Tuesday, December 2, 2014

Book Review: Can China Lead?

This book is published by Harvard Business Review and my review first appeared in Amazon.

If the authors had posited the rhetorical question from the geopolitical point of view, the short answer would be: "Yes, China can lead though not in the confrontational style favored by the Americans." When applied to doing business in China or by Chinese companies on the global stage as the authors intended, the answer is more nuanced and complex. The authors tried hard and deserve a "B" for their effort but they missed the bullseye. 

This thought provoking book loaded with information and case histories (in the tradition of Harvard Business School) is highly instructional for those wishing to understand today’s China, especially the business environment of China. While the authors provided a balanced discussion of the complexity of a society undergoing breathtaking rate of change, the analysis that accompanied the discussion was often too light and not fully satisfying.

The book began with a historical review demonstrating that much of China’s centrally planned policies had the roots in the early republic days as proposed by Sun Yat-sen, the founding father of modern China. Contrary to Western perception, many of China’s policies were not invented by China’s Communist Party but preceded CCP’s coming to power.

The authors then described the rapid development of China’s economy alongside intensive investment in infrastructure that has been unprecedented in human history. They attributed the success to China’s leaders being trained in engineering, as opposed to emphasis in law as is the case with western political leaders.

The book presented many successful business cases as well as failures. Both categories included state-owned enterprises as well private ones founded by entrepreneurs. Reasons for their success or failure were useful and instructional. The book also talked about China’s rapid expansion of the capacity to train college graduates and China as emerging source of outbound foreign direct investments. 

While the description of China’s impressive economic progress was positive and fair in giving the policymakers their due, there was an undertone of nagging concern that China’s miraculous development won’t last. Because of China being a single party rule, they expect the nation to eventually hit the wall. As I read the book, I kept waiting the other shoe to drop. That is, I waited for an analysis and explanation of why China will ultimately fail but that conclusion while hinted was never articulated.

It is somewhat unfortunate that the book went to press just after the sentence of Bo Xilai. To the authors’ credit, they did not simply dismiss Bo’s downfall as political infighting between his losing faction and Xi Jinping’s winning faction—as some western pundits have suggested. Had they waited a bit to see the full implication of the anti-corruption drive, still on going today, they might have a more hopeful prognosis on China’s future.

I suppose it’s unrealistic for a less than 200 page book to fully cover the many facets of China, some contradictory and conflicting, and some too complex to lend to straightforward analysis. For example, the authors devoted one paragraph on the likelihood of military conflict with the U.S. and their concluding sentence was: To the extent there is a Chinese-American competition, we believe it will be primarily economic, not military, in nature. Wow, there were a lot of whys and why-not’s that they didn’t talk about.

In discussing the rise of China, especially in the early years after Deng Xiaoping return to power, the authors did not discuss the critical (in my view) roles of Hong Kong businesses relocating into Shenzhen and Taiwan manufacturing companies into Dongguan and Kunshan. They were in China well ahead of significant western presence and their factories began the knowledge transfer of good manufacturing practices to the indigenous factories, heretofore indoctrinated by the “iron rice bowl” mentality wherein quality and productivity did not matter.

While the book drew linkages to early republic days just after the fall of the Manch  dynasty, it barely mentioned the early signs of privatized venture led by the so-called township enterprises (乡镇企业) in the early days of economic reform. To my knowledge no one has really gone to the trouble of figuring out why the TVEs had such meteoric rise and why they flamed out.

The book also did not talk about how failing SOEs were “rescued” by some energetic entrepreneurs, usually an insider, taking the small efficient part of the operation with greatly reduced payroll and restart as a stock holding company. In exchange for a minority equity in the new company, the local government was left to deal with closing and laying off the greater part of enterprise beyond economic salvage. Some newly formed company raised capital by agreeing to relocate to the outskirts and giving up the dilapidated facility located in the heart of town to the local government for cash, whereupon the government would raze the old factory and build new shopping mall or office building or high rise apartments. Everybody won.

The round-trip funding of the newly formed privately held company also played a critical role in the early days of economic reform. “Round trip” refers to the secret transfer of funds from inside China to Hong Kong and then remitted back to China as qualified foreign direct investment, sometimes accompanied by addition of fresh funds from Hong Kong. The motivation for the round tripping was that any enterprise with 25% or more equity belonging to the foreign investor qualified as foreign invested enterprise and FIEs were eligible for favorable tax treatment and other concessions.

