Friday, November 22, 2019

An American's view of the Hong Kong protest

An American residing in Hong Kong wrote three letters, two to US Senators and one to CBS 60 minutes. His is a valuable point of view presenting a more balanced perspective on this tragic event.

🇱🇷 An American living in HK 🇭🇰🇨🇳submitted the below email to websites of US Senator Hawley, Senator Cruz and 60 minutes (for their biased piece
on the HK protests)

So well written. Must Read.
Senator Hawley

Your willingness to sacrifice an entire city, its way of life, its civility, the future of its youth, its freedoms unmatched anywhere else in the world, and its high degree of autonomy in a historically unique circumstance, is in my opinion a crime against humanity.

Your sole punitive objective of giving China a black eye, demonstrates not only a childish approach to the needs of the world, but also demonstrates a depravity of moral value, unbecoming of any religious institution whether Christian, Muslim, Judaism or Buddhism.

And you call yourself a Christian. Should I not be surprised that the most brutal inhuman treatment of other humans beings I have ever witnessed is being committed by your Christian-led organisation?

The world is NOT seeing the truth of HK. And you are only perpetuating that lie. It is seeing a facade of half truths created by one nation with the sole intent of undermining another nation hoping to curtail the continued emergence of that nation on the world stage. The world is seeing a singular view of HK events from the lenses of those who wish to destroy its parent, where the only possible outcome is to completely sacrifice the child.

I’m not going to excuse China’s past behaviour. But to choose HK as the sacrificial lamb for that reckoning is not only morally wrong, it is tactically and strategically wrong - if your objective is to bring China to its knees. You will not achieve your objective by bringing anarchy to HK.

You are choosing the ways of the past to solve problems of the future. HK may need change but don’t revert to a page in the history of China (the cultural revolution) to destroy a society and attempt to build a new one on its ashes when no one in the protest movement, nor their American benefactors, are presenting a better option to what was one of the freest societies on earth protected by one of the best, most restrained and least corrupt police forces on the planet.
Senator Cruz

If you don’t understand something don’t weigh in. Your incomplete view can destroy lives. Your being a sideline US enabler of violent protesters will have no positive outcome for the protesters you are supporting...or the city stuck in between your real target (China) and your country. So quit using HK and its students as a pawn in your clear objective to curtail what you fear - Chinese hegemony in the region. You are only perpetuating that outcome.

I am an American living in HK and for you to come to this city, claim you see no violence in your short limited time here, and give unquestioned support to those who are destroying this city is an affront to all intelligent law abiding peaceful people who live here.

These protesters you are supporting are violating and undermining all rules of law of this great city. They are clearing a path to anarchy. They are lynching innocent bystanders (who are in fact voicing their freedom of speech in the most basic ways), they are destroying anything and everything of a contrary view (and in the most violent way). They are destroying public property everyone in this city depends on. They are committing the most horrendous acts of violence against fellow human beings - Yet you support them.

You are an evangelical Christian but there is nothing Christian like in the protesters behavior. It is ironic isn’t it - that the most inhuman and brutal treatment of fellow human beings I have ever witnessed in my life comes at the hands of your Christian led movement. Shame on you Mr Cruz for perpetuating a lie - you see no violence!

There is nothing peaceful about these protests. There is nothing Christian about their murderous and destructive ways. There is nothing democratic about their wholesale rejection of anyone who speaks a contrary opinion or offers any solution different from theirs (and they don’t offer any solutions)

For you to claim you see no evidence of violence by the protesters you are supporting shows you are nothing but an unmitigated liar or a complete idiot. Such a statement from a foreign government official unmasks your true intentions.

I have seen a lot in my worldy travels but I have never seen a peaceful, law abiding free and open society descend into such chaos, over such a short period of time. Where mob justice underpinned by mob violence is the new law in the streets, where those you are supporting are demonstrating a complete lack of humanity to fellow human beings - and propagandising everything in their wake.

Perhaps you would like the same violence inflicted on your city? your transport system destroyed, the business in your neighbourhoods set to fire, your friends beaten to an inch of their lives, your young children brainwashed and becoming modern day red guards, only to lose their futures consumed by their hatred and violence which has no possible positive outcome? Then have representatives of foreign governments come to your city vocally supporting those who are destroying the city.

