Friday, December 15, 2017

The silent enabler

I always wonder what is the rationale Hong Kong residents have when they are faced with the evidence that China is progressively chipping away at Hong Kong’s way of life (freedom of expression, rule-of-law, separation of powers, etc. All the good stuff in a free society).

One of the pundits, Michael Chugani, has made his position clear in his SCMP comment on the suggestion that tickets for the Express rail might be payable in RMB:

"Are you serious, Mr Secretary? Do you really want to pursue the folly of using China’s renminbi as the currency to buy express rail tickets in Hong Kong? Unthinkable as it may be for many Hongkongers, that’s exactly what Transport and Housing Secretary Frank Chan Fan said two weeks ago.
These were his exact words at a press conference about the railway’s logistics: “How about the kind of currency that we are [to be] using? Should it be the Hong Kong dollar or should it be renminbi?”
I can think of only two reasons for Chan’s astounding remark: he wasn’t thinking straight, or he is unfamiliar with the word “mainlandisation”.
Either way, it again proves that our officials have an inborn knack to shoot themselves in the foot.
Mainlandisation is anathema to many Hong Kong people. But it’s an inevitability that’s already eating away at the feel and culture of our city. Mainland developers have humbled local property tycoons in snapping up land. Mandarin has become a fixture in our finance sector. Even Hong Kong icon Cathay Pacific has lost its blue-chip status to a mainland firm on the Hang Seng Index.
Do we want to hasten the process by requiring Hongkongers to pay in renminbi for express rail tickets at West Kowloon?
The HK$84 billion Guangzhou-Shenzhen-Hong Kong Express Rail was built with Hong Kong dollars and paid for by local taxpayers. Its terminus is in West Kowloon, which will remain part of Hong Kong even after a section is placed under mainland jurisdiction.
Call me a localist if you will, but I am ruffled by the thought of having to pay in renminbi for a ticket on a railway built and paid for by Hong Kong.”

Sure, but these are details. The important part and the character of Hong Kong is not the fact that it is using the Hong Kong dollar to pay for a train ticket.

“Don’t confuse my brand of localism with that of the lunatics who equate it with self-rule. Independence is never going to happen, but drilling that into the brains of such people is mission impossible.

My definition of localism is accepting Hong Kong as a part of China but keeping at bay the kind of mainlandisation that dilutes our city’s character and culture. Many local stores, particularly high-end ones that cater to mainland tourists, already accept payment in renminbi.
But the express rail is not a store. It is a taxpayer-financed government entity intended to showcase Hong Kong as an international city efficiently linked to the world’s second-largest economy.”

Oh, so, now it is quite clear; for Chugani, mainlandisation is the irrelevant details. The big things that made Hong Kong what it is, he does not seem to understand or care for. What is now Hong Kong was the land nobody wanted before the Brits took it over, and then enshrined the principles of free enterprise, rule-of-law, freedom-of-the-press, freedom-of-expression, an independent judiciary, no communism… That is what makes Hong Kong what it is.
I am not saying that colonialism is preferable, that's not my point at all. But for sure, everything that a CCP-ruled China will be bringing is the antithesis of the Hong Kong character.

“But joint immigration at West Kowloon does scare many Hongkongers who fear being arrested by mainland officials on Hong Kong soil.
Opposition legislators have fanned this fear, insisting that joint immigration violates the Basic Law. They have used, and intend to continue using, every trick in the Legislative Council rule book to stall local legislation that will allow joint immigration.
Some in the opposition have even ridiculed the express rail link as a pricey showpiece that benefits business elites rather than ordinary Hongkongers.
Does Chan really want to throw them more red meat by considering renminbi as the fare currency? Such a move will play right into the hands of the opposition. What next, they will ask. Charging renminbi for plane tickets to the mainland? What happened to “one country, two systems”?
It is, of course, a given that passengers travelling from the mainland to West Kowloon should pay with renminbi. I don’t even mind if passengers to the mainland are given a choice of either currency.
But choosing renminbi as the only currency? No sir, Secretary Chan. Banish the thought here and now.”

See, that’s the crux of the problem with people such as Chugani. Either because of ignorance or naivety, he believes that his idea of the Hong Kong character will survive within China even if the core of Hong Kong political, economic, and legal system goes. It cannot, because it is the Hong Kong character! Let’s see how content Chugani is when the only thing left of Hong Kong is Cantonese opera and pineapple buns. 