“Above are rules, below are ways around the rules (上有政策,下有对策)” is one saying everybody in China is familiar with. It is very much ingrained in the Chinese business culture and something every western business in China needs to keep in mind. The authors emphasized the importance of western companies understanding and getting along with the national and local governments in China. Very true. The challenge is that nothing in China is black or white but in shades of grey--nothing to do with sexual bondage but everything to do with staying out of FCPA related indictments back home. Knowing where the line is and not stepping over the line is the daily challenge for the expat manager.

While there was an impressive collection of cases presented in this book, there were some gaps I could nit pick. For example in discussing China’s rising trend to consumerism, they talked about the competition of Ford and GM to win the hearts and minds of the Chinese consumer. Actually VW, who was in China years before GM or Ford, has been much more a competitor to GM than Ford.  Breathing down their collective necks are the local privately held entities as well as the big state-owned auto companies that are in bed with the western automakers.

Also as part of the discussion on China’s rising consumerism, the authors studied the use of credit card companies as a “growing appetite for consumer debt.” Missing in the discussion is a much needed, more expansive study of the Chinese consumer (or is it the government) that resisted the use of outside credit cards such as Amex, Visa and MasterCard until the introduction of UnionPay, a Chinese version of a universal credit card. What made UnionPay successful? What was the government’s role?

In fact, an entire new chapter could be devoted on how Chinese companies emulated a successful western business and localize the model in order to succeed in China. Examples would include Baidu over Google and Alibaba over eBay and Amazon. The authors suggested that the government tilt the field in favor of the Chinese companies but I believe there was more to it. The Chinese entrepreneurs understood the local culture and practices and made sure theirs was an approach that took advantage of their understanding. An interesting case to watch for possible inclusion in their next edition of this book will be the rise (and more rise or fall) of Xiaomi in the highly competitive mobile phone market.

The authors devoted only one sentence to the turbine maker: Sinovel was also accused of stealing proprietary wind turbine technology from its American main supplier. This was somewhat misleading because the dispute was over alleged theft of software, and as the authors rightly pointed out, software was not a strength of Chinese companies. Actually the authors missed an opportunity to develop a case study on how to develop a strategic partner and avoid a nightmare. (The damaged American company was located in Massachusetts and should have been easy to interview.) Instead of same bed, different dream, based on the Bloomberg report, I suggested that the American executive missed the opportunity to form a classic win-win relationship, a virtue the Chinese love to extoll.

The authors are using this book for one of their China related courses. It is a worthy first effort but I would expect future revisions and editions, if for no other reason because China is still very much a moving target. As I suggested in this review, to do justice to this subject, the book needs to be much bigger, at least twice the number of pages accompanied by more in-depth analysis.


Thursday, November 20, 2014

Make Abe a global persona non grata until he stops denial

The New York Times recently published an opinion piece on comfort women and Japan's continued denial by Ms. Mindy Kotler. Ms. Kotler pulled no punches as she presented a long list of rape and violence by the Japanese soldiers on women throughout the war. She criticized the Abe administration for their vigorous effort to revise history and restore Japan's imperial wartime honor. This was another timely reminder of Japan's national amnesia over the WWII atrocities committed by the Japanese imperial troops.

Until Japan wakes up from its amnesia, the world cannot forget the trauma of the hundreds of millions brutalized by the Japanese. This was particularly true for nations in the Asia Pacific. The best way to jolt Japan's collective memory is to make sure the shame of world wide censure overwhelms the comfort of hiding under continued denial.

In Germany and other parts of the world, school children are taught about the European Holocaust perpetrated by Nazi Germany that killed millions of Jews. Deniers of the Holocaust can be sent to prison. In similar vein, to drive home that Abe cannot get away with denying the Asian Holocaust, let international community declare Abe and all members of his cabinet as persona non grata and denied passage or entry to any other country. The precondition to lifting the travel ban would be only after they have rectified the textbooks missing the actual history and publicly informed the Japanese public of the truth of WWII.

Rather than seeing themselves as the victims of WWII, Japan must accept its responsibility as the perpetrator of atrocities of a magnitude beyond human imagination and understanding.

As the recognized leader of the world, the U.S. government must make the first official proclamation that Abe and his cabinet officials are, until further notice, no longer welcomed in the United States. Other nations will surely follow suit, but even if not all go along with America, the shock of the American indignation would surely catch Japan's attention. When losing face by continued denial far outweigh the pain of owning up its sordid past once and for all, Japan may finally join the community of nations with a conscience.

Wednesday, November 12, 2014

Book Review: One Man's View of the World

My friend, Ken Fong, found the book so compelling that he bought a bushel so he can give a copy to each of his friends as he ran into them in daily encounters. At age 90, this is most likely the last book by Lee Kuan Yew. Lee was Singapore’s first prime minister in 1959 and led the city state to full independence in 1965 when the rest of Malaysia rather unceremoniously invited Singapore to go their separate ways. By the time he stepped down in 1990, Singapore has been transformed into a First World metropolis. His is a legacy of what good government is like and how a successful national leader should behave.