Your misguided sense of righteousness is going to lead to ruination for those you are supporting. And you will shoulder that blame, and those in this society will never forget that. Accountability will fall on your shoulders.

You can take your false Christian values and take them straight to hell with you Mr. Cruz.

60 minutes

I love your show. Always have for the last 30+ years. But I am incredibly dismayed by your single sided view of the HK protest movement. A completely unbalanced view of a Christian led movement that is committing unspeakable acts of violence and showing a lack of humanity I never thought possible. All against the citizens in HK who, if you had done your research, might find them to be a majority.

You made no attempt to seek a view of the other side. And by the other side I do not mean China. I mean the majority of people living in this city, now living under a cloud of fear - fearful of speaking any contrary opinion to those who are ironically seeking a democratic platform - those very people you are supporting who have not shown an iota of tolerance for other opinion, but rather have shown an incredible lack of humanity in the violent mob justice they are committing against so many in this city - including a very large number of single elderly individuals who happen to be unlucky enough to be in the wrong place at the wrong time.

Not Jimmy Lai, nor Joshua Wong, nor their violent protesters running amuck destroying the fabric of life in what once was the most open, free, law abiding place on Earth, are appropriate representatives of HK. But they are in fact the only reason the people of this city are losing their freedoms and their gold standard legal system. Not China.

Next time do your research before becoming an unwitting (or perhaps witting) enabler of the violence being inflicted on a city, and the majority of people living here - living now in fear - not because of anything China has done, but what the protesters, and those of you who are enabling them -are doing.

Wednesday, November 20, 2019

Decouple? Americans better learn what it means

China hawk Peter Navarro is leading Trump down a disastrous path, not just for the US but for its allies. First posted on Asia Times.

The tortuous slog for China and the US to reach phase one of the agreement that would end the trade war looks increasing problematic and may indeed go “poof” into the ether before Presidents Trump and Xi can agree on a place to meet and sign.

One day, Trump declares that we’re about to sign the best deal ever. The next, Trump threatens to raise the tariff to the next level.

China believes the phase one agreement would include an US commitment to subsequently remove all tariff on imports from China. Peter Navarro, who Bloomberg Businessweek called the most strident China hawk, is the White House hardliner who opposes rescinding any tariff on Chinese goods. 

Navarro leads Trump astray

Navarro has persuaded Trump that imposing tariffs on Chinese imports would close the trade deficit. Instead, the US trade deficit with China has only worsened. Despite being wrong, Navarro’s credibility with Trump appears intact. His view prevailing within Trump’s China team may mean no deal at all.
Trade hawks like Ron Vara, aka Peter Navarro, insist that the US can win the trade war with China by piling on tariffs. Navarro habitually credits the fictional Ron Vara for the more ludicrous assertions and statements that he has concocted. Most likely he’s too ashamed to be identified with the more outlandish positions.
Navarro/Ron Vara learned from his mentor and good friend Gordon Chang (author of The Coming Collapse of China) that attacking China can be personally rewarding. As proof, despite Chang going off the rails predicting the collapse of China nearly two decades ago, he still gets invited to US network news and writes commentaries for the print media.
Navarro does Chang one better because he’s a better writer than the rambling “Collapse” Chang. Navarro’s book Death by China, though full of misrepresentations, nonetheless caught Trump’s fancy, and that’s how he became part of the White House team on China.
One of Navarro’s favorite assertions is that China’s unfair trade practices steal jobs from Americans, an accusation he has managed to imprint on to Trump’s brain.
However, his former colleagues at the University of California, Irvine have just published a factually based study supported by charts and tables in the Harvard Business Review that refutes his allegations about China. Specifically, the study showed that the US had not lost any jobs to China since China joined the World Trade Organization. Of course, as I reported earlier, the same colleagues also told me that Navarro came from not knowing anything about China.
The concluding sentence of the HBR article said, “But the data of the last 25 years portray US-China commerce as the most synergistic bilateral relationship in world history, bringing peace along with mutual prosperity.”

