Over the past three decades, a pragmatic and fiercely reform-minded Chinese leadership have brought this huge and complex country from ignominious poverty to a nation of respectable middle income earners. This progress seems set to continue, albeit at a less frantic pace than we have seen since 1980. A Beijing teacher who in 1978 was bicycling to work and subsisting much of the year on cabbage today drives a car, WeChats on a smartphone and takes holidays every year to Japan and Thailand. Perhaps China’s greatest challenge at present is not to sustain indefinite growth, but to prepare its population to recognize that no booms can continue indefinitely. In the west we have tended to let the market lead that process, however brutal that sometimes can be. 

 

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[SCMP Column] Why Blame China for the Funk over Global Economic Malaise?

August 27, 2015

In 2007 – the year of strongest global growth ahead of the 2008 crash – the US, with an economy of UD$14.48tr, and 1.78% growth, added UD$260bn to the global GDP (according to the IMF). Meanwhile, the EU, growing at 3.34%, on a GDP of US$17.67tr, added about UD$511bn. And China, with a smaller US$3.5tr economy but 14.2% growth added US$1.33tr to the global economy. Amazing how helpful to the world economy China’s heady GDP growth was. So the three together added US$2.1tr in value to global economic output.

Turn to 2014, seven years into the global recession, and the numbers tell a fascinating story: the US, with a GDP of US$17.4tr, and growth up to 2.39%, added US$375bn to the global economy. But the EU, flatlining at 1.4% growth, added just US$200bn. China’s growth had tumbled to 7.4%, but with a GDP valued by then at US$10.4tr, it added US$1.32tr to the global economy – steady as she goes from 2007. Of course, together, the three only added US$1.9tr – a headache compared with global growth of US$2.1tr in2007.

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[SCMP Column] Reshaping the World Order through ‘One Belt, One Road’

July 15, 2015

But three things seem to make the concept distinct. First, the inclusion of the vast and neglected region of “stans” – from Kazakhstan to Turkmenistan to Uzbekistan – and the convulsive Islamic states around Iran and Iraq, and north Africa. Second, the clear priority of infrastructure-building, whether roads and railways, or gas and oil pipelines. And third, attention willfully turned away from the United States.

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[SCMP Column] China’s astute decision to abandon export processing by upgrading manufacturing base

May 20, 2015

 

Statistically, and in terms of Customs measurements, China was exporting items at $180 – which greatly boosted apparent export earnings. But most of this export value was accounted for by the import of high value components and services that had earlier been imported from countries like the US, Germany, Korea and Japan.

Since this discovery, China’s leaders have steadily raised minimum wages in the coastal export zones to where they are more than double today what they were in 2000. This has forced manufacturers out of this immiserating part of the value chain. They have had to boost productivity, raise value added, and move into higher technology areas, or they have withered.

From this discovery forward, China’s leaders have recognized that providing rich consumers in the West with low-cost consumer goods may have been right for the emergent 1980s, but by locking their own work force in low-wage poverty, they were throttling the growth of their own domestic consumer market, and were also building social discontent problems for themselves in the future. Since the early 2000s, and in particular since the crash of the global financial markets in 2008, they have recognized the logic and urgency of building their own consumer middle classes.

Hence the priorities of the China manufacture 2025 Plan, and the recognition that development of their services economy (to drive efficiency and productivity in their supply chains) has to play an essential part in building a competitive future manufacturing economy. We saw this very clearly in APEC last year in China’s fierce advocacy of services development.

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[SCMP Column] Great Games between China and the US is alive and well

May 11, 2015

But in the US and in China, the great game is being played out by more traditional rules: in the TPP the US is bringing together 11 allies, above all else Japan and excluding China, that alongside its economic agenda is intended to balance Pacific power in its favour, underpinned by its relationship with Japan.

And in China, President Xi’s visit to Russia, Kazakhstan and Belarus – alongside his recent visit to Pakistan and a visit by India’s prime minister to Beijing – marks China’s own efforts to rebalance power in Asia and the Pacific around its own interests and priorities.

Since the Ukraine conflict, Russia’s relations with the West have been strained.