As the book jacket stated, with little else left to prove, he looks ahead to offer his unvarnished view of the future shape of the world. In reading his view of the world, the reader will come to understand the core beliefs of this remarkable man. Some of these include:

(1) For any nation to succeed, clean government is a must. Road to a clean government is to pay the civil servants generously so that there is no reason for corruption. For those that do stray and gets caught, the punishment needs to be harsh for betraying the public trust.

(2) Democracy is no panacea. If the citizens are poorly educated and have no idea of what democracy is all about and if the country lacks a history of progressive thinking and culture of individual equality, the introduction of democracy will fail. As Lee predicted in his book, winter inevitably followed Arab Spring because tribal based feudal systems of the Middle East cannot nurture democracy.

(3) Education is the necessary foundation to any successful developing nation and the access to quality education must be equal to all citizens, male and female. Educated workforce is vital to economic development and a growing economy gives the population opportunities to a better life and thus a willingness to support their government. Thus in his view, the caste system will always hold India back from realizing its full potential and keeping women from education will block the development of Islamic countries.

(4) Diversity in a population trumps homogeneous population because diversity means more diverse gene pool and greater range of creative thinking and capacity for innovation. From his point of view, the U.S. greatest strength is its welcoming attitude towards immigrants. By the same token, Japan’s inability to accept anything foreign, even ethnic Japanese who has lived abroad is the root of its inevitable decline.

Hi book deals with major global topics and each major regions of the world.  On China, his impression of Xi Jinping is in the “Nelson Mandela class of persons,” and Deng Xiaoping is undoubtedly the most impressive international leader he has ever met. Key difference between the US (a benign power) and China is that China does not believe in “evangelizing their form of government.” His biggest concern on China is if the future young generation of Chinese, not having experienced the challenges of China’s difficult past, gets overly nationalistic and aggressive.

From his visits to the U.S, “I came to appreciate fully the dynamism of the entrepreneurial American.” Lee sees long-term success of the U.S. resting on its ability to continue to attract “bright and restless immigrants from the world.” As for the competing influences of the U.S. and China in Asia, he felt that even though the US military budget is still six times greater than that of China, China has advantage of proximity in competing for influence in its neighboring states. He seems to think that both sides need to find mutual accommodations around a stale mate.

Lee is considerably less optimistic about Europe. He sees two major hindrances. The flaw behind the Euro is monetary integration without fiscal integration between 27 nations with wide and disparate of economic development. He sees no hope for fiscal integration ever. Europe is afflicted with the welfare state mentality and stifling labor laws that discourage entrepreneurialism, innovation and striving for productivity. Rather condescendingly, Lee thought Europe might be able to get away with the welfare state mind-set if they were competing with Fiji or Tonga.

The book jacket endorsements list some of world’s who’s who as heads of state, diplomats and international notables.  But I don’t think that was the reason Ken liked the book so much that he became a volunteer propagandist of Lee’s worldview. In Lee, he sees and the world sees a great statesman who successful synergized his impeccable western education with his innate Asian values to show the world how a small port city can integrate into the global economy and let the people thrive. The politicians in Washington would do well to read and heed the lessons he learned.

Saturday, November 1, 2014

Will Obama Seize the Moment and Make History?

A shorter version appeared earlier in China-U.S. Focus. The short version also appeared on the Chinese website, Guancha.cn on November 14, 2014

When President Obama goes to Beijing and meet President Xi, will he make history and finally make good on the Nobel Peace Prize awarded him rather prematurely at the beginning of his first term?

He will be in China to attend the summit of the annual Asia Pacific Economic Cooperation. In addition, he will also have a private meeting with China’s President Xi. This trip could be Obama’s best chance and possibly the last chance to radically alter the bumpy bilateral relations and leave a lasting legacy of genuine peace.

Up to now, his administration has far from winding down violent conflicts around the world—naively anticipated by the peace committee—but has instead presided over violence and mayhem more intense than even during the reign of the predecessor war mongering administration.

Today we see Ukraine confronting its eastern secessionists supported by Russia in direct opposition of the U.S. and Ukraine’s western allies.

The competence and reliability of new leadership in Afghanistan and Iraq are at best dubious; the internal stability and security is shaky to say the least; and the prospect of American military and mercenaries being able to extricate is never bright and becoming dimmer by the day.

