Big Lychee, Various Sectors

The government rejects a proposal to buy back taxi licences for HK$5 million each…

The value of a licence and a taxi has gone from a historic high of HK$7.66 million in 2009 to below HK$3 million in recent months, resulting in significant financial losses for owners.

The licence owners are not, of course, the people who actually drive taxis: they make their effortless income by renting the vehicles out to the old guys trying to make a few hundred bucks per shift. Families that have been sitting on stacks of the permits for decades have – some suspect – notable establishment credentials. Thus, so the theory goes, officials have been reluctant to issue more licences, or to allow Uber to operate legally. But it seems you can only postpone reality for so long. Still, full marks for having the nerve to demand HK$5 million for an artificially scarce piece of paper.

And then it’s back to NatSec…

The Chief Executive defends the inclusion of NatSec conditions for restaurants, funeral homes, etc…

Lee shrugged off worries raised by some businesses in the city that they may run afoul of the law unwittingly.

“Offending conduct means any offence that endangers national security, or acts and events that are contrary to national security and public interest in Hong Kong. It is very clear,” he said in Cantonese.

“Security is the foundation for development, and we will continue to revamp the laws and the mechanisms of safeguarding national security, he added.

Perhaps it is clear: you could lose your restaurant if an off-duty waiter is arrested for – let’s say – playing the wrong computer game.

Yes…

Hong Kong police warn people that downloading a computer game called Reversed Front: Bonfire endangers national security. It has…

…the aim of promoting secessionist agendas such as “Taiwan independence” and “Hong Kong independence”, advocating armed revolution and the overthrow of the fundamental system of the People’s Republic of China established by the Constitution of the People’s Republic of China. It also has an intention to provoke hatred towards the Central Authorities and the Government of the Hong Kong Special Administrative Region. Any person or organisation who knowingly publishes the application or related content, including sharing or recommending the application to others via the Internet, may commit the offence of “incitement to secession” under Article 21 and the offence of “incitement to subversion” under Article 23 of the Hong Kong National Security Law, as well as “offences in connection with seditious intention” under Section 24 of the Safeguarding National Security Ordinance.

…those who have downloaded the application may be regarded as in possession of a publication that has a seditious intention. Under Section 24 of the Safeguarding National Security Ordinance, a person who, without reasonable excuse, possesses a publication that has a seditious intention, commits an offence. A person who provides pecuniary or other financial assistance or property to the application developer, including making payment through in-app purchases, with an intent to provide funding to the relevant developer for the commission of secession or subversion, also commits an offence.

You would probably never have heard of it if they hadn’t issued the press release. It seems players ‘choose to pledge allegiance to Taiwan, Hong Kong, Mongolia, Tibet, Kazakhs, Uyghur, Manchuria or the Rebel Alliance of Cathaysian and Southeast Asia’ to ‘overthrow the regime’. 

Presumably, if you rewrite the app so you keep the female characters’ huge boobs but give the various territories different names – say Atlantis, Camelot, Avalon, etc – it suddenly ceases to threaten national security.

What if you rejig the game so the locations are parts of the Manchu Empire during the late Qing era?

A Bloomberg op-ed claims that Hong Kong’s dollar peg is in practice over. As evidence, the author points to the fact that local benchmark interest rates are significantly lower than US ones. If the past is any guide, this situation should correct itself, at which time we can say the peg is once more not over in practice. But then, if Hong Kong’s interest rates rise closer to the US level, there will be the usual problems like a softer property market. Which brings the author to the basic point: that the 7.8-to-1 peg should be scrapped because of the damage done to the city by tying its currency to a weakening US dollar.

Most of the arguments for ending the peg have been made before whenever US exchange/interest rates are too low or high to suit local conditions, going back several decades. The difference this time is that – to the easily-worried, at least – we are not just seeing the vagaries of economic cycles, but maybe a US and its currency in permanent, even terminal, decline. This essentially assumes that Trump will declare himself ruler for life, the US will default on its debt, etc. 