‘Be careful what you wish for’

Former Australian prime minister Kevin Rudd spoke recently to the Asia Society in Palo Alto, California. He said, “Those seeking to unravel this relationship, be careful what you wish for in terms of known consequences and unintended consequences.” Rudd was referring to people like Steve Bannon and certain members, such as Navarro, of the Trump administration who are pushing for decoupling with China.
The consequence of a decoupled US could be as devastating as a nuclear winter, and the American public needs to know and fully understand what the US would look like once decoupled from China. It’s high time to examine the consequences carefully.
As the threat of a trade war loomed early last year, Chinese consumers begin to favor their own local products over competing American brands. The Apple smartphone, once the must-have item for every Chinese yuppie, has fallen behind at least four Chinese brands in market share in China.
Online sales on Singles Day (November 11) broke all records with 25% higher revenue than last year. Obviously, China’s consumer economy is not being hurt by US imports, made more expensive by added tariffs, because consumers are not buying US goods. Decoupling would mean American businesses being permanently kept away from a market at least four times as large as their own domestic market.
On the technology front, decoupling would bring collaboration to a halt and slow innovations and advances. Take Huawei’s 5G (fifth-generation telecom) development as an example. Decoupling would force Huawei to source many of its components from outside the US, but it’s double-edged. As much as 70% of Qualcomm’s revenue depends on supplying Huawei.

According to National Public Radio, 54 countries have already accepted Huawei’s 5G while only the US, Japan, Australia and New Zealand are banning Huawei. If the US and China are fully decoupled, the world will be split into those countries with 5G and a handful without. The gap would only widen, since countries with Huawei’s 5G will be in line to move up to 6G years ahead of others, as 6G is already under development at Huawei.
How China and the US influence the rest of the world would be dramatically different.
The US military is stationed in more than 60 countries with around 1,000 bases. The basis of alliance with the US would rest primarily on this umbrella of armed security. Economic synergy, if any, would be minimal, or even negative for US allies as Trump strong-arms them to pay more of the cost hosting American troops in their homelands.
Instead of military alliances, China seeks economic collaboration with many countries around the world, especially as part of the Belt and Road Initiative. After it was launched in 2013, 65 countries involving 4.4 billion of world’s people have entered agreements and projects with China under the initiative.
In general, China offers to finance and assist in the building of infrastructure projects. These projects can be railways, highways, power plants, ports and the like. What these projects have in common is that their size and scope are more than the individual country can handle and the completion of the project would provide a significant boost to its economy.
The US, Secretary of State Mike Pompeo in particular, goes around warning Third World countries of the potential debt trap that these BRI projects represent. The response from most of these countries is, “Do you think we’re too stupid not to recognize debt traps?”
Instead, they have seen how infrastructure investments in China have resulted in hundreds of millions of people being taken out of poverty, and they want some of that. Of course, it goes without saying that Chinese investors financing BRI projects must ensure that the terms of financing are sound and not give cause for BRI skeptics to say I told you so.
Uzbekistan a beneficiary of BRI
Uzbekistan is one of the more recent success stories. When the Uzbek strongman Islam Karimov died in 2016, his successor stepped in and opened the country to the outside world. Reforms eliminated corrupt practices and enacted laws to safeguard foreign direct investments.
China liked what it saw: a politically stable country, a large market of 32 million people, and a high-caliber workforce. Sixty percent of the population was under age 30. Within the last two years, more than 1,200 Chinese companies have entered Uzbekistan to create employment for young workers. At the same time, China became the largest contributor of foreign direct investment at US$15 billion.
China has installed fast rail from Tashkent to Xian to help Uzbek farmers sell fresh fruits to China, replacing fruits formerly imported from the US. Up to now, most of the Uzbek fruits have been exported to Russia, but now the farmers see a Chinese market potentially 10 times as big.
The rail link also sends cotton, Uzbekistan’s No 3 major export product, to the textile plants in China. To improve the quality of Uzbek agriculture, China sends agricultural machinery, seeds and technology.
The ancient Silk Road used to run through the length of Uzbekistan and its old cities are popular tourist destinations, and visitors from China are no exception. Becoming fluent in Mandarin in order to be a tour guide has become a popular course of study for young Uzbeks.
Recognizing the tourism potential of historic Samarkand, China has sent a team of architects and city planners to work with the Uzbeks. Funded by China’s Silk Road Fund, the team is working to redesign the ancient city for maximum tourist appeal, conservation and preservation of precious sites while facilitating economic growth.
Another reason Uzbekistan is important to Beijing is its critical geographical location between China and Russia. The BRI objective to link China to Russia and Western Europe by rail has to run through Uzbekistan.
The hostility of the Trump administration has pushed Russia and China to a high level of collaboration and cooperation. Chinese President Xi Jinping has had 30 meetings with his Russian counterpart Vladimir Putin over the past six years and made eight state visits to Russia this year alone.