ISIS didn’t even exist during the disastrous Bush years and arguably might not come to being if the American military incursion under Bush hadn’t broken the hornet’s nest of radical jihadists. Nonetheless, history will credit the emergence of ISIS and its threat to the existence of Syria and subsequent tearing asunder of the entire Middle East to Obama’s watch.

During his watch, Israel and Palestine have been as nasty to each other as ever and inevitably with the hapless and out-fire powered Palestinian getting the worse of lives lost. The prospects of peace are no more realistic than before.

Egypt and Libya should have been bright spots where Obama could claim ownership for replacing authoritarian regimes with democracy. Only problem is that the new governments are not letting their people enjoy any fruits of democracy. We don’t hear much about their being worse off only because the media’s short attention span is now focused elsewhere.

On top of all that, a worldwide Ebola outbreak threatens.

Despite both sides claiming a warming of bilateral relations, the bilateral relation between China and the U.S. has been more of one step forward and one step backward, sometimes even two steps back.  The latest example was for the Pentagon to give a senior PLA official the red carpet treatment while the Justice Department was very publicly indicting 5 PLA soldiers alleging illegal cyber attack.

The current U.S. annual defense budget plus the cost of veteran services is around $900 billion. The Obama budget for 2015 will have to borrow $561 billion to meet revenue shortfall and the interest on debt is expected to be $252 billion representing 6% of the annual spending. While facing the daunting task of taming the federal budget deficit, can Obama justify adding to the nation’s financial burden with a “pivot” to Asia designed to confront if not to contain China?

Rather than increasing military expenditures in the Pacific to correct any perceived imbalance with China, Obama needs to throw away the moldy script of “strategic ambiguity” left in the White House desk by his predecessor.

Obama should understand that petty politicians take pot shots at China for perceived profit at the polls. Of all people, as president, he should see that it is in America’s national interest to have a friend and not an adversary across the Pacific.

He needs a China less willing to work with Iran and Russia and more openly willing to cooperate with the U.S. and he can be proactive about it. He should stop pandering to those that do not see the big picture.

All it takes is political courage and a start from scratch with a new approach to China. The new approach should include the following:

(1)         Stop expecting or telling China to do what we want them to do. Respect that they have a different point of view and a different way of getting things done. Treat them as a prospective partner and they will become a friend. Treat them as an adversary and they will become one.

(2)         Stop articulating differences publicly but by all means discuss them frankly but in private. Already in place are regularly occurring bilateral meetings between leaders and working level officials. Use them constructively.

(3)         Recognize that China wishes to establish its sphere of influence around its borders, and as an act of good faith, stop surveillance flights near China. Let China work out their bilateral relations with Japan and other Asian states without the U.S. being the elephant in the room. Accept that China too has its own national interest. It’s not in our interest to go out of our way to deprive China of theirs.

(4)         Stop writing rules of conduct unilaterally, such as proclaiming that cyber activity by the NSA is legitimate but any from China is not. Instead both sides need to sit down together, share best practices and agree on lines on the sand that neither side would cross. Then invite other nations to join in the discussion. The dispute should not be between states but between legitimate governments and the cyber criminals.

(5)         Agree that terrorists are terrorists. So long as the U.S. sees terrorists in China as possible freedom fighters, there is a big problem. Agreement on the other hand would allow the two major powers to work together in stemming the jihadist madness.

(6)         Remember that the Cold War is over. China is not a stand-in for the former Soviet Union. Rather than any expressions of intent to compete with the U.S. for world domination, China has gone out of its way to stay out the U.S. way.

The above six basic planks for developing a new bilateral relations with China represent an affirmation that China is a economic partner, sometimes a competitor but not an adversary. Given time for the two countries to work together, a genuine and durable partnership could develop and the U.S. find a China more willing to pick up its share of the tab for maintaining world peace.

Critics might consider the proposed approach naïve. But the naiveté if it succeeds will save America from grief and finally reap a peace dividend that Bush squandered away. When Americans charged into Iraq expecting a liberating hero’s welcome, that naiveté cost the U.S. dearly--last count exceeding $1 trillion and close to 40,000 casualties.

At least starting from a position of goodwill, Obama can credibly propose to Xi on resolving the North Korea debacle as a common problem to tackle between friends.

Both Bush and Obama had expended a lot of energy on getting North Korea to undo their nuclear program to no avail. When the lack of progress frustrated the U.S., they would throw up their hands and proclaimed that only China can influence the North Koreans to behave.

In reality China has been just as frustrated by North Korea. China’s only leverage is to sever the economic lifeline that has been keeping North Korea from economic implosion. China can’t afford to let North Korea collapse because the existing treaty between the U.S. and South Korea would allow American troops to move right up to the China/North Korea border.

