If HK Burns - China Burns



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ORIGINAL POST

Posted by Ed 53 days ago
HONG KONG (Reuters) - Concerns over Hong Kong’s political and economic future are growing as pro-democracy protests drag on and turn increasingly violent, and China makes clear that forceful intervention is possible.
 
An intervention by Chinese troops could seriously damage Hong Kong’s standing as a stable international financial center and a gateway for global capital flowing into the world’s second-largest economy. No other Chinese city, not even Shanghai, could step into that role in the foreseeable future.
 
 
 WHY DOES CHINA NEED HONG KONG AS IT IS?

 

While China still has extensive capital controls and often intervenes in its financial markets and banking system, Hong Kong is one of the most open economies in the world and one of the biggest markets for equity and debt financing.
 

The size of Hong Kong’s economy may only be equivalent to 2.7% of mainland China’s now, down from 18.4% in 1997 when it reverted to Chinese rule, but the territory punches above its weight due to its world-class financial and legal systems.

All that is possible due to its unique system of governance.

 
 
Chinese banks hold more assets in Hong Kong — $1.1 trillion in 2018 — than lenders from any other region, according to Hong Kong Monetary Authority’s data compiled by Natixis. That figure equates to roughly 9% of China’s GDP.  
 
 
https://www.reuters.com/article/us-hongkong-protests-markets-explainer/explainer-how-important-is-hong-kong-to-the-rest-of-china-idUSKCN1VP35H 
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=50f970b1-76fc-43b7-a843-36429c764aa8&refreshStamp=0
 
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=9798df65-6e9b-4f42-90d0-53b6677b0490&refreshStamp=0
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=d0b73b83-32ab-4611-8912-f04e9f51ffa2&refreshStamp=0
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=9fc46709-1be3-4183-8b37-87d97abaa922&refreshStamp=0 

COMMENTS

Ed 13 days ago
HONG KONG - There is No Alternative  
 
The formula for stealing Hong Kong’s mantle is no great mystery. Would-be rivals need to have vibrant, innovative capital markets plus the sort of quality of life that could tempt financial professionals to migrate.
 
That means a decent level of English proficiency, (though Hong Kong is by no means in the first rank on that criterion); good transport and public services, particularly international schooling; and, ideally, something of the low taxes and cheap domestic help that many residents privately see as essential to feeling affluent in one of the world’s most expensive cities.
 

A common-law legal system like the one that underpins legal contracts in most English-speaking countries would help, too — but that will only be replicated in places that already have it, like Singapore.

The most important trump card for Hong Kong is something no other city can quite match.

China still needs it — both as its gateway to the world, and as a bolthole for wealthy mainlanders to stash their wealth.
 
Almost two-thirds of China’s inward and outward foreign investment passes through the territory in some fashion or other.
 
If anything, that role could grow as China seeks to attract more foreign funds to plug what’s becoming a persistent capital account deficit.
 
Blocking that conduit could pose risks to the Chinese economy that would dwarf the problems of Hong Kong.
 

“There is this fundamental view that you can only do business with China if you tiptoe around human rights, fundamental freedoms and civil liberties,” said Anson Chan, the territory’s most senior civil servant for four years either side of the 1997 handover.

“It’s just not true.”
 
https://www.bloomberg.com/graphics/2019-opinion-will-tokyo-taipei-singapore-be-next-hong-kong/

Ed 12 days ago
Hong Kong’s Retail Sales Won’t Recover This Year or Next Year: ING’s Pang
 

Ed 10 days ago
Compounding the problem, residential home prices are plunging down nearly 27%.   
 
Adding to the problem:
 
Hong Kong protests are pushing the city’s commercial property market off a cliff, and sellers are in denial Read More
 
 
And:   Hong Kong’s Retail Sales Suffer Worst Drop on Record  Read More 
 
 
It would appear that the protesters strategy of 'We Burn - You Burn' by attacking the economy of Hong Kong is closing in on a 'Mission Accomplished' moment.    
 
 
Trying to shut down a rebellion that has deep support --- in a key financial centre like Hong Kong --- is not possible  through the barrel of a gun.   That would only serve to accelerate the trajectory towards total implosion.
 