Chinese-Russian strategic relations

The two leaders call theirs a strategic partnership, a special relationship. The partnership encompasses sharing of Russia’s advanced weaponry and anti-missile warning systems and China injecting foreign direct investments to help Russia revitalize its economy at an average rate of $5 billion a year.
As one example, Great Wall Motors invested more than $500 million for a state-of-the-art sport-utility-vehicle plant in Tula, south of Moscow, to supply its popular Haval to the Russian market. The factory provides employment for 1,000 workers.
Huawei is engaged in helping Russia develop its 5G telecommunication network with no concerns about back-door leaks but with the wide recognition that 5G will be a crucial boost to the Russian economy.
Russia is also encouraging China to help develop polar navigation in the Arctic. As an alternative direct shipping route from China to Western Europe, it is a Belt and Road initiative of keen interest to China. It is an interest shared by the Russians, but they lack the resources to go it alone.
Every university and institution of higher learning in Russia has a partner school inside China. Students exchange residences to learn what each country has to offer, while facilitating the sharing of research.
Russia offers its expertise in classical music and mathematics while the Chinese do so in technology. And they work on artificial-intelligence projects together.
Russian students find studying Chinese a popular pursuit, an asset in their portfolio for a future career path involving China. At present, salaries in China are two to three times as high as in Russia for comparable occupations.

Fork in the road

The two countries also have another foreign policy in common: They do not try to tell other countries how they should run their governments.
Carry decoupling to the extreme, and we will see two very different worlds. Uneasy lie the countries that depend on the American military for their sense of security. They never know when Uncle Sam will hand them a sudden uptick in the bill for services rendered as Trump is currently doing with South Korea. Nor can they tell when the US might want to renegotiate the terms of the military arrangement.
China would lead the world based on trust and a mutual sense of security derived from trade and shared economic interests. Given that China is already the leading trading partner for well over 100 countries, I would anticipate that at least three-quarters of the world would gladly join an integrated global economy led by China.
The American people are at a fork in the road. Their president has elected to base his China strategy on Navarro, whose false narrative puts his personal agenda above national interests. That path will surely lead the US into isolation and diminished prospects of economic well-being.
Or, do they listen to far wiser observers, former government officials and statesmen who do not counsel disengagement with China? Kevin Rudd and Joseph Nye are just two of many examples. Nye has a distinguished record of government service and was former dean of Harvard’s Kennedy School of Government.
In a recent interview, Nye said, “I think the important point is to realize that China does not present an existential threat to the US like Hitler did or like Stalin did. China is not trying to really destroy or change the American system.”
The first step to re-engaging China is for Trump to decouple from Navarro.

Tuesday, October 8, 2019

Houston Rockets’ Faux Pas with China

Under a different title, it was first posted in Asia Times.

The latest bruhaha between the NBA and China once again proves that money rules over words and politics trumps economics. Many commentators and politicians, as usual, missed some of the finer points of a matter that should not have been enlarged into another thorn in the US China bilateral relations.

Houston Rockets general manager, Daryl Morey, is fully within his rights to tweet: “Fight for freedom. Stand with Hong Kong.” Whether it was the wise thing to do is another matter.

Although it was quickly deleted from cyberspace, the tweet did not escape the notice of the millions of Internet users in China and immediately prompted a firestorm of criticism and objections from the Chinese, many professed to be die-hard fans of the Rockets.

Basically, their message to Morey was that you don’t understand the complexity of Hong Kong and you should keep your opinion to yourself. Obviously, the Chinese are not empathetic to the American idea of freedom of speech.

The management of NBA and Rockets have seen how indiscretions by name brands can cost them business in China, in one case leading to a full withdraw from the China market. They understood that unpopular reaction of the Chinese can quickly bite into the bottom line for American pro basketball. 

Thus, they quickly made Morey’s tweet go away. So far so good. Making money overrules Morey’s freedom of speech.

Then the US politicians from both parties jumped into the fray with their two cents worth. These fine leaders of democracy can’t tell the difference between the voice of the Chinese people and the national policy of China.

