Hong Kong is NOT a free market: Introduction

Hong Kong is famous for having the freest market in the world. Indeed, that is one major reason why I moved here, and the reason for everything good in Hong Kong. Despite everything, the government here still cares about its ranking on the Fraser Institute and Heritage Foundation indexes of economic freedom.

But actually (perhaps obviously), Hong Kong is not a perfectly free market. While it is indeed freer than the rest of the world, there are exceptions to this freedom that I will argue are not minor, and are even a significant cause of Hong Kong’s instability right now. (I believe the economist Richard Wong argues along the same lines, although probably much more rigorously than I will).

Let's try and change this.

As we enter 2015 and my fourth year of living in this special city, I have made a resolution to post a series of articles that show where and how Hong Kong diverges from the philosophy of the free market (or “non-interventionism” in Hong Kong policy jargon) and how in every case this is a mistake that harms ordinary people at the expense of not only their freedom of action, but directly impacts their wealth and their livelihood. These seemingly obscure interstices in the free market are actually the direct and exclusive causes of all the cronyism and much of the authoritarianism that Hong Kong is suffering from. (I think the dysfunctional and undemocratic governance structure is to blame for the rest, but that problem already has enough focus!)

With too many ordinary (disenfranchised) people openly blaming the free market for their economic problems (along with the dysfunctional and undemocratic governance structure), I must forcefully disagree and try to persuade everyone that it’s the deviations from the free market that are to blame.

I will try to argue in good faith, so if you still disagree with me please point out any mistakes you think I have made in my logic or assumptions and I will do my best to correct them!

Lastly, please do tell me now what you consider to be the most egregious violations of the freedom of Hong Kong residents, to make sure I don’t miss any out.

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Private Eye again: a confused letter about Hong Kong

Continuing to perform my public service of moving Private Eye content about Hong Kong online, a letter has been in response to Private Eye’s article about the MTR’s being the new Crossrail operator. It’s on page 17 of issue 1378, and it’s from one David Mather, on which more shortly.

First, though, the letter (with my unsolicited comments interspersed, naturally):

Sir,

About this “authoritarian clampdown” in Hong Kong. There isn’t one.

That would be news to the journalists attacked in the street or demoted or fired for doing their jobs properly, not to mention people arrested for writing on Facebook.

There is a fairly big protest which (so far, after three weeks) is being allowed to play itself out.

If “by playing itself out” you mean assaulted by triads and beaten by the police then you are right, if a little unorthodox in your choice of words.

Quite why the MTR chairman’s seat on HSBC’s board is relevant, I’m not sure. He’s there to be given regular wiggings by the bankers to whom his little enterprise owes substantial sums of money.

Private Eye didn’t say it was relevant. They merely pointed that Raymond Chi’en Kuo Fung chairs both MTR Corporation Ltd and is a non-executive director of HSBC, a British bank (since 1997!). Private Eye is a British magazine and HSBC is a British bank, so maybe they thought it would be of interest to their readers. That banks and government are barely independent these days only increases the interest.

As for including the chairman of a company who owes lots of money on your board, isn’t that a conflict of interest? Furthermore, I thought board members had certain duties beyond being given “wiggings”. The 2013 annual report of Hong Kong Banking Corporation Limited (the wholly-owned subsidiary of HSBC Holdings PLC, and the company of which Chi’en is an NED) states

Non-executive Directors are not HSBC employees and do not participate in the daily business management of the Bank; they bring an external perspective, constructively challenge and help develop proposals on strategy, scrutinize the performance of management in meeting agreed goals and objectives, and monitor the risk profile and reporting of performance of the Bank. The non-executive Directors bring experience from a number of industries and business sectors, including the leadership of large complex multinational enterprises. The Board has considered the independence of each of the non-executive Directors and determined that each non-executive Director is independent in character and judgement and that there are no relationships or circumstances likely to affect their judgement, with any relationships or circumstances that could appear to do so not considered to be material.

The Hong Kong Institute of Directors has a guide for Independent Non-Executive Directors that states

As an Independent Non-Executive Director your role is or will be to supervise management, participate in the direction of the company’s business and affairs and speak out firmly and objectively on these and other issues that may come before the board.

That sounds like rather more than getting wigged.

Back to the letter:

By the way, if Crossrail is half as good as the Hong Kong MTR, it will be the best rail offering in Britain.

I personally agree with this, but I’m not sure what the relevance to the article is, to borrow an argument.

David MATHER.
Via email.

So who is David Mather? Assuming he’s the same man as this chap, he’s an HSBC stalwart who’s been involved with the bank for decades. According to his LinkedIn profile, since March 2014 he has been a Masters Student in London, long before the protests started.

As a self-described “Asia specialist”, surely the misdirection and omissions in his letter are inadvertent?

Can Hong Kong’s ruling class please stop capitulating to China?

Erica Ng,  Director-General of the Hong Kong Economic and Trade Office, London
Erica Ng, Director-General of the Hong Kong Economic and Trade Office, London

[STOP PRESS: Chris Patten is talking RIGHT NOW to the Foreign Affairs Committee. I guess Emily Ng didn’t get her way after all.]