There must be a negotiated settlement.   And the negotiations need to start soon....
 
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=dff1a4ce-32a1-4dea-9dc8-ceff7af4ac6b&refreshStamp=0 
 
 

Ed 10 days ago
Festival Walk shops and owners are burning....
 
Hong Kong protests: vandalised Festival Walk to remain closed until first quarter of 2020 for repairs, hitting retail and catering brands
 
 
  • Mall’s owner says it will need to repair glass entrances, glass curtain walls, escalators, lifts, and glass balustrades that were vandalised
  • The closure will mean even less earnings to businesses which are already struggling from a decline in tourist arrivals and a weak consumer sentiment
 
https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3040788/hong-kong-protests-vandalised-festival-walk-remain 

Ed 10 days ago
Slogans...   catchy....  emotive....  but generally empty...
 
Obama had "Change we can believe in" 
 
 
 
 
("More of the Same" would have been more appropriate)
 
 
Trump has "MAGA" (Make America Great Again) 
 
 
I'll be walking on water before MAGA happens.... 
 
 
 
 
Then in HK we have "We Burn - You Burn" 
 
 
 
 
 
No empty promises there --- they have lit the city on fire --- just walk through Soho to see the burned out hulks of many restaurants and shops ---- the flames are licking at thousands more across the city....  the massive Festival Walk shopping mall is shut.... 
 
Property owners are walking over scorching coals at the moment (both commercial and residential)...
 
Airlines and hotels are sweating like a banker in a suit running to catch a cab in Central in August ....   
 
Tourists can smell the smoke from thousands of km away.... and they are not coming...  would-be expats have gotten a whiff as well - and are not interested in accepting positions in HK...   
 
We are running a substantial campaign for a company that assists broiling expats with moving money out of Hong Kong at a better rate than the banks.... 
 
 
 
The protesters are following through on their promise....   
 
Will the gov't call in the water bombers to douse the fire by indicating a willingness to negotiate?   
 
 
 
 
 
 
 
 

Ed 8 days ago
China’s rising household debt a ‘major concern’ as government tries to boost consumption amid trade war
 
  • Household debt in China hit 60.4 per cent of its gross domestic product at the end of 2018, according to the People’s Bank of China (PBOC)
 
  • The rapid growth of household debt has raised concerns among policymakers and analysts at the same time the government tries to boost consumption
 
 
“[Household debt growth] is a major concern for the central bank,” said Xia Le, chief economist for Asia at Spanish banking group BBVA. “Looking at the rate of growth of household debt or leverage, in just over two or three years, it’s already grown to a level where you can’t say it’s particularly safe or low. It may be becoming a financial risk.”
 
https://www.scmp.com/economy/china-economy/article/3040346/chinas-rising-household-debt-major-concern-government-tries 
 
 
A key gauge of China’s debt has topped 300% of gross domestic product, according to the Institute of International Finance (IIF), as Beijing steps up support for the cooling economy while trying to contain financial risks. 
 
https://www.reuters.com/article/us-china-economy-debt/chinas-debt-tops-300-of-gdp-now-15-of-global-total-iif-idUSKCN1UD0KD 
 
 

China is hurtling toward another record year of onshore bond defaults, testing the government’s ability to keep financial markets stable as the economy slows and companies struggle to cope with unprecedented levels of debt.”

https://www.bloomberg.com/news/articles/2019-12-03/china-s-17-billion-default-wave-is-about-to-break-a-record

 
 
 
Could the HK revolt be:
 
 
 
 
 
 
 
 

Ed 7 days ago
Protesters remind the CCP of what will happen is 'Hong Kong Burns' ....  by painting the message onto the Bank of China:
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=97b2ebc9-87f4-41e1-9865-202246a6958a&refreshStamp=0 
 
 
Close to 1 million people on the streets yesterday... 
 
1.  The rebellion is not going to fade away
 
2.  Sending in the PLA will burn down the economy 
 
3.  Allowing this to continue to fester will burn down the economy
 
4.  Burning down the HK economy will burn down the mainland economy
 
 
The options here are rather limited....  time to blink?