A quick interlude from David Frum in the Atlantic…

If Trump can incite disturbances in blue states before the midterm elections, he can assert emergency powers to impose federal control over the voting process, which is to say his control. Or he might suspend voting until, in his opinion, order has been restored. Either way, blue-state seats could be rendered vacant for some time.

Cooler/more-naive heads will expect that even the stupidest Americans will notice the drawbacks to Trump’s economic and other chaos, and traditional boring old bumbling governance will be restored in a few years. But if the US goes the way of Rome, the peg would have to be ditched.

What would it be replaced with? As is usually the case with op-eds of this sort, the Bloomberg columnist doesn’t say. She does hint that the trading band could be adjusted to relieve the pressure. The problem with that is that no-one would trust the government not to do the same thing again whenever it feels like it, and everyone would move their cash into other currencies. 

Other options are equally unappealing. Floating the HKD would be the obvious way to go, except the currency would then be at the mercy of local monetary and other policy. Currencies of authoritarian states tend to have a hard time winning confidence. Adopting the RMB is the traditional trendy solution, but that brings its own problems: the Yuan is itself tied to the USD; it isn’t freely convertible; plus authoritarian government. That leaves tying the HKD to a basket of currencies, as Singapore does. That has always been seen as more trouble than it’s worth, but if the ‘US is dead’ predictions prove correct, it starts to look like the least-bad choice. In reality, Beijing would make the call.

CE John Lee says the peg will stay. Of course he does. If the authorities ever decide otherwise, you will be the last to be told.

Already in prison for subversion (participating in the pan-dem primary election), Joshua Wong is charged with another NatSec offence – conspiring to collude with foreign forces…

Wong stands accused of conspiring with self-exiled activist Nathan Law and “other persons unknown” between July 1 and November 23, 2020, to request foreign countries, organisations, or individuals based overseas to impose sanctions, blockades or engage in other hostile activities against Hong Kong or China, according to the charge sheet seen by HKFP.

He also allegedly conspired to request foreign powers or organisations to “seriously disrupt the formulation and implementation of laws and policies” in Hong Kong and China, “which was likely to cause serious consequences,” the charge sheet said.

…Wong has already spent over 1,600 days in prison after he was remanded in custody on November 23, 2020, over a separate case of unauthorised assembly.

Wong is due for release in January 2027, by which time he will still be only 29 years old. The maximum penalty for this additional crime is life imprisonment. Jimmy Lai is being charged for the same offence (plus publishing sedition material). 

Both are among several pan-dem activists currently in prison who could, conceivably, be a focus of significant public attention if or when they are released. Imagine Long Hair, for example, meeting and greeting his many fans on the street if he is allowed out. 

From Brian Kern, a list of NatSec enforcement activity around June 4 this year. Includes police camping overnight at Lion Rock, with equipment delivered by helicopter.

The Standard reports that the government is adding NatSec licensing conditions to restaurants and food shops – even funeral homes. They move seems to make businesses liable for any NatSec transgression by an employee…

The terms stated that authorities may revoke a license if the holder, or “any related persons,” including directors, employees, agents and subcontractors, have engaged or been involved in, or are engaging or being involved in, any “offending conduct.”

“Offending conduct” refers to any act or activity that constitutes, causes, or is likely to cause an offense endangering national security, or is deemed contrary to national security or public interest, according to a government license application guide.

It seems the ‘focus on the economy’ thing will have to wait, as NatSec becomes ‘part of Hong Kong’s culture’…

In an interview with the Beijing-backed newspaper Wen Wei Po, published on Friday, Lee said the government’s effort to safeguard national security was still at its “starting stage.”

Bloomberg on the recent replacement of Beijing’s Liaison Office boss in Hong Kong…

As fraught an exercise political tea-leaf reading may be, the difference in tone between Zheng and Zhou’s first public comments may well speak to Beijing’s shifting priorities for Hong Kong, as well as its growing importance to President Xi Jinping’s administration. (To be sure, Reuters reported that Zheng’s departure in part reflected Beijing’s displeasure over being surprised by CK Hutchison’s plan to sell much of its global ports business, including those in Panama, to a group initially led by BlackRock.)