[tl;dr: Skip to the letter at the bottom of this post written by the woman shown above, and weep]

In case you haven’t noticed, Hong Kong has been convulsed (by Hong Kong’s standards) by “Occupy” protests, made under an Umbrella Revolution/Movement moniker [there are active debates about the name], which have now settled after a month into blocking a couple of second-tier roads and intersections. The city hasn’t actually stopped functioning in any important sense, but psychologically and spiritually Hong Kong has entered a new phase in its story.

These protests are too big and multifarious to discuss even their aims and motivation in detail, but one definite factor is most ordinary people’s wariness and fear and annoyance at the blatant extent to which China now interferes in Hong Kong’s politics and administration. While Hong Kong has an almost-completely separate political and administration system on paper, in practice everyone is noticing how the government blatantly pushes as much as it can in favour of the interests of the Chinese government and the local tycoons. This is not just a technical problem; it directly affects people’s lives and livelihoods, from preferring building roads to pedestrianised spaces, to manipulating the property market to push up prices. This has all been covered before elsewhere.

The aforementioned paper that keeps Hong Kong autonomous actually has a name: the Basic Law. Amazingly, the Hong Kong government actually treats this Basic Law as Jews treat the Commandments given by God to Moses on Mount Sinai: sacred, foundational to their creed, infinitely wise, and unchangeable. This allows them to claim to be acting according to that most moral of modes of governance, the Rule of Law. And indeed, with notable exceptions, Hong Kong is a lawful society, and we are all grateful for that.

But where did this Basic Law actually come from? From the Sino-British Joint Declaration, signed 30 years ago in 1984. This agreement, as the name implies, was between the then-colonial master of Hong Kong, the United Kingdom of Great Britain etc., and the People’s Republic of China, Hong Kong’s current sovereign. This agreement supposedly bound China to agree that Hong Kong would continue with its own capitalist system for 50 years after becoming part of China (again, if you like), i.e. until 2047. The Basic Law is the manifestation and codification of the Declaration.

And this Declaration is not just any scrap of paper; it is a formal bilateral treaty between two member states of the United Nations, and registered with the latter organisation. Therefore it is of legitimate interest to the whole world that the Declaration is adhered to. The UK is particularly entitled to continue to monitor the situation in Hong Kong, because it is one of the signatories of the Declaration, and indeed, Annex II of the Declaration set up a Joint Liaison Group where the UK and China could discuss with each other the implementation of the Declaration. The Foreign Office (the UK’s foreign affairs ministry) continues to issue reports on Hong Kong every six months, and even the US under Section 301 of its United States-Hong Kong Policy Act of 1992 required its Secretary of State to “transmit to the Speaker of the House of Representatives and the chairman of the Committee on Foreign Relations of the Senate a report on conditions in Hong Kong of interest to the United States”.

At least the basic facts of this situation are pretty well-known by most of Hong Kong’s population, so I would presume Hong Kong’s highly educated (or at least highly schooled) bureaucrats would too. So riddle me this: why, when the UK Parliament’s Foreign Affairs Committee set up an inquiry into the UK’s current relations with Hong Kong, focusing particularly on how well it “monitors the implementation of the Joint Declaration”, did one Erica Ng, Director-General of the Hong Kong Economic and Trade Office in London, send the following letter to the committee? (I have converted the text from the scanned PDF offered).

Dear Sir Richard [Ottaway, MP, Chairman of the Foreign Affairs Committee],

Thank you for your letter of 10 July 2014.

UK’s relations [sic] with the Hong Kong Special Administrative Region have always been a cordial one to the mutual benefit and satisfaction of both sides in many respects, such as trade and cooperation in education, technology, and culture, etc. [sic]

Matters such as constitutional development and domestic economic and social developments, however, are clearly internal matters for the Hong Kong Special Administrative Region, and we strongly disagree and regret that the Foreign Affairs Committee should consider holding an inquiry on these subjects.

The Hong Kong Special Administrative Region strongly urges your Committee not to hold such an inquiry, which is clearly an interference into the internal affairs of the Special Administrative Region, and to call off public evidence sessions and visits to Hong Kong for the purpose.

Best regards,

Erica Ng,

Director-General
Hong Kong Economic and Trade Office, London

In light of the background to the situation that I described earlier, I don’t even know where to begin with the critique of this letter. The ignorance and arrogance it displays is breathtakingly astounding. Even without any knowledge of the situation — which I would consider in itself unacceptable in a representative of Hong Kong posted abroad — Ms. Ng’s request that the committee stops “interfering” is itself a clear example of an attempt at interfering! Furthermore, the only functions that Hong Kong is supposed to have handed over to China are defence and foreign affairs, and the committee indeed received two letters from state organs of China. So why is Ms. Ng writing to the committee too? How is this letter within her purview as a trade envoy?

I would like to know to what extent the Hong Kong government supports the sending of Ms. Ng’s letter and its contents. If the government does not support these things, then will it censure Ms. Ng, or has it already done so? At the time of writing, Ms. Ng is still the Director-General of the Hong Kong Economic and Trade Office in London.