As such, he is silent enabler; thinking that if we go quiet, the Chinese government is going to keep the status-quo. Unfortunately, the evidence of the past few years  support the exact opposite. And no, they are not all related to the Occupy movement (abducted booksellers rings any bells?)

I think that quite the opposite; China will accelerate the complete removal of the Hong Kong character unless the silent-enablers wake up and voice their dissent.

P.S. On a side-note, the SCMP has taken to refer to Hong Kong as a 'City' instead of a 'S.A.R.' lately…

Thursday, December 14, 2017

The actual poverty situation in Hong Kong; not nearly as bad as some make it sound

One has surely read the line in a paper recently to the effect that “Poverty in Hong Kong hits record high” or that “one million people live in poverty, about 1 in 5”.

The press merely copy and pasted the headlines from the Hong Kong’s Commission on Poverty’s recently released report on poverty in Hong Kong.

Can this really be the case? It is, but only if you consider the Hong Kong government’s definition of poverty as being the state of someone who’s salary is below half of Hong Kong’s median income. That definition does not include investment income of any sorts (except for taxable one such as rental income).

I do believe that a definition of poverty relative to median income is sensible when compared to absolute-need poverty that was more suited for the middle-age.

But the calculation of income should be accounting for all sources of income, or risk being abused, and used to derive bad policies. I think that most would agree that if Li Ka Shing retires and stops receiving a salary from his various businesses, he should not be counted in the Hong Kong “poor”, which, by the current calculation, he would be.

I think it would have been critical for the press to highlight this fact as people have an assumption of what poverty is, and it certainly does not include millionaire retirees and well-to-do see-lais. Another perverse side-effect is that, unless the current calculation is amended to reflect income from all-sources, we would logically see a year-on-year increase in “poverty” as an increasing percentage of the population are retiring, and, by the current definition, automatically becoming “poor”.

I had a feeling that something was afoot as the number of “poor” people just seem so high that it seemed to indicate something fishy in the calculation. Then, I figured that unless the way of coming up with these figures was based on population surveys, only the salary-based income could be included in these as all investment-related gains are not taxable, and therefore not declared here in Hong Kong.

To make sure, I did contact the Hong Kong’s Commission on Poverty, which confirmed that any income derived from investment were not calculated in the Hong Kong definition of poverty as they base their calculations on data from the Internal Revenue Department (ie. your income tax declarations)

Let’s have a look at the document and try to make some reasonable assumptions to establish a more accurate Hong Kong poverty level.

“ES.16 It must be pointed out that adopting household income as the sole indicator for measuring poverty may overstate the poverty situation since some “asset rich, income-poor” persons may be classified as poor. In fact, among the poor population after recurrent cash intervention in 2016, 84.6% (842 900 persons) resided in non-CSSA households, among whom 539 800 persons (64.0%) had no financial needs, which were up by 27 500 persons and 0.3 percentage point when compared with the corresponding figures in 2015 (512 300 persons and 63.7%). Among some 0.34 million poor elders, 87.6% (295 400 persons) resided in non-CSSA households and over 70% of Hong Kong Poverty Situation Report 2016 Executive Summary xii them (211 100 persons) had no financial needs to apply for CSSA. In addition, over 60% of the poor elderly households resided in owner-occupied housing without mortgages, representing the highest share in eight years. This reflects that many poor elders do have considerable assets.”

There you have it; 84.6% of the “defined-as-poor” population actually live within a non-poor household. That’s basically my wife, who’s technically “poor” but actually has quite a nice lifestyle, traveling abroad on a near monthly basis. This is further confirmed by the 64% of that population having ‘no financial needs’. Let’s be conservative and assume that there’s 10% of these that are fringe cases that do need assistance for whatever specific situation, but just happen to fall through the cracks of the system. That would still mean that out of the strictly-by-current-definition 1 million-or-so “poor”, only about a quarter should actually be considered poor (about 240,000).That is a more accurate 3.2%, all-income-sources, median-relative Hong Kong poverty rate.

“ES.20 In 2016, the poverty rates of unemployed, economically inactive and elderly households after recurrent cash intervention were the highest (69.8%, 59.2% and 48.8% respectively) among all socio-economic groups. The corresponding poverty rate of working households was relatively low (8.0%), demonstrating that employment is the best way to prevent poverty.
ES.25 Indeed, for groups that lacked recurrent employment earnings (including elderly persons aged 65 and above, elderly households, households with elderly head and economically inactive households), their poverty rates were persistently high. Conceivably, as members in these groups have mostly retired, their poverty rates, which are defined by income, tend to be relatively high and bear no significant direct relationship with economic cycles.”