If Obama were to build real mutual trust between China and the U.S. and, in the context of building trust, pledge to withdraw all U.S. troops from the Korean peninsula upon the reunification of Korea, there would be a whole new ball game.

China would consider the U.S. as a genuine working partner in the global arena. North Korea, realizing that the prospect of American soldiers standing across the Yalu River no longer serves as a threat to China, would have to be more amenable to negotiate for security assurances in exchange for giving up the bomb. Over the longer term, the north may find the reunification with the south inevitable.

South Korea should welcome a less belligerent north and be open to reconciliation in exchange for the cancelling the military alliance with the U.S. The treaty was established in 1953 and the South Koreans have been questioning the relevancy of the treaty since at least 2006.

China and South Korea are already quite comfortable with each other. They are major economic partners. Xi and President Park of South Korea like each other, and Xi would find a united Korean peninsula one less source of worry—so long as the Americans are no longer there.

The U.S. would be the biggest winner of all. Obama can claim to finally achieve a nuclear free Korean peninsula, to have created go-forward progressive relations with China, and to deduct the cost of stationing 30,000 troops in South Korea from the annual budget.

The world will thank him for the legacy of at least making one part of the world safer then he found it. He can then rightfully be a Nobel laureate. 

Friday, October 31, 2014

There exists solid footing for Creationism after all

Recently I attended a lecture given by Professor Peter Fisher, head of MIT Physics Department. The subject of his talk was on dark matter in the universe.

He said the universe we can see, i.e., all the stars, galaxies and other light sources make up only 4% of the universe. The other 96% of the universe is made up of dark matter and dark energy. So far, we humans have not found a way to see the dark matter and energy.

That was an OMG moment for me. That 96% gives the Creationists and advocates of Intelligence Design plenty of "ground" to stand on.

Monday, October 27, 2014

Update on Internationalization of the Renminbi

Even though I have not said much about China's bilateral swap agreements in recent months, I have been following the development with interest. My last count revealed that China had entered into about 20 such swap agreements. Everybody understands that swap agreements bypasses the need to convert payables into dollars from one currency and then reconvert the calculated dollars into the other currency--or pay the bill in dollar and not in either local currency. By doing able to deal directly, the two trading partners can skip having to hold dollars in their reserve to pay bills.

Experts on international monetary policy also say that the swap agreement is a way for China to gradually open the door for the renminbi to become an internationally accepted reserve currency, even before the yuan becomes freely convertible.

The latest news indicate that China has also signed multiple currency swap agreements totaling 2.9 trillion yuan (472 billion U.S. dollars) with 26 overseas monetary authorities. "Monetary authorities" rather than countries because the list includes Hong Kong and Taiwan.

The main reason for the news bulletin was to announce direct trading of the renminbi with the Singapore dollar beginning October 27, 2014. The Sing dollar is the latest to be added to the major currencies that China can do onshore trading. Others are U.S. dollar, the euro, British sterling, Japanese yen, Australian dollar, New Zealand dollar, Malaysian ringgit and Russian ruble.

This move is said to help Singapore become a "renminbi offshore center." The same article goes on to say that the PBOC has also authorized offshore renminbi clearing and settlement arrangements in Singapore, London, Frankfurt, Seoul, Paris and Luxembourg, as well as Taiwan, Hong Kong and Macao. The article from official source in China does not clarify the difference between clearing and settlement and just plain center.

The article also said China's foreign exchange reserve as of June 2014 totaled $3.89 trillion.

Reuters recently reviewed China's possible strategy on internationalization of the renminbi that I thought was rather informative. The article was specifically referring to Canada and Middle East as next likely offshore centers, but the discussion was generally useful in understanding what China is doing. On November 8, China and Canada announced swap agreement up to 200 billion yuan for three years and Toronto will be the first city in North America to clear renminbi based transactions.

Another report indicated that Qatar is the 24th country to enter a swap agreement with China. In this case, the swap would enable the use the renminbi for purchase of oil in lieu of the dollar.

A comprehensive discussion on the move to internationalize the renminbi was recently published on the blog for China's central TV. This post indicate that China has swap agreements in place with 29 monetary authorities. Even though the renminbi is not yet freely convertible and far from becoming a reserve currency like the dollar, the growth in the use of the yuan for trade settlement has leaped more than a thousand fold from 2009 to 2013, from 3.58 billion yuan in '09 to 4.63 trillion yuan in '13. The amount in first three quarters of '14 has already exceeded the total for 2013.