So if the inference that the Hong Kong government therefore supports Ms. Ng’s letter is correct, we are in the situation where the Hong Kong government repudiates the Joint Declaration, and therefore its autonomy. And where does that leave us?

Guest post: my friend’s plea for democracy in Hong Kong

Mr. Zhang of the Liaison Office reportedly told the democrats to thank their lucky stars for still being “alive” under Beijing’s leniency. Quartz updated on the friendly reminder with a link to a Chinese article covering the August meeting in its actual context; turned out the democrats were only told they were lucky to be still “sitting here today” ( http://qz.com/263627/beijing-tells-hk-pro-democracy-lawmakers-theyre-lucky-its-so-lenient/).

Lost in translation or an educated guess? Did Zhang mean it was a heavenly gift that these dissidents even had the honour of sitting in the same room with His Highness and pretending to have a discussion, or was the comment tinted with a threat of unspeakable consequences? I’d like to think they wouldn’t go that far, but every time we thought so they managed to surprise us.

Either way, we can’t say they didn’t warn us when we see, one day, people of different opinions to Beijing’s silenced by whatever means. Just unlucky, right?

Anyhow, we have long entered an era of state level triad rule. Blackmail, anonymous attacks, mysterious “suddenly red” groups, organisations and leaders out of nowhere. It’s going from annoying to unnerving.

One common rebuttal to such lamenting I encounter is that HK had never been a democratic society under the colonial rule, so why should it be entitled to more autonomy now? There are many reasons why this is an idiotic argument (sorry my friends, I truly think so, and you’re welcome to confront or unfriend me if you think it matters to you personally). For practical reasons, the life we enjoy and things we endorse in HK will simply not be allowed with people like Zhang directing you what to and what not to think. It’s perfectly true that HK is always known for being a (relatively) free society without democracy (“有自由無民主”), and it flourished while many democracies struggle to tackle poverty. However, that was under an entirely different leadership, in style and in interest. The foundations of Hong Kong’s past success were many things, but the absence of a democratic electoral system wasn’t one of them. People were able to enjoy “freedom” because the colonial government chose to implement lax policies, a leniency that resulted from decisions made by individual governors on the advice of think tanks and advisors, which had nothing to do with universal suffrage or the lack thereof. What Zhang achieved was to confirm that the standard of leniency has since dropped considerably. Under an autocratic administration, freedom as we know it can be easily taken away, and it’s precisely why we need a better checks-and-balances system to safeguard the few rights we still have. Democracy is not some idealists’ dream, it’s a practical , imperfect tool widely adopted in the contemporary world albeit being commonly miscarried. It won’t be the ultimate solution, but it will give ordinary people a little voice and it will help people like the pan-democrats feel a little safer to tell Zhang to STFU when he decided it was appropriate to say what he did. It’s really in no one’s interest to indulge in the illusion that the current “freedom without democracy” model would be sustainable under Beijing’s watch, and for people like Robert Chow who are counting on Beijing to reward them, just remember the old lesson from those before you: to keep accompanied the Emperor is to keep accompanied a tiger. Hold on to your British passport, Mr. Chow.

Frost in Hong Kong, elsewhere

I’m trying something different (how exciting): publishing my fantastically interesting graphs and R code about Hong Kong on rpubs.com, with the help of Rstudio and knitr.

So this post is actually at http://rpubs.com/slygent/frostinhk. Go look at it now. Here’s a preview if you’re still not tempted. Now you can go.

Image

 

Margaret Thatcher and Hong Kong

Margaret Thatcher, the former Prime Minister of the UK, and the first female head of government in Europe, has died. Here are some pictures of her in a Hong Kong context:

Margaret Thatcher on a classic Hong Kong tram.
Margaret Thatcher greeted with adulation while on a classic Hong Kong tram.
Less adulation for Maggie at the 1st July 2012 protest
Less adulation for Maggie at the 1st July 2012 protest

There is a lot of anger nowadays over the role of the British government, and Thatcher in particular, for giving China control of Hong Kong and essentially washing their hands of the place. But the historical record is clear that actually Thatcher was against returning all of Hong Kong initially, and only acceded when Deng Xiaoping made it clear he would invade if necessary.

I leave the last word on the Hong Kong perspective to the Big Lychee, who is basically right about her influence and symbolism, and especially why so many are wrong about her.

Update: Oh, new last word: A broadcast interview with Margaret Thatcher about Hong Kong and China. Does anyone know more details about it, such as who is interviewing her and when?

Another update: A transcript of a speech in the House of Lords by Margaret Thatcher given in December 1992, soon after she become a member of that chamber. One depressing quote:

“It is already agreed that half the members of the Legislative Council will be directly elected in the year 2003. That means that there could be universal suffrage by 2007, 10 years after the end of Britain’s responsibility. It is not perfect perhaps, but it is a provision for steady and orderly progress towards full democratic elections.”

Her strong support for democracy and universal suffrage in Hong Kong, including Chris Patten’s attempts to expand the franchise in 1995 against the vehement opposition of the Chinese government and its local lackeys, should give the current pro-“business” anti-democracy forces in Hong Kong much pause.