Consider that the top Chinese diplomat, Wang Yi, was just in town to promote Hong Kong as a global mediation hub. Xia Baolong, director of the Hong Kong and Macau Affairs Office in Beijing, is set to visit the city later this month for the first time in more than a year, the South China Morning Post.

…Meanwhile, the local bourse played host to the world’s biggest listing this year, with CATL’s debut on the city’s exchange last month helping the battery giant raise billions of dollars while navigating complex capital market geopolitics. More high-profile listings are set to follow, underlining the city’s crucial fundraising role for mainland companies that represent China’s industrial and technological prowess.

All this is playing out as relations between Washington and Beijing have deteriorated. … While Beijing is firmly in control, Hong Kong retains some distinctive financial qualities even as political ones have been largely sandpapered away. And, at least for now, the city has been elevated once again to a significant and strategic platform.

…Five years after the worst unrest in decades rocked the city and led to the imposition by Beijing of a national security law, Hong Kong is finding itself refashioned from a restive and recalcitrant outpost — less a pebble in Beijing’s shoe than a cornerstone of its global ambitions. Chief Executive Lee gave a nod to this new chapter over the weekend, noting Hong Kong’s “transition from stability to prosperity.”

Hong Kong’s ‘distinctive financial quality’ is the absence of capital controls. There was a time when people thought/hoped that the city could become Asia’s New York or London. A future where its main purpose is helping Beijing ‘counter the US’ sounds relatively underwhelming.

Desmond Shum discusses China’s ‘century of humiliation’…

A lot of Western politicians, academics, and journalists still repeat the CCP’s line about the “Century of Humiliation” as if it’s some deep, emotional truth shared by all Chinese people. But the reality is—it’s not. It’s a made-up narrative, carefully crafted by the Chinese Communist Party to serve its own political agenda.

We need to call it what it is: a piece of state propaganda designed to reinforce the Party’s hold on power.

In China Books Review, former FT China correspondent Lucy Hornby reads eight official oral histories of Xi Jinping’s life…

Unsurprisingly, these books do not make for gripping reading. It is easy to imagine that their intended audience extracts enough of the general picture to recite a few key lessons at a study meeting, then moves on. That, dear reader, is formalism — one of the deadly sins that transforms a revolutionary Party into a stagnant bureaucracy. Formalism is something that Xi Jinping does not like, and (according to these books at least) has never succumbed to himself.

A close reading of the series, and a healthy dose of context, reveals more about Xi Jinping than the editors may have intended. 

A good read. Includes some interesting background on the role of oral sources in the crafting of official accounts of the past.

A fascinating snippet from a YouTube vid by an gambling expert on a Macau casino scam a few years ago.

From HKFP, pix and stories from Causeway Bay yesterday…

In Victoria Park, a man holding an electric candle while sitting on a bench was surrounded by police officers at around 4.30pm. The man, wearing a face mask, a white cap, and dressed in black attire, was later brought to a police van. Police did not say whether he was apprehended.

Among others stopped by police: a dog wearing a collar with yellow ribbons, and a woman eating a banana.

Customs take action against a candle shop…

Hong Kong customs officers inspected ex-district councillor Katrina Chan’s incense shop for hours on the eve of the Tiananmen crackdown anniversary, accusing her of failing to comply with product safety regulations.

…They told her she was suspected of violating the Consumer Goods Safety Regulation because she had failed to include bilingual safety labels on products.

Inspections of the products lasted more than four hours, from 7.30pm to around 11.40pm, after the mall had already closed.

Oiwan Lam writes on the Hong Kong tax authorities’ recent interest in independent media…

These organisations and individuals were requested to pay a provisional tax demand before IRD’s investigation into any alleged underpayment was complete. The total provisional tax demanded from the eight media organisations was about HKD 700,000 (USD 89,300), while from individuals it was about HKD 1 million (USD 127,590). 

What’s worse is that the tax authority has made errors and unreasonable claims when auditing profit tax for independent media outlets and their reporters’ income, according to [HKJA chair] Selina Cheng. Although they could apply for a review and a deferred payment, they had to prepare financial records to invalidate the authority’s estimations.