Democratic presidential candidate Julian Castro’s tweet is representative of the bias in the American leadership. He said, “China is using its economic power to silence critics—even those in the U.S.” 

Note in his tweet, Castro said China not the Chinese people in China. Suddenly, the visceral reaction of the people has been become the repressive policy from Zhongnanhai. (Zhongnanhai is where the Chinese leaders go to work, Mr. Castro.)

Many Chinese businesses have begun to distance themselves from the Houston Rockets and even the NBA. The Chinese Basketball Association, led by Yao Ming, the Hall of Famer that played for the Rockets, has announced that they are suspending their relationship with the team.

The businesses in China and the CBA are responding to the freedom of speech of the millions of Chinese people. Just as NBA is trying to repair the economic damage to their presence in China, the Chinese establishment is safeguarding their relationship with their fan base by distancing from the NBA.

However, basketball is too big and important with the Chinese people and we can expect that the tempest will soon blow over and fans back to being fans.

For the US politicians to take cheap shots at China show a failure to understand China and the Chinese people, in the process making a molehill bigger and the bilateral divide wider.

It’s time to realize and accept that China will never be like America. In their own way they have their own values and own sense of personal freedom. So far as much as 90% of the populationapprove of the direction their government is moving as opposed to a mere 35% in the US.

The sooner America can accept China for what they are and not what the US would like them to be, the sooner both parties can begin to focus on where mutual ground and common interest exist and find ways to maximize benefits for both sides.

Sunday, October 6, 2019

George Galloway Talk Show from London

Billed as the Mother of all Talk Shows, see episode 16 for a two hour discussion

A special panel dedicated on the HK protest

Informative Video Presentation on Belt Road Initiative

Look for a balanced presentation on China's Belt and Road Initiative by PBS on 9/27/19

PBS also explained how China produced billionaires faster than anyone on 9/29/19 free of polemics

Thursday, October 3, 2019

An Alternative View of HK Protest

This was first posted in Asia Times.

In reporting the Hong Kong protest movement, the western media has represented hoodlums as heroes and hooliganism as a movement for democracy. The rioters beat up on innocent by-standers, attacked police with gasoline bombs and sharpened metal rods, destroyed government buildings and metro stations, and interrupted the international airport operations.

The Hong Kong economy has been grounded to a halt. Yet the media praised the rioters as freedom fighters. In fact, the ringleaders of the riots demanded that the disturbances be not called riots but as protests.

When the Hong Kong police pushed back on the protesters, the cameras always found them, much less so when the violence were perpetrated by the rioters. In fact, police brutality was frequently bandied about as the provocation for the ensuing violence.

In the months from early June to early August, the HK police had to face protesters numbered in the millions, at least that was the media report. The police with great restraint made 420 arrests.

By contrast, the New York finest arrested 700 on the one-day Occupy Wall Street protest on October 1, 2011 and the size of the crowd was in the thousands and not millions. If the mayhem that happened in Hong Kong took place in New York, rivers of blood would have covered the pavement and city jail and hospitals would have overflowed with victims.

So, what was the original cause for mass unrest?

It was precipitated by the HK government proposing to enact an amendment to the existing Fugitive Offenders Ordinance. 

The necessity of the amendment became obvious when a young man took his pregnant girlfriend from HK to Taiwan, murdered and buried her dismembered remains there and came back knowing that he couldn’t be extradited to Taiwan to face justice.

Safe haven for fugitives

I asked my friend, a long-time resident of Hong Kong and a senior advisor to both HK governments before and after handover, for an explanation. He said, “There are currently hundreds of known fugitives using Hong Kong as a safe haven because Hong Kong only has agreements with certain countries but have so far not included Macao, Taiwan and mainland China.

“The proposed amendments to the Fugitive Offenders Ordinance are designed to promote criminal justice and to redress a situation whereby certain criminals can use our city as a safe haven.”

Agitators seized the opportunity to convert a government intent to close a loophole into a cause célèbre by claiming that the added statute would give Beijing arbitrary power to arrest and extradite anyone, even those merely passing through HK, into China for incarceration or worse.

The Chief Executive, Carrie Lam, assumed that correcting the omission was straightforward and failed to anticipate the storm that followed. Even as Lam officially suspended and then subsequently withdrew the bill to amend the extradition provisions, the fury of the protests continued.