Tuesday, October 7, 2014

Looking Deeper About Occupy Central in Hong Kong

An earlier version was posted in China US Focus

 When Hong Kong reverted to China in 1997, western pundits predicted doom and gloom for the future of Hong Kong and they couldn’t be more off target. The same gaggle of pundits and analysts are now attempting to make sense of Occupy Central movement taking place in Hong Kong and their interpretations are again suspect.

There are western observers that are quick to draw the analogy of Tiananmen in 1989 to Occupy Central in Hong Kong and attribute to both movements as a cry for democracy, demand for government reform, and even overthrow of the ruling elite. These are views reflecting their western bias and not grounded in reality.

There are similarities, of course. Students led both movements and both demanded democratic reform. However, the students at Tiananmen did not really understand the meaning of democracy. They wanted to replace the authoritarian government of Zhongnanhai with one to be run by the leaders of the movement. Idealistic yes, realistic no.

The students of Hong Kong also demand democratic reform. They are too young to competently compare the relative freedom they now enjoy to no voice on how they were governed when their parents lived under the British rule. They thought they saw an opportunity to rewrite the Basic Laws and make a grab for complete universal suffrage. They are being naïve.

Since the handover in 1997, Beijing has hewed to the line of “one country, two systems” and honored every term and condition as outlined in the Basic Law. The people of Hong Kong will be able to vote for their next chief executive in the 2017 election, just not the right to nominate the candidates who will run for the highest office. The voters will choose from among the candidates vetted by a nominating committee. It’s a limited form of democracy but that is the Basic Law.

The student leaders at Tiananmen overstepped the legitimacy of their complaints when they publicly insulted the Premier of China, which then escalated tragically to bloodshed. The western media unintentionally contributed to the incendiary circumstances. They followed Gorbachev on his State visit to Beijing and noticed the ragtag bunch congregating at Tiananmen. Their attention to the students rekindled a movement running out of steam, thus leading to disastrous consequences.

The students of Hong Kong are demanding the immediate resignation of chief executive C.Y. Leung, an ultimatum impossible to be met. The Hong Kong police have shown professional restraint and keeping a delicate balance between maintaining order and minimizing violence. They have been doing their utmost to keep the disturbance civil and, unlike Occupy Wall Street in New York City, have not resorted to cracking heads with swinging batons.

If anything, there are now loud demands for law and order from ordinary citizens weary of the blockage by protestors and a desire to resume their daily lives. Such confrontations between civilians and students have potential tragic consequences. So do continue disruption of traffic and normal daily business activity.

Fortunately, the situation seems to be calming down. Office workers are being allowed to go back to work. Protesters and government representatives are having a conversation. Hopefully, this is the beginning of negotiations that will lead to a mutually acceptable resolution.

I have been a regular visitor to Hong Kong since 1978 and I believe there are genuine issues to consider that might lead to accommodations both sides can live with.

Until recently, people of Hong Kong have not been overly concerned about their freedom to vote and much more concerned over the freedom to make money. That was true under British rule and carried over after the handover. China’s own economic success, especially after Tiananmen and then after the handover, created enormous opportunities for the folks in Hong Kong that wanted to achieve financial success.

After China began their reform under Deng Xiaoping’s exhortation that “to get rich is glorious,” Hong Kong business people became wealthy by moving their factories into China and transferring their management and business knowhow to the mainland. Then Hong Kong real estate magnates moved into Chinese cities and showed China how to make money in property development.

Entrepreneurs inside China were quick learners. As they became wealthy, they in turn invested in Hong Kong property, raised money via the Hong Kong stock exchange and used Hong Kong as their business conduit to the rest of the world. It has been a symbiotic relationship. Instead of the “preordained” gloom and doom, Hong Kong prospered like never before. As some wise observers have counseled the protesters, Hong Kong’s future rides on coattails of China’s future.

The young protesters need to think about the heavy cost if the symbiosis with the mainland is damaged or destroyed. If they think having a truly democratic form of government will be ample compensation for an estranged relationship with Beijing, they need to think again.

They need to ask themselves, “What form of democracy is likely to provide them with a future superior to riding on the coattails of China’s economy?” Certainly not the U.K., former masters of Hong Kong. Theirs is a deficit economy tittering on the brink of insolvency and desperate for China investments and fees from renminbi-based transactions to keep the country afloat.

What about the United States, the paragon of all democracies? Which part of this democracy would the Hong Kong protesters like to emulate? The grid-locked dysfunction of Washington as a model of good governance? The right to vote completely quashed by the politics of money where deeper the pockets, louder the voices behind the checkbook? May be they would like to help pay the mounting national debt, currently close to $60,000 per person?