Cheng herself is also a victim of such arbitrary tax audits. She was asked to pay backdated tax for the 2018/2019 financial year. Her annual income at that time was only HKD 230,000 (USD 29,340), but the authority claimed her income was up to HKD 630,000 (USD 80,380) and demanded that she pay the backdated tax.

HKFP reports that a different sort of business run by a pan-dem figure is getting similar attention…

Derek Chu, an ex-district councillor and the owner of e-commerce company As One, said on Tuesday that the Inland Revenue Department (IRD) demanded in April that his business pay HK$120,075 in profit tax for the financial year 2023-24.

The tax assessment would mean As One made a profit of about HK$1.5 million in 2023-24, but in reality, his shop only recorded a profit of less than HK$100,000, Chu told HKFP in a phone interview.

Most of As One’s HK$4 million income last year was spent on salaries, rent, and restocking products, he added.

“The numbers should have been obvious to the IRD,” Chu said. “I don’t know how they could see that much profit.”

The shop owner, who also founded the prisoners’ rights advocacy group Waiting Bird, accused the IRD of “targeting” his business and said he decided to speak up about the tax demand to “set the record straight.”

“It’s about telling people that what the IRD did was completely unwarranted,” he said.

The nearest thing to a June 4 vigil allowed these days is people walking around Causeway Bay eating ice cream cones. The largest-scale activity to mark the events of 1989 is the police presence. SCMP on the authorities’ June 4 preparations…

Hong Kong authorities will take action against anyone who threatens national security, the chief executive has warned, as the 36th anniversary of the Tiananmen Square crackdown approaches.

Asked about the legality of commemorating June 4 by lighting candles or wearing clothing with related slogans in Causeway Bay, where annual vigils had been held for decades, city leader John Lee Ka-chiu said all activities must comply with the law.

“Any activity on any day must comply with legal requirements. No one should violate the law,” Lee said on Tuesday, a day ahead of the anniversary, without mentioning the historical incident.

And HKFP reports…

Police officers patrolled Victoria Park – the former site of the city’s annual vigils for the Tiananmen crackdown – and its vicinity on Tuesday, one day before the 36th anniversary of the crackdown.

Outside the Sogo department store, plainclothes officers stopped and searched performance artist Chan Mei-tung as she was chewing bubble gum.

The officers set up a cordon and told reporters to stay on the other side of the road as they warned Chan and filmed the scene.

They then escorted Chan to the Causeway Bay MTR station and waved goodbye to her as she walked through the station’s gates, photos from local media outlets showed.

Chan was arrested for disorderly conduct on the eve of the anniversary in 2022, after standing outside Sogo and peeling potatoes.

Meanwhile, a patriotic food carnival called the Hometown Market in Victoria Park attracted 100 to 200 visitors on Tuesday afternoon.

That’s for 300 booths. Admittedly, some sell grilled lamb.

The BBC’s John Simpson looks back.

Bloomberg summarizes the sheer wretchedness of debt-ridden New World Development’s plight: its HK$$20 billion 11 Skies mega-mall project at the airport has so far leased only 40% of its space…

The 3.8 million square foot complex, equivalent to about a quarter of the combined square footage of New World’s major investment properties in Hong Kong, stood mostly empty on a recent weekday afternoon visit. Only two eateries out of more than 800 shop fronts were open, and those were to service nearby office workers. White hoardings covered up most retail storefronts, escalators stood motionless and there wasn’t any signage naming future tenants.

…New World is struggling to service around HK$210.9 billion ($26.9 billion) in liabilities. The property group faces worsening pressure to repay loans if it can’t strike a deal with banks to refinance HK$87.5 billion of its borrowings by June. So far, it’s secured commitments for about 60% of that amount after pledging some of its most prized assets…

…Revenue from 11 Skies may also run into a ceiling because New World is required to pay the Airport Authority either guaranteed rent, or up to 30% of the mall’s gross annual revenue, whichever is higher, until 2066

Sound like they’re screwed. Maybe turn it into housing?

Not really, but sort of, perhaps. Financial Secretary Paul Chan…

…noted that the Development Bureau had already initiated various studies on the Lantau Tomorrow Vision and that technical research would proceed to prepare for potential challenges, including hydrological considerations, should the project move forward.