Forcing Lam to backpedal, the protesters pressed forward with more demands, including exoneration of those arrested, resignation of the Chief Executive and universal suffrage for selection of members of the Legislative Council and the Chief Executive.

By the end of August, my friend shared this observation with me: “Whatever organization is behind supportingand promoting this unrest is apparently well funded and highly organized
with weekly schedules on what and where the disturbances will take place

Bankrolled by New Endowment for Democracy 

As reported by various sources, a main source of funding support is the National Endowment of Democracy. NED is in turn funded by the US Congress to finance organizations around the world that advocate democracy and human rights. Some 18 organizations identified as active in China have received funds from NED. Six of the 18 are known to operate in Hong Kong.

Lest anyone think that NED involvement with Hong Kong is the first time, it’s not. NED also bankrolled the Occupy Central movement that took place in Hong Kong in 2014. Fomenting unrest in the name of struggling for democracy and freedom is consistent with NED’s mission.

This time the ringleaders took the protest to a new level, not only in terms of duration and level of violence of the disturbances, but also took their case to Washington. These supposed representatives of Hong Kong asked the US Congress to grant them freedom and democracy.

That the U.S. had nothing to do with the handover between Britain and China seemed immaterial to these young aspiring freedom fighters. It was also equally a no-brainer for the bipartisan members of Congress to propose “The Hong Kong Human Rights and Democracy Act of 2019,” which is likely to be enacted by the full body.

“No brainer” because it doesn’t take any brains by Congress to take this action and also no cost because any reaction to such a legislative action won’t be consequential to their constituents. But the cost to all the people of Hong Kong, not just the handful of activists, can be major.

With the Hong Kong act in hand, the US government can then feel empowered to tell the Hong Kong government how they should govern, which the HK government would reject, and Beijing would vigorously object on the grounds that the US has no right to interfere..

Then the US would feel that they have grounds to remove the recognition of Hong Kong as a special administrative region and with it, the removal of the most favored nation status. 
That’s a move the Trump administration would implement as part of their goal to decouple China and the US.

If that were to come to pass, the people of Hong Kong would be the losers. Without the special status, the city would be just one of many and not even as valuable to Beijing as the neighboring Shenzhen. Any economic advantages Hong Kong enjoys now would disappear.

About five years ago, I had the occasion to conduct a video interview of Joshua Wong, one of the young dissident leaders who testified before Congress. My impression of Wong at the time, still a high school student, was that he was articulate and energetic and had seized the mantle of being a democracy advocate as a career.

I don’t know if he had gone on to college; I suspect that he found being a dissident an easier living and facing the media limelight more rewarding than pursuing higher education. He showed appalling ignorance of Chinese history and culture.

A generation disconnected with China

Wong represents the generation born after the handover. This generation of young people have no sense of what British colonial rule was like but has somehow acquired a romantic idea that being a British subject was golden.

In reality, Chinese subjects under the colonial rule had no say in the selection of their rulers and no right to cast ballots for any official posts. Whereas the Basic Law, negotiated between China and Britain, provides for selection of the Chief Executive by universal suffrage in gradual steps leading to full vote by the populace before the end of the 50-year transition.

Mark Pinkstone, an Australian journalist with 50 years of experience in Hong Kong said, “The Basic Law, the constitutional document that supports one country, two systems, provides freedoms of expression, speech and religion. Not one of them has been eroded since the handover in 1997. The current demonstrations are living proof of that.”

Pinkstone’s point of view, of course, contradicts the protesters claim that the loss of freedom as the reason for the demonstrations. Perhaps a legitimate adjudicator of the two conflicting points of view is The Human Freedom Index monitored by Cato Institute, based in Washington.

According to the latest index, Hong Kong is ranked 3 trailing only New Zealand and Switzerland. The index ranks 162 countries and autonomous regions based on 79 measures of personal and economic freedom. The US is ranked 17 as measured by the same indicators. It would appear that the young Hong Kongers don’t appreciate how well off they are.

Failing of the Hong Kong government

Of course, the HK government must bear responsibility for the build-up leading to this summer of discontent. After the handover, the Hong Kong government did not introduce a curriculum that would teach the children what it meant to be Chinese and their affiliation with the Chinese culture. Instead of identifying and being proud of their Chinese heritage, they grew up estranged and feeling that it would have been better to be faux British.