I respectfully suggest to the young people of Hong Kong that they value the qualities of Hong Kong that make the city special. Rather than tearing it down, they need to work with the government on improving the conditions for all the people. And, there are some significant issues that need the urgent attention of the SAR government headed by CY Leung.

The most obvious has been the tension created by the flood of mainland visitors to Hong Kong. Their lack of civil behavior such as spitting or urinating in public places are visible irritants and generators of ill will. Even worse when the visitors game the system in order to give birth in Hong Kong and then clean the store shelves of baby formula when they go home leaving the local consumers to deal with shortages.

How to deal with the tourists from China, obviously a two-edged issue, is a matter the SAR government needs to take up with Beijing. The solution has to somehow discourage the abusers that take advantage of Hong Kong but encourage those genuinely interested in Hong Kong as an interesting place to visit.

The internal issues are perhaps more serious but well within the purview of the SAR government. One is to continue to upgrade the quality of education so that young graduates would qualify for well paying jobs and embark on their own paths to prosperity. Give them hope of upwardly mobile careers and they are less likely to barricade the streets.

Second issue has been the lack of reasonable and affordable housing for the large pool of population that have not fully participated in the per capita income growth that Hong Kong has enjoyed. Given that Hong Kong has the world’s highest per capita of billionaires and most of them derive at least in part their wealth from real estate, it would seem that this is an easy matter to resolve by the public and private sector working together.

As is frequently the case, public unrest hints at underlying causes. The student protest at Tiananmen began because of resentment of official corruption and favoritism that ballooned out of control. So it is pertinent to look at causes that lie beneath Occupy Central.

Sunday, August 31, 2014

Iceland: Land of Fire and Ice

Coming home from a tour of Iceland comes closest to the feeling of having been to another world and back.  Indeed American astronauts trained for their first landing on the moon near the center of Iceland, so my analogy is not far fetched.

In geological terms, Iceland is a truly young landmass, very much a nature’s work in progress. New land is still being created by lava flows and new islands emerge from under water volcanic eruptions, the newest being Surtsey, about 50 years old, off the southern coast of Iceland. (Surtsey is off limits to casual tourists to keep it pristine for earth scientists to study new land creation.)

Iceland is frequently called the land of fire and ice. Fire comes from the constant volcanic and geothermal activities beneath the surface and ice from the weight of massive glaciers above. The consequent landscape reflect those qualities, fields of jagged lava rocks, glacier waterfalls that cut through mountains, jagged if formed after the ice age and flat table silhouetted if the mountains were sheared by the retreating ice. The landscape was light green from the moss that grew on the lava and darker green from the grass farmers planted for the livestock. Iceland has no indigenous tall trees or large land animals.  In order to protect their domesticated livestock, local inhabitants were quick to kill rare sighting of polar bears that landed from drifting icebergs. Before the advent of man, any unfortunate bear that landed on the relatively barren Iceland most likely starved to death.

That's sand eels hanging in its mouth
Before humans discovered Iceland, it was already migratory birds’ favorite honeymoon spot. Millions and millions came to Iceland in the summer months to mate and breed. Approximately 80% of world’s puffins have their nests on Iceland. That comes to more than 20 visiting puffins for every Icelander.  Sadly because of climate change and resulting shift in the food chain, increasingly fewer puffin chicks survive the breeding season and grow strong enough to join their parents for the migration to the open ocean where they spend the rest of their time. Puffin’s average life expectancy is about 40 years, so there is still time for the species to adapt and reverse the path to extinction.  (Our tour of Iceland began in late August, which was a tad late for viewing puffins in their natural habitat, but I was fortunate to photographed one on the water.)

The official settlement of Iceland was attributed to a couple of Vikings around 870 AD. Some Irish priests may have been in Iceland a hundred years earlier but weren’t around by the time the Vikings arrived. Life on the rugged island was far from easy and most did not come willingly but usually under duress, such as having worn out their welcome in their homeland in Norway by committing some egregious indiscretion such as killing somebody important. 

The original settlers came without a written language and had to pass down their traditions and rules of conduct through oral recitations and the integrity of the oral history greatly depended on the memory of those passing them on.

By the 12th century AD, the alphabet was introduced from the British Isles but adapted to represent the Icelandic version of the Norwegian language. The invention of paper had already arrived in the West from China but had not yet found its way to Iceland and writing was restricted to inscribing on the skin of farm animals, understandably a much more costly medium. Snorri Sturluson was one such wealthy landowner/farmer/major chieftain who transcribed much of the oral history into written sagas. He was not only a major contributor to Icelandic history and culture but also that of Norway since much of the roots of the sagas originated from Norway.