Ed 6 days ago
Meanwhile....   all is not well across the border :
 
 
China Car Market Heads for Unprecedented Second Annual Drop

 

Car sales in China continued to decline in November, extending a historic slump and all but ensuring a second straight annual drop for the world’s biggest auto market.
 
Sales of sedans, sport utility vehicles, minivans and multipurpose vehicles fell 4.2% from a year earlier to 1.97 million units, the China Passenger Car Association said Monday. The decline was the 17th in the past 18 months, with the only increase coming this June as dealers offered large discounts to clear inventory.
 
Wholesales of new energy vehicles cars, including electric vehicles, fell 42% last month to 79,000 units, PCA said.
 
Sales of cars running on electric motors have been falling since July as regulators reduced subsidies.
 
https://www.bloomberg.com/news/articles/2019-12-09/china-s-historic-car-slump-drags-on-as-sales-plunge-in-november

Ed 6 days ago
Ed 6 days ago
At least 5,600 retail jobs to go in Hong Kong and 7,000 firms to fold in coming six months as protests land heavy blow on economy, survey finds
 
  • About 30 per cent of the 176 companies which responded to survey said they would lay off 10 per cent of their staff in the coming six months
  • Hong Kong Retail Management Association, which carried out the survey, says doom and gloom in industry will cause a chain reaction for economy
 

Tse said the companies planning lay-offs employed 21 per cent of the industry’s 270,000-strong work force, which meant more than 5,600 people would lose jobs. Those polled included companies running chain stores and individual small- and medium-sized enterprises (SMEs). 

This means more than 5,600 families will be affected,” she said. “When these families have lower or no income, their spending power will be hurt and their mortgage repayments will be affected, too.”
 
 
 
https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3041288/least-5600-retail-jobs-hong-kong-and-7000-firms
 
 
If this trajectory is not checked (by solving the crisis) ...   this will be the result (with unemployment as the catalyst as opposed to interest drain)
 

Ed 6 days ago
Some 97 per cent of the companies were losing money. About 11 per cent of those polled said they would fold their businesses in the coming six months. Tse said based on the 64,000 business registrations of retail firms in Hong Kong, at least 7,000 companies could be included.
 
 
How many of those business owners who are losing money ...  have fat mortgages to pay...  
 
How many will be dumping other assets such as stocks... to keep their businesses afloat.... 
 
 
 

Ed 5 days ago
As of December 6, the Post found that at least 39 stores were vacant along Hennessy Road, the main thoroughfare connecting Causeway Bay, Admiralty and Wan Chai, one of the most sought after retail strips by big chains.
 
 
'We Burn - You Burn' --- in action.... 
 
 
 
https://hongkong.asiaxpat.com/Utility/GetImage.ashx?ImageID=a4e62d18-6d61-4b92-9574-eeb6ebf8d219&refreshStamp=0 

Ed 2 days ago
Hong Kong Sevens week setback as rugby Tens cancelled amid ongoing protests
 
  • The famous rugby tournament serves as a curtain-raiser for the Sevens and attracts future and former stars from around the world
  • Organisers say they had difficulties in attracting and securing firm commitments from enough overseas teams of sufficient quality
 
 
https://www.scmp.com/sport/rugby/article/3041627/hong-kong-sevens-week-setback-rugby-tens-cancelled-amid-ongoing 

Ed 16 hrs ago
Another reminder why HK is important:
 

In the public broadcaster interview, Li detailed his frustrations with building Oriental Plaza. A sprawling development in the heart of Beijing, the project faced political wrangling and loud public disagreement about its size as it went up in the 1990s.

 
His Chinese partners, he said, gained a 40% share of the project, up from an initial 10% or so.
 
Li said he had learned a lesson.
 

“In a political and cultural center like Beijing, one has to put business and economics in a lesser position,” he said. “Although I’ve run into all sorts of trouble, I now have a better understanding of China.”

 
https://www.reuters.com/investigates/special-report/hongkong-protests-tycoons/ 

Ed 12 hrs ago

One of the most common statistics thrown about regarding Hong Kong’s loss of significance is that its gross domestic product is only equivalent to 3 percent of China’s, down from more than 20 years ago when it was 18 percent.