Friends are in short supply. Out of invitations to 68 countries to stand alongside him to commemorate Russia’s Victory Day marking the 70th anniversary of the end of World War II, fewer than 30 world leaders have agreed to join. Japan, Israel, the US, France, Germany – and even North Korea’s Kim Jong-un – have given Putin the cold shoulder.

President Xi’s presence has huge diplomatic importance.

For China, alongside the raw diplomatic importance, Kazakhstan, Russia and Belarus are three anchors for their new Silk Road initiatives that look west towards parts of the world ignored by the West for almost a century.

Russia’s isolation has hurt Belarus and Kazakhstan economically, so the arm of China’s political and economic friendship has great attraction. For example, Belarus’s exports dropped 22.7 per cent in the first quarter of 2015 following the Ukraine conflict.

Meanwhile, China’s ties with this region long ignored by the West have grown steadily in recent years – driven strongly by China’s ever-growing need for natural resources as well as the need to stabilise potentially disruptive Islamic forces in China’s west.

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[SCMP Column] US needs to adapt to an engaged China

March 25, 2015

One reality is clear: China is emerging as an economic and diplomatic force more rapidly than is comfortable for many in the Asia-Pacific. Lacking any legacy debt to the regional power architecture created in the 1950s, Beijing’s efforts to create some new architecture that reflects its needs – like a Brics Bank, the maritime Silk Road, new credit-rating agencies, dilution of the dominance of US dollar-denominated global capital markets, and the China-Asean free-trade agreement (and beyond that the free-trade area of the Asia-Pacific) – makes reasonable sense.

US diplomacy would be better spent not boycotting such initiatives, but getting inside them and making sure they can mesh effectively with the massive global architecture already in place. I am sure that Lee Kuan Yew would say that someone in Washington is losing the plot.

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[Commentary] The AIIB: writing Asia's new rules

March 09, 2015


For those who see US opposition to the AIIB as part of a strategy to keep China from the diplomatic epicentre in Asia, there is seen to be a common motive in US efforts to complete the Trans-Pacific Partnership (TPP), which includes 12 Asia Pacific countries and leaves China out. But even clearer evidence has emerged in the 22-economy Trade in Services Agreement (TiSA) negotiations in Geneva. China initially stood aloof from these services liberalising negotiations, but has in the past year formally sought to join. The US is today the only TiSA participant  blocking China’s engagement, after an EU shift in March last year after Chinese President Xi Jinping’s high profile visit in Europe.

Given the lesson of the AIIB, the next big question is whether the US will stand firm to block its emerging rival in global trade talks or whether it will change its geopolitical strategy?

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[SCMP Column] Why Xi's corruption purge may soon make its way here

October 09, 2014


So Xi’s anti-corruption purge seems barely to have started, with huge and unsettling ramifications for Hong Kong and our power elite. The Chinese Academy of Social Sciences estimates that more than 20,000 officials have fled China since 1995, taking with them over US$150 billion in spoils. Alongside legitimate overseas investment, these flows have made Chinese the biggest overseas investors in the US and Australian property markets, and have made Macau the world’s gambling Mecca. As the purge has become serious, no wonder the share prices of all of Macau’s casinos have slumped by between 27 and 40%. With the minimum price of a VIP casino chip set at HK$10,000, and RMB10,000 being the maximum a Chinese can legally bring out of the Mainland, it seems that Wang Qishan and the Central Discipline Inspection Commission need to do little more than put a video camera up on the VIP exits, and escort people to a nearby interview room!

But if Macau is set for a period of turbulence, so too must Hong Kong. The simple volume of Mainland money channeled through Hong Kong over the past three decades must surely mean that significant billions have corrupt origins. As Beijing is now forging links overseas to pursue corrupt funds channeled overseas, it is surely not insignificant that links are being built with our cherished ICAC, and with more than 40 other anti-corruption agencies around the world. If the ICAC has the mettle to handle the challenge, and whatever the outcome of the Raphael Hui courtroom case, this may be but the first of many inquiries to come.


 

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[SCMP Column] China needs urgent reality check on infrastructure needs

September 25, 2014


So we should be pleased that China recently hosted a major APEC Public Private Dialogue on promoting infrastructure investment through public-private partnerships (PPPs). After all, China is going to account for an awful lot of infrastructure investment.
 