According to Icelandic sagas, Leif Erickson was the first to sail to America and even settled there for a part of his life in late 10th and early 11th century AD. His sister-in-law, Gudridur, who was in his party, even gave birth to a boy in 1004 on an island thought to be today’s Manhattan. Her first husband who was Leif’s brother had died and Gudridur was married to someone else when Snoori, not related to Sturluson, became the first white baby boy to arrive in the “new” world. Unlike Iceland, the new world was already inhabited and the Vikings apparently did not find a way to coexist with the American natives and eventually abandoned their settlement and went back to Iceland.

Gudridur was a remarkable woman and well travelled having gone back to Iceland from Greenland then America, and then to Europe and even to Rome to meet the Pope before returning to Iceland and to retire in a convent. Gudridur most likely talked about her days in the new land to the west because according to Icelanders, an Italian was known to have visited Iceland in 1470 and stayed for a couple years to learn all he can about the new lands. This was why 20 years later, the same Italian, Columbus was able to set forth brimming with confidence that he would find land. No doubt, the Vikings would have found his wide margin of navigational error appalling.

In preparing to settle in Iceland, Vikings had to bring everything they needed to survive such as horses, sheep and cattle and even lumber for the construction of their dwellings. After the trickle of migrating Vikings halted, the populations remaining on the island were left to develop in relative isolation. As the main beast of burden, the horses evolved into a hardy breed that can survive the winters in the open. The Icelandic sheep’s wool is particularly soft and the lamb meat particularly tasty. Retrospective study through genetic testing showed (according to the National Museum) that about 80% of the men are descended from the Vikings but 62% of the women trace their origin from mothers from the British Isles, especially from Ireland. No doubt the Vikings supplemented their breeding stock of women en route from Norway to Iceland.

The living conditions on Iceland were harsh, barely allowing the settlers to scrape by, relying on farming and fishing, and did not leave much time for cultural pursuits. The population never exploded nor developed the wealth needed to grow into a great civilization. They also had the good fortune of living on a barren land unmarked by gold ore that would have been the magnet for avaricious European adventurers. Even today, the total population of Iceland is around 320,000, more than 2/3 living in the greater Reykjavik engaged in usual urban occupations and not with farming and fishing. With a landmass of 42,000 square miles, it is slightly larger than the state of Tennessee but at a population density of 3 per square km, Iceland with roughly one thousandth of the U.S. population is only denser than Montana, Wyoming and Alaska among the U.S. states.

While inhabitation of Iceland occurred in relatively recent human history and from a rather humble beginning, the country in recent years has flourished and has become a modern nation with enviable metrics of success. Not least is its relatively low unemployment and possession of world leading technology in the utilization of geothermal energy for electricity generation and hot water for heating. About 95% of the population are regular users of the Internet, a significantly higher acceptance than the rest of Europe. Free access to the Internet was everywhere, including not just the hotels but nearly every café and restaurant provide access for the asking without any complicated log in process. Visitors to the Blue Lagoon would be impressed with the use of the smart chip to monitor entry and exit, personal use of lockers as well as keeping track of purchases of food and beverage while bathing in the lagoon.

Since 2010, tourism in Iceland has been increasing at double-digit rate. For the current year, Iceland expects to welcome more than one million visitors for the first time.  Our tour operator, Overseas Adventure Travel specializes in small group travel limited to not more than 16 per group. OAT 11-day group tours arrived nearly one per day during the summer months and they contracted 25 professional trip leaders in order to take care of them all. On our OAT tour, we saw waterfalls of varying sizes, glaciers in the distant and up close, a landscape of strange lava rock formations dotted by occasional little churches and farm houses, birds and whales offshore and Icelandic horses and sheep on land.
Three representative photos to show the diversity of Icelandic landscape
The Icelanders we met were uniformly warm and friendly, educated and easy to talk to in English. Our affable trip director, Oddur, kept teaching us about all aspects of Iceland with grace and ease. Vignir, our driver, is writing a book based on the oral history of selected Icelanders. Instead of eating in their restaurant in Heimaey, the owners hosted dinner at their home and entertained us with the story of the 1973 eruption that buried part of Heimaey on Westmen Islands but increased the landmass by 20%. They also sang for us and Oddur was invited to join in for a number Kingston Trio made famous. The husband of the couple that home hosted our dinner in Akureyri was a trained journalist, now chief editor of a weekly paper, and an author of several books. His wife is resuming her education pursuing a PhD in museology. Oddur at various stops on the tour would play the church organ or piano for us. I am left with the impression that many Icelanders face years of long dark winter days by developing other skills and interests making them interesting people to interact with.

Statue of Leif Erickson, a gift of the US government
(so the story about him must be true)