The focus is now on the Northern Metropolis. This isn’t because spending a half-trillion-plus on a fairly small amount of land requiring massive connecting infrastructure didn’t make sense even when Hong Kong had huge budget surpluses and reserves. More because the extra space doesn’t even seem to be necessary, especially if you prioritize land valuations.

On a related subject, New World Development’s share price, from HK$52 in 2019 to HK$4.45 yesterday…

The latest fall followed an announcement that it would defer payments on perpetual bonds (which, not being quite as perpetual as markets would like, are now trading at around 60 cents on the dollar). (Update: more like 23 cents.)

Hong Kong retail sales decline for the 14th month in a row. A breakdown shows that consumer durable sales are down 23% year-on-year, though interestingly, alcohol sales have zoomed up by nearly 30%. Officials are renewing efforts to reverse the trend, notably by attracting more tourists.

Falling consumption might be a symptom, not the cause, of a problem. Discuss. 

RFA on the replacement of Zheng Yanxiong with Zhou Ji as head of the Liaison Office…

No reason was given Friday for removing Zheng and if he was being appointed to another position.

Zheng was dispatched by Beijing to Hong Kong in 2019 to oversee the crackdown on the protests, before his appointment in 2020 as the first head of the Office for Safeguarding National Security in Hong Kong. In 2023, he was promoted to director of the Liaison Office – the position he’s now vacating.

Throughout his tenure, he aggressively promoted the enforcement of Hong Kong’s National Security Law as Beijing looked to curtail the freedoms that had set the city apart from the mainland since the 1997 handover from British control. His tenure saw tighter controls over the press, academia, and civil society — drawing widespread international criticism.

Courtesy of a tip in the comments: the Ombudsman’s archives, with reports dating back to the mid-1990s, are on Github. (Have Github’s computers slowed down as a result?)

HKFP op-ed asks why lawmakers have been advised to keep quiet on the Office of the Ombudsman’s deletion of online archives…

…local media reported that authorities silenced LegCo on this issue. Authorities sent out “warm reminders” that LegCo members should not “follow up” or “comment” on the Ombudsman saga.

This gives the impression that LegCo is simply an extension of the government, speaking for the government only. What of its checking role? 

…The Ombudsman’s deleted reports saga tells us that Legco has lost some capacity to hold authorities to account. It tells us that officials expect Legco to speak for the government and not for the people of Hong Kong.

Yet, LegCo members should be able to speak out on issues such as this. Authorities should understand that speaking out is not “attacking” the government but trying to improve local governance. LegCo members’ constitutional role includes checking the government.

Authorities should relax the gag order on LegCo members so that they can better serve the people. This will build trust in our institutions, which is in everyone’s interest.

Of course the new-look legislature is expected to ‘speak for the government’. If the authorities wanted an assembly that represented the people and checked the executive, they wouldn’t have abolished the freely elected seats and created an ‘all-patriots’ LegCo. There are dozens of issues today’s lawmakers don’t talk about – from construction site safety, to over-tourism, to futile checks on Japanese seafood, to tax audits of independent media, to never-ending NatSec arrests and trials. 

Perhaps a more pertinent question is why the Ombudsman’s Office decided to remove these online records. Did a highly paid bureaucrat order the deletion because he thought all the files were slowing computers down? In which case the only reason lawmakers are being told to keep quiet about it is because the government finds it embarrassing. Or is this part of a new style of government? Are old election results, LegCo votes, Auditor’s reports, budgets, demographic data and other records going to become harder to find? If you wanted to bring about a system of increasingly tight control, making such information harder to access would help the authorities create new official narratives about the past. 

Today’s competition: Spot the plain-clothes cop. This Tweet claims there are 10 undercover police in the 12-second video clip panning out across from Sogo in Causeway Bay as June 4 approaches. If the number is correct, I think I got them all – on the third viewing. One is 98% obscured by another at the beginning and a couple of probables pass by with their backs to you. It’s the hair and the trying-too-hard-to-look anonymous (and the overt and bored hanging around). Fun for all the family.