But I came away schizophrenic – encouraged, but concerned. So many seemed to believe that challenges start and end with the supply of money. That is why China is proposing this Asia Infrastructure Investment Bank (AIIB) to supplement the infrastructure-building work being done by the World Bank and the Asian Development Bank.
 
Unfortunately, my own understanding after dozens of private sector discussions over the past year on the region’s infrastructure-building challenges is that even though the dollar numbers are awesome, money shortages are not the main blockage point: on the contrary, two key problems have to be addressed: first, projects need to be properly structured and “packaged” - and governments lack the expertise to construct large, long term infrastructure project proposals.


 

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[SCMP Column] Constitutional crunch crimps HK competitiveness

July 03, 2014


In 2007 the Bauhinia Foundation asked Mike Enright and I to revisit the Hong Kong Advantage book 10 years on, to examine the competitive changes that had occurred. This we did, and the findings were generally positive, despite the unanticipated adversities arising from the 1998 Asian Financial crisis, the dot-com crash, and the SARS crisis of 2003. Against the odds – and the forebodings of many – Hong Kong remained robustly competitive, and Beijing interference remained laudably light-handed. 

But the Bauhinia Foundation asked us to add a chapter – on how political changes were affecting Hong Kong’s competitiveness. This we also did, but so politically sensitive was our chapter that the foundation chose not to release it.

I was irritable at the time, and I was equally irritable when I reread the chapter last week. So much of what we addressed remains untackled today, and must be tackled if the ugly political developments we are now witnessing are not to get worse.

“There has clearly been some erosion (in competitiveness),” we concluded in 2007: “The huge amount of political and administrative energy that has been diverted over the past decade into debate on constitutional reform has been an exhausting distraction and has often been counterproductive. It has diverted the administration from other practical issues in the community, making it tougher to dedicate time and attention to the factors and forces that will underpin Hong Kong’s future competitiveness.” Surely this is true in spades seven years later.


 

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[SCMP Column] Case of Tolerance

June 19, 2014


But more important, we should remember that emerging affluence across the Mainland and China’s steady integration with the rest of the world after many decades of isolation, are for most Hong Kong people the best thing that has happened to us in our lifetimes. China’s opening up has brought massive stimulus and huge benefits to the entire global economy – and nowhere have these benefits cascaded more prodigiously than here in Hong Kong. As China’s GDP has exploded 80-fold between 1978 and today, from US$188 billion to US$14.8 trillion, rising from less than 1% of global GDP to almost 16% today, no community has benefited more than Hong Kong. China’s exports – a mere US$21 billion in 1978 – have soared 200-fold to more than US$4 trillion, with much of this trade managed through Hong Kong.

The reality is that China’s extraordinary emergence is reshaping the global economy, and creating uncomfortable transformations for everyone, everywhere. Shock waves may be more powerful here, but they are no less significant in Europe or the US or Latin America as they reshape our world.

China’s tourism boom is but one manifestation of this – and this boom is just in its infancy. Our challenge is not to build a wall against it, but to channel it as fluently as we can. 


 

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[SCMP Column] China's Tech leap forward

May 08, 2014


China still has a long way to go truly to “sorpasso” the US: GDP per capita is still barely one tenth of the US, and productivity barely a fifth of US productivity. China is still below Peru in terms of per capita incomes, and the purchasing power of GDP per capita places China 99th in world rankings. And of course, the coyness is also deeply embedded in Deng Xiaoping’s appeal to “hide your brightness, cherish obscurity”.

But for all the caveats and cautionary words, this “sorpasso” is genuinely a big deal. Already China is the world’s leading trading power. Less comfortably, it is the world’s biggest emitter of CO2, and the leading consumer of a host of raw materials. And it is emerging from a century of ignominy and poverty at warp speed.

Nowhere is this clearer than in the internet and telecoms areas, where stunning developments must be sending shudders through Silicon Valley’s internet community. Unfettered by the legacy telecoms technologies dependent on copper wire, the Chinese have adopted social media on a scale that very few outside the country appear to recognize. Today over 700 million Chinese own a mobile phone – and according to fascinating KPMG research, 78% of these are smartphones (compared with 47% in Germany and 40% in the US).