The succession of post-handover governments also saw the need to generate affordable housing but did nothing about it; or, could not because the real estate tycoons that control the Hong Kong property market opposed it. The frustration of wages not keeping up with rising cost of cramp housing led to the boil over in 2014 and again five years later.

The World Economic Forum published a surveyof the people from 25 nations asking them if they thought their own government was heading in the right direction or not. The survey was conducted between October and November of 2016.

China emerged leading the pack with 90% of their citizens thought their government was on the right track and only 10% thought not. The US was squarely in the middle, ranked at 13 with 35% of their citizens thought their government was going in the right direction and 65% thought not.

Too bad, Hong Kong was not separately polled, but if I have to guess, I would suspect that the sentiment of Hong Kongers toward their government would be closer to the US than to China. 

Sadly, if the young people of Hong Kong decide to cast their lot with the US, they will become disillusioned by a dysfunctional democracy that they’ll get to see up close. And they will miss the opportunity of hitching their future to a China going in the right direction.

Friday, September 6, 2019

Trump can't afford to win any trade war with China

This was first posted on Asia Times.

The response to last week’s grand opening of Costco’s first warehouse store in China was quite a surprise. As reported in the popular media, including Asia Times, throngs waited three hours to get in and two more hours just to get through the check out line. The company had to close the doors by 1:30 PM on the first day and quickly regulated the numbers on the second day.

This customer response from ordinary, everyday folks certainly belied Trump’s assertion that China’s economy is failing and is a sad commentary of the ignorance and misjudgment of his China team.

Give Costco credit for doing their homework on the China market and hit the sweet spot for shoppers in Shanghai. The sweet spot is huge, representing the purchasing power of middle-income households of China at about three times that of the US.

How can Trump’s China team be so far off in misreading the strength of China’s economy? Because they are lulled by the complacent feeling that America remains exceptional, that China only knows how to steal and copy and further that China will grovel when faced with the threat of tariffs. They are wrong on all counts.

Trump being misled by his advisers

Trade negotiator Lighthizer, a trained lawyer, doesn’t know much about economics and believes that the only way to reduce trade deficit with China is to levy tariff on imports from China. Trump’s China advisor Navarro never knew much about China and quite willingly pretended that he doesn’t know much about economics either—just like his boss. That way he can stroke Trump’s ego with the line of nonsense that trade war with China is easy to win.

The Trump China team never bothered to find out what’s going on in China. If they had, they would realize total foreign direct investments into China in the first half of 2019 actually increased by 1.5% from previous year. In other words, companies are not backing out but continue to invest in China because, unlike Trump, they believe in China as an attractive place to do business.

China’s GDP increased by 6.5% last year, only 1.5% was due to export—and obviously export to America contributed only a fraction of that. In other words, exporting to the US wasn’t as important to China’s economy as Trump had imagined. In recent years, China’s policy was to encourage domestic consumption and Chinese consumer spending now accounts for more than 50% of its GDP.

The Trump White House simply didn’t appreciate that China’s consumer economy is already much bigger than the US. More recently Beijing has promulgated 20 new policy-related regulations designed to stimulate more consumer spending. The new regulations include such things as encouraging the opening more 24/7 convenience stores, and promoting auto sales and shopping, taking more vacations and entertainment options and the like.

Clearly, China has a plan to deal with the adverse impact of the trade war. They are counting on domestic consumption to keep China’s economy vibrant and resilient.

Trump’s only response is tariff

Trump’s only strategy to counter China is to levy more tariff and threaten to levy more. He has publicly asserted repeatedly that tariff collected is “free” money being paid by China. Someone needs to tell him that the free money is hurting the American consumer by raising the cost of goods and draining the American pocketbook. The money isn’t free and not coming from China.

Ahead of Trump imposing a new round of tariff on a range of consumer goods on September 1, American retailers such as Best Buy are already wailing in anguish. They know the import duties on Chinese made goods will cut down their margin, raise the price tag for their customer and reduce traffic to their stores. 

Costco in China does not have this problem; they carry made-in-China goods to serve their customers in China. American retail stores, on the other hand, depend on low priced, Chinese made products to stock their shelves. By lowering the tariff on imports from other countries, China can more than offset the increased tariff on American imports. Thus, the Chinese consumer is untouched by the trade war. 