This indirectly restates the problem with the calculation; if you don’t have salary income, you are almost guaranteed to be poor as per current definition. That is after the poverty-alleviating measures.

“ES.36 On the other hand, since the poverty line analysis under the core analytical framework does not take assets into account, some “asset-rich, income-poor” elders are classified as poor elders. Among some 0.34 million poor elders, 87.6% resided in non-CSSA households, and around 0.21 million of these poor elders had no financial needs. Over 60% of the poor elderly households resided in owner-occupied housing without mortgages, representing the highest share in eight years. This also reflects that many poor elders do have some assets. In this connection, the Hong Kong Mortgage Corporation Limited announced in April 2017 a life annuity scheme to help the elderly turn cash lump sums into life-long streams of fixed monthly income. Scheduled for launching in mid-2018, the annuity Hong Kong Poverty Situation Report 2016 Executive Summary xvii scheme would provide those elders with some assets an additional financial planning option to manage their longevity risk by turning their assets into regular income streams.”

Again here, hardly the definition the average would make of living in poverty. Also seems that the annuity scheme is a good option to offer, regardless of poverty level.

“1.V.1.15.(i) Poverty situation by age of household head: the existing poverty line only takes income into account while most elders do not have employment income. This may result in overestimating the elderly poverty counts. It is anticipated that this problem will be aggravated by more acute population ageing down the road.”

This is the concern that I stated above; if the poverty line calculation does not account for other sources of income, then the ageing population will skew the stats.

Additionally, it seems that the aim of CSSA is not aligned with the definition of poverty, which makes the popular interpretation of ‘poverty’ unduly confusing: while the poverty line is relative to median (and therefore not basic needs), the CSSA’s designed is for basic needs:
“The Comprehensive Social Security Assistance (CSSA) Scheme is designed to provide financial assistance to individuals and families in need so as to bring their income up to a prescribed level to meet their basic needs.”

In  conclusion, we can now establish that:

·         the real poverty rate in Hong Kong is more likely around 3% after the government measures are applied, a far-cry from the 15% dictated by the current calculation methodology
·         The official poverty level cannot be compared to other developed economies as it does not use the same variables, resulting in an over-representation of Hong Kong poverty when compared to other countries with similar GDP-per-capita
·         Once the poverty rate calculation is amended, it would seem that complete poverty-alleviation is within reach with a bonification of current measures

I wanted to point-out that the Hong Kong’s Commission on Poverty is quite clear on the limitation of the current measurement method and therefore, cannot be faulted for merely following the government’s requirements.
To be used as a meaningful comparator of real poverty level among the 1st world economies, the Hong Kong government should align its poverty calculation on those of Canada, France, or Germany, which all include income from all sources.

Monday, October 30, 2017

I refer to Alex Lo's October 23rd's article titled 'Policies on HK are more forward-looking" where he states "US President Donald Trump's unexpected victory has been a godsend. It exposes the unreliability and irresponsibility of a democratic society".  Actually, Trump's election does not do such a thing at all. Quite the contrary, it shows that through the electoral system, democracy has lots of checks and balance which makes it incredibly hard for Trump to push the most radical parts of his agenda. Something that would not happen in China as we see Jinping giving himself unchecked powers.

Actually, Democracy has been the most stable political system since the industrial revolution; a system most adapted to balance the need economic growth, and popular desires.

This is what the autocrats such as Mr Lo fail to understand about democracy: it trades short-term "disorder" for long-term stability, while dictatorships are orderly through force in the short-run and invariably finish in revolutions of the people.
JC Clement

The original article from South China Morning Post: 

"Policies on Hong Kong are more forward-looking

Xi Jinping’s speech was without the warnings given by Hu Jintao against “external forces” and the need for a “grand united front”. Instead the focus was on long-term stability and prosperity

Critics of China will beg to differ but the policies of the central government annunciated by President Xi Jinping towards Hong Kong during the 19th national congress have been much more positive and forward-looking.
Gone are the warnings against “external forces” and the need for a “grand united front” in the speech given by then retiring president Hu Jintao at the 18th congress. Instead the focus is on long-term stability and prosperity, with such initiatives as the economic development of the Greater Bay Area of Guangdong, Hong Kong and Macau.
Concerns about foreign interference cumulated with the Occupy protests of 2014. But as the so-called yellow umbrella movement dies down, so too have fears about political intervention by foreign forces.
Meanwhile, the split within the loyalist camp between the so-called Leung gang (named after ex-chief executive Leung Chun-ying) and the Tang camp (after Henry Tang Ying-yen, his defeated electoral rival) has been mended under pressure from Beijing.