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[SCMP Column] Running out of options

April 10, 2014


Can Shenzhen airport and the other PRD airports ride in like white knights to save the day for Hong Kong’s increasingly congested Chek Lap Kok airport? As environmental lobbyists continue to grab at any available straw to block construction of a third runway at the airport, it has often been claimed that the PRD airports can fly in to Hong Kong’s rescue.

These lobbyists are not wrong to force the Hong Kong government to turn over every possible stone to discover an alternative to building a third runway. It will be horribly expensive and the construction period will inevitably result in inconveniences and dislocations.

But I can say with confidence now that they will find exactly what I found when I went through the same stone-turning exercise three years ago: The frustrating but consistent finding of the study I published in June 2011* was that we have no choice but to press ahead as speedily as possible with a third runway. From as early as 2016 we face increasingly severe airport congestion whatever temporary palliatives are discovered. The longer the delay, the more severe will be the diversion of business activity to other regional competitor hubs.




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[SCMP Column] China Syndrome

January 30, 2014


Of course Hong Kong businesses are anxious to learn all they can about China. Obviously, for Hong Kong businesses, China’s chairmanship of APEC is a big deal. Not only is 2014 the 25th anniversary year of APEC, and the 20th anniversary of the “Bogor Declaration” that in 1994 famously and ambitiously set a target for free and open trade and investment in the Asia Pacific by 2020 - even more important, Beijing clearly intends to use its year of APEC chairmanship to give substance to the economic reform programme that was tantalizingly sketched out in the “Decision” of the Third Party Plenum in November last year.

But there is a story behind Hong Kong’s obsession with developments in China that troubles me, and gives me sleepless nights over our future competitiveness.

I have always argued that if Hong Kong was able to survive – and thrive – when China was closed to the world, then surely it should prosper even more as China opens and reengages with the global economy. But today I am no longer so sure. The “China vortex” has now become so powerful an influence on Hong Kong – and is set to become steadily so much more powerful in the years to come – that the very internationalness that has underpinned our value in past decades is being put in jeopardy.


 

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[SCMP Column] Betting on that extra mile

January 16, 2014


I and other fans of the Hong Kong economy have often reminded nay-sayers that anyone who has ever bet against Hong Kong has lost. For the past 35 years, we have been right. But the nay-sayers are still around, and are still willing to bet against Hong Kong. I went last night to my first Happy Valley race night of the year of the horse. I was still betting on Hong Kong. And I won. I am not taking it for granted that I will always win, and our government would be well advised to do the same.

 

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Down but Not Out in the PRD Economy

June 03, 2011

Funny how little things catch your attention… but there it was, right in the middle of an SCMP article: “Sources close to the Hong Kong Economic and Trade Office in Guangdong said the number of Hong Kong factories (in the Pearl River Delta) dwindled to about 35,000 at the end of last year… from a 2007 peak of 80,000”.

Pardon? The number of Hong Kong factories in the PRD has genuinely more than halved in the past four years? Yes, I know Hong Kong’s manufacturers have seen bad times in the recent past as the PRD governments have begun to favour high-value adding, non-pollutive industry, at the same time lifting labour costs – but so bad? And if the claim is true – and sourced to Hong Kong’s official Government presence in Guangzhou, why shouldn’t it? – why is this story not shouting at us from the front page?

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The PRD’s Fleeing Manufacturers – Not

July 16, 2010

In the wake of the “Foxconn crisis”, media tell us that manufacturers are fleeing the Pearl River Delta in their thousands in search of cheaper production locations in Vietnam, Indonesia or Cambodia. They say that the jump in labour costs, combined with likely appreciation of the RMB, are undermining the region’s hard earned competitive advantage. What utter nonsense.

Let me start with a prediction: the Pearl River Delta will remain Asia’s largest and most competitive export manufacturing base for the next two decades and beyond. Some companies will establish manufacturing operations in places like Vietnam and Cambodia, but these will be hedging strategies linked with precautionary diversification, and will do nothing to dilute the powerful competitive advantage of manufacturing in the PRD. Some low value activity, focused mainly in garments and footwear, may be transferred on a larger scale, but this is manufacturing that the PRD can do without.
 

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