Exiled activist and ‘absconder’ Joe Tay’s cousin and her husband are brought in for questioning by NatSec police…

Tay’s other cousin and his wife were brought in by the police for questioning earlier this month.

Tay, 62, currently based in Canada, is one of six overseas activists for whom police issued arrest warrants in December. He left Hong Kong in June 2020. Each wanted person has a HK$1 million bounty on their head for alleged national security violations.

Tay is accused of incitement to secession and collusion with foreign forces.

Police wanted poster.

As with other NatSec enforcement, investigations of fugitives’ relatives tends to lead to negative news reports overseas. To counteract ‘US-backed Western media smear campaigns’, the Hong Kong government is encouraging online ‘influencers’. Hundreds of them…

…to attract global attention through “market-savvy and humorous” approaches, Chief Executive John Lee Ka-chiu said.

Speaking at a Legislative Council Q&A session, Lee revealed that authorities invited 650 influencers in the first quarter of this year, including from the UK, Australia, South Korea, Thailand, Indonesia, mainland China and Taiwan. 

Among them, an Australian influencer’s content alone garnered 50 million views, he said. 

Last year, 2,600 influencers promoted Hong Kong, generating 380 million views.

China condemns the US plan to refuse or revoke student visas to some or all Chinese students. As usual with Trump, details are vague and subject to caving at any time. But whatever emerges, it seems students with CCP connections are being specifically targeted. Numerous experts on China rush to remind us all that young people in China join the Party out of cynicism rather than ideology. Kevin Carrico – former front-page star of Wen Wei Po – considers the proposed measure from a different angle…

The near universal shock at the possibility that any country in the world may not be eager to roll out the welcome mat for members of the Chinese Communist Party highlights to me the stunning degree to which membership in the Party has been normalized on a global scale.

…it is well past time to also push back against what I call here CCP privilege: the assumption that one can be a member of an organization opposed to basic human dignity and engaged in genocide without any potential repercussions, even on a global scale.

One argument defending CCP privilege claims that the Chinese Communist Party today is less a Leninist authoritarian party than just a social club or honor society.

…I am thankful to say that no social club that I ever joined has engaged in genocide or other crimes against humanity. And if by chance I had ever mistakenly joined such a social club, I would personally be eager to depart such a club once I understood what was happening, as being part of such a club would be a form of complicity in these crimes.

…The day that news of the policy proposal broke, Google searches for “quitting the Party” rose dramatically. 

The self-interested nature of Party membership, based in the search for privilege, has always been the Party’s greatest strength. Yet if there is ever a price to be paid for membership, it may become the Party’s greatest vulnerability.

Transit Jam goes to the Ombudsman’s Office HQ to view a document that would until recently have been available online. Everything is as difficult as you would expect – from booking ahead to negotiating the Shun Tak Centre to reading documents while staff linger outside the room. Almost as if they don’t want anyone to see their archives.

Asia Times on Apple’s boss and China…

…Cook sold Apple’s soul to China.

He deepened the company’s dependency on a regime that censors dissent, surveils its citizens, and threatens global security—all because the margins looked good.

He didn’t just outsource production. He outsourced principle. While Musk battled regulators and Zuckerberg sparred with Congress, Cook was quietly bending the knee to Beijing, deleting apps, filtering maps and making sure nothing upset the Politburo.

His legacy isn’t one of innovation or bravery—it’s of appeasement in pursuit of profit…

From Chinadiction, reviews of two books on Taiwan. One tries to clear up Formosa’s often-misunderstood past…

…the tribal histories that preceded and coexisted with the Dutch, the Spanish, the Ming refugees, the ascendant Qing Dynasty Manchus who semi-managed western coastal Taiwan until the arrival of the Japanese in 1895 – and after them the en-masse arrival of the defeated Chinese Nationalists (Kuomintang, or KMT) in 1949.

The other looks at the possibility of a war…

…despite all the rehearsals and incessant training, taking Taiwan is a toweringly tall order for an untested military such as China’s especially as modern warfare changes before our eyes. Hopefully, the best deterrence of all – as Xi continues to purge PLA generals, reportedly for corruption and “violating political discipline” – is China itself.