In the meantime, the American farmer is hurting badly. Bankruptcy has increased by 13% in the first six months of this year. Trump’s offer to subsidize farmers out of the tariff collected is a band-aid over a gaping wound. Who from the White House can advise them on what to plant next year as bankruptcy looms for more households?

American leaders also don’t respect China’s technology

American political leaders from both sides of the aisle subscribe to the notion that China’s technology prowess comes from theft. Even Huawei’s 5G technology must be illicit and stolen from somewhere, despite the fact that nobody else has the technology for Huawei to steal from. Washington may find solace in dismissing China’s technological prowess, but America is sadly being deluded.

For example, according to the latest statistics, Samsung has kept their leading worldwide market share for smart phones. But Huawei has move into the second place with 15.8% while Apple slipped into third place with 10.5%. Significantly, in changing positions, Huawei sales increased by 16.5% while Apple sales dropped by 13.8%. No amount of badmouthing can change the actual sales results.

About ten years ago, China purchased highspeed rail technology from Siemens. At the time, some of the German experts privately thought it would take China decades to digest and absorbed all aspects of the technology. Yet in a decade, China has surpassed the German technology to become the world leader. China’s highspeed rail run faster and come cheaper than the Japanese or the Europeans. This is just one indicator of how quickly China can develop excellence in technology when they put their minds to it.

As part of China’s highspeed rail consortium, CRRC has won bids to make metro coaches for American cities. They proposed assembling the railcars in new plants in the US, that would create employment for American workers and present a state-of-the art design at a lower price than any competitive bids. By manufacturing interior components of the car in the US, the finished product would have more than 60% local, i.e., made in America, content. Needless to say, this is an all-around winning arrangement.

Yet, when CRRC delivered its first car to Boston, NY Senator Chuck Schumer’s only comment was that he’s worried about the Chinese using the cars to spy on America. More recently, Congressman Harley Rouda, D-CA, has taken a step further and sponsored legislation that would ban the use of federal money to buy rail cars from CRRC.

Rouda said that “American taxpayers’ hard-earned money (should) not support Chinese companies bent on undermining industries that are important to our national security.” He must be confused or is just being xenophobic because Americans have not made subway cars for decades. If indeed it’s an industry important to American national security, he better hurry and resuscitate the companies from the graveyard.

Or, perish the thought, Rouda knows better but he’s just grandstanding for some easy political brownie points. Everybody in Washington knows that taking cheap shots at China is the easiest way to get media attention.

We can see that China has a plan to deal with the trade war in the near term while the Trump White House is clueless. But the long-term implications are even more damaging.

Long term the trade war will hurt the US even more

Whether it’s soybean from Iowa or lobster from Maine or wine from California, once the Chinese stop buying from the American sellers, the markets won’t come back in a snap. China has found replacement sources. The longer the trade war goes on, the more entrenched it will be for the new suppliers and harder it will be for the US exporters to displace them and recover their market share. That is, if and when the trade war ever comes to an end.

On the technology sector, the situation is just as bad. Trump thought he had the upper hand when he ordered US semiconductor companies to stop selling key electronic components to China’s high-end smart phone makers such as ZTE and Huawei. But China is such a huge market that American semiconductor devices companies can’t afford to walk away.

The American companies pleaded with Trump and he has grudgingly relented and continue to allow the US companies to sell to China for a limited period, albeit the deadline keeps get extended. But the Chinese companies that depend on critical chipsets from the US can see the handwriting on the wall. Huawei, for example, has already announced their own OS for the smartphone to replace the Android OS from Google and is frantically developing their own telecommunication chip sets to replace Qualcomm and Nvidia. 

If the past performance is any indication of the future outcome, Huawei will cut loose their dependence on American technology faster than Washington expects. Then, American high-tech companies will soon lose market share and witness the erosion of their presence and influence in China. 

If the Trump White House does indeed succeed in decoupling the two economies, both countries will be losers. Neither will be able to leverage from the advances made by the other and enjoy the multiplier effect of the interconnection of the world’s two largest economies. Historians may well lament the zero-sum conflict the feckless Trump has brought about and rue the mutual gains that could have been realized had the two largest economies worked together and avoided the lose-lose confrontation.