The tone of the central government today is much more confident and assertive. No wonder; after the debacle of the city’s failed electoral reform, Beijing has essentially forced all the major Western governments to concede that Hong Kong is solely a matter of China’s internal affairs. Besides lip service, no Western government will stand up for autonomy claims made by the local opposition.
US President Donald Trump’s unexpected victory has been a godsend. It exposes the unreliability and irresponsibility of a democratic society. As the most unprepared and inexperienced president in post-war US history, Trump makes Xi look like a world-class statesman.
No Western country can take a meaningful stance against China without US backing, not even Britain, now deeply mired in Brexit. And over Hong Kong, there is virtually no hope or incentive for them.

So all the noises being made about Hong Kong by busybodies, usually from the US and Britain, are just that – noises. Tory activist Benedict Rogers being barred from entering Hong Kong? Good for a few news headlines. The report by the US Congressional-Executive Commission on China on “the long-term viability of ‘one country, two systems’? Nobody reads it. Marco Rubio, who?
Hong Kong has a great future when it can sort out a workable and amiable relationship with the rest of the country. Its opposition camp just needs to stop all that self-destructive foolishness thinking it can buddy with Western governments to put pressure on Beijing."

Friday, May 12, 2017

Fake news

Neil deGrasse Tyson was on the 'Hot Ones' show where he explained the universe while eating spicy wings. Funny premise which has led to him saying what I believe should be a quote for the ages. Read and integrate this deeply for the implications are critical:

Host: "Over the last 10 years or so, have you seen an increase in the number of people maybe think these things (bunk crazy ideas)?"
N.D.T: "I think that number of people may be the same over time. They just now, can write a blog that the whole world has access to via a search engine. You'd be alone with your own view that has no correspondence to objective reality. And you type it in to a Google search, and it'll find every other person like you, who think the same way, giving you the false sense that you're actually onto something, that you have some deep insight into the world that no-one else has. This is delusional. The Internet landed in our laps without creating a curriculum that empowers you to know when someone online is full of shit."

Check-out the whole thing here:

Sunday, May 07, 2017

Watch and smartwatches; some data

"According to the latest research from Strategy Analytics, global wearables shipments reached 22 million units in the first quarter of 2017. Apple captured 16 percent marketshare and became the world’s largest wearables vendor, overtaking Fitbit"

Sunday, March 26, 2017

More religious countries tend to be less innovative

"MORE religious countries tend to be less innovative, according to a paper published last month by America’s National Bureau of Economic Research. In “Forbidden Fruits: The Political Economy of Science, Religion, and Growth”, Roland Benabou of Princeton and Davide Ticche and Andrea Vindigni of the IMT Institute for Advanced Studies Lucca find a strong negative correlation between innovation, as measured by patents, and religiosity, measured by the share of a population that self-identifies as religious."

NBER Working Paper No. 21105Issued in April 2015

Forbidden Fruits: The Political Economy of Science, Religion, and Growth

"We analyze the joint dynamics of religious beliefs, scientific progress and coalitional politics along both religious and economic lines. History offers many examples of the recurring tensions between science and organized religion, but as part of the paper's motivating evidence we also uncover a new fact: in both international and cross-state U.S. data, there is a significant and robust negative relationship between religiosity and patents per capita. The political-economy model we develop has three main features: (i) the recurrent arrival of scientific discoveries that generate productivity gains but sometimes erode religious beliefs; (ii) a government, endogenously in power, that can allow such innovations to spread or instead censor them; (iii) a religious organization or sector that may invest in adapting the doctrine to new knowledge. Three long-term outcomes emerge. First, a "Secularization" or "Western-European" regime with declining religiosity, unimpeded science, a passive Church and high levels of taxes and transfers. Second, a "Theocratic" regime with knowledge stagnation, extreme religiosity with no modernization effort, and high public spending on religious public goods. In-between is a third, "American" regime that generally (not always) combines scientific progress and stable religiosity within a range where religious institutions engage in doctrinal adaptation. It features low overall taxes, together with fiscal advantages or societal laws benefiting religious citizens. Rising income inequality can, however, lead some of the rich to form a successful Religious-Right alliance with the religious poor and start blocking belief-eroding discoveries and ideas."