 
But given Hong Kong’s population of 7 million is less than 0.5 percent of China’s population of more than 1.4 billion, Hong Kong is clearly still punching far above its weight.

More importantly, Hong Kong’s worth has never been about the size of its GDP, but its functions as a business hub.

 Hong Kong facilitates the majority of investments and other financial transactions between China and the world. Hong Kong is also a major stock market for top Chinese firms such as Alibaba to launch IPOs, and it is the world’s top non-mainland yuan clearing center.
 
In short, Hong Kong is China’s top international business hub. If Shanghai was capable of taking over Hong Kong’s role, it would have done so years ago.
 
 

Hong Kong is also by far the biggest offshore clearing hub for the renminbi, accounting for more than 70 percent of deals. This is despite a growing number of cities, including London, Toronto, and Zurich, that also act as offshore renminbi hubs.

Meanwhile, almost two-thirds of direct investment into and out of China originate or are transacted through Hong Kong. Again, clear regulations and lack of capital controls mean it is much easier for investors to channel funds to or from the mainland through Hong Kong rather than directly.

 Simply put, Hong Kong is an indispensable gateway for foreign funds to China.
 
 

All these functions cannot be quickly taken over by Shanghai or Shenzhen anytime. Hong Kong possesses several key advantages that can’t be found in those cities or elsewhere on the mainland.

First, despite the Communist Party’s best efforts, it maintains rule of law which includes a legal system based on common law and an independent judiciary that is not directly controlled by the government.

 
China’s notoriously opaque legal system is built on ambiguous and arbitrarily applied laws, secret kidnappings, and courts completely under the rule of the government. That renders business dealings deeply uncertain, and financial transparency often nonexistent.
 
Second, there are no capital controls, allowing for the free flow of funds into and out of the territory. On the mainland, strict controls limit how much money can be transferred outside of China by both individuals and corporations to prevent capital flight.
 
Third, it features a relatively free press environment (which has come under threat in recent years) as well as uncensored internet. Contrast this to the mainland, where in addition to politically sensitive topics, even economic news can be censored. 
 
  
https://foreignpolicy.com/2019/12/11/protests-alibaba-economy-china-still-needs-hong-kong/ 
 
 
 
 
 
Simply put.... if Hong Kong Burns - China Burns. Period. 

Ed 12 hrs ago
Ed 7 hrs ago
Protesters try to shut down Christmas shopping -  target 5 malls:
 
One of the protesters, Stephanie, explained the aim of the protest.

"Christmas shopping is not literally shopping in the shopping mall. It's just that we want to gather enough people to bring pressure on stores [so] that they will close down. That's the ultimate goal," Stephanie said.

She added that the protesters want to put enough pressure on the landlords and developers to push the government to agree to the protesters' five demands.
 
https://news.rthk.hk/rthk/en/component/k2/1497765-20191215.htm?spTabChangeable=0 
 
 
We Burn - You Burn - Everyone Burns.... 
 
 

Ed 6 hrs ago
At a Maxim’s fast food shop in Telford Plaza, protesters hurled verbal abuse at diners. Many of the customers left during the protesters’ invasion. The protesters later left after putting stickers on the storefront.
 

In New Town Plaza in Sha Tin, meanwhile, protesters began taking over the atrium at around 2pm as others marched around the mall, singing protest songs and shouting anti-government and anti-police slogans.

They invaded a restaurant under the Maxim’s chain, shouting at diners, and spraying graffiti on the storefront.

A woman tried to argue with the protesters and was spray-painted on the face. Paramedics later took her away. No one was arrested.

A Starbucks cafe shop also pulled down its shutters.

Similar scenes also played out at Metroplaza in Kwai Fong, where protesters harassed customers at an Arome Cafe store, shouting verbal abuse and calling them “pigs”.
 
https://www.scmp.com/news/hong-kong/society/article/3042169/hong-kong-protests-restaurants-spray-painted-and-diners 


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