How to damage the HK business environment

Hong Kong’s 11-week uprising finally starts to die down with… 1.7 million people on a peaceful march. (You can quibble over numbers, which are impossible to measure. Hong Kong demonstrations these days come in two categories – ginormous and not ginormous. This was yet another of the former.) The official response is even more brief and constipated than usual, tut-tutting about traffic and concluding…

The Government will begin sincere dialogue with the public, mend social rifts and rebuild social harmony when everything has calmed down.     

We are told all this unrest in the streets harms business, and we should be bursting into tears at the sight of real-estate moguls like Prada’s landlord, Allan Zeman and Hysan cutting retail rents.

At this point, our friendly neighbourhood Communist Party says ‘here, hold my beer’ and shows what real damage to the business environment looks like.

The forced public kowtow by Cathay Pacific and parent Swire Group is punishment for the airline’s nonchalance over its employees’ involvement in Hong Kong’s protest movement. Gory details (and some arguably misleading but minor tittle-tattle) here (and more here).

The whole chain of events must permanently undermine large companies’ confidence in Hong Kong as a business location, ‘partnership’ with Mainland entities, and the idea of having good relations with China…

  • Group chairman Merlin Swire was summoned to Beijing and ordered to fire Cathay’s top two senior managers.
  • For additional humiliation, the news was broken by state CCTV before the company had a chance to make an announcement.
  • The share price plummeted (sending a message that China could ruin stockholders and perhaps enable second-largest owner state-owned Air China to buy up the remains).
  • The SCMP quotes a source as saying “Merlin had to save [ritually dismember] Cathay to save Swire.” Swire’s Mainland interests include property, Coca-Cola bottling and much more. The great and ancient hong had zero choice.
  • Top executives Rupert Hogg and Paul Loo have been banished from the Swire Group as a whole. Anyone else who hires them in future will be defying the Wrath of the Panda and will, in Beijing’s eyes, be ‘hostile to China’.
  • Hastily appointed replacement CEO Augustus Tang, the SCMP implies, has been chosen for his ethnicity, as a further sign of submission to the Han emperor.

It gets worse…

  • Beijing has extracted a forced confession from Cathay in its official statement – a self-criticism that its actions have ‘called into question’ the airline’s ‘commitment to flight safety and security’. It would be a shocking wrongdoing for an airline to slip up on safety and security. What’s really shocking is that Cathay (however much you might whine about the grilled lobster in the first-class lounge) has an impeccable safety record (ask insurers). Beijing has forced the company to libel itself.
  • Last but not least, Swire has long prided itself on its warm and productive relationship with Beijing, dating back to the 1980s. This is how the CCP treats its friends.

Hard to believe that just nine months ago we were upset when the Hong Kong government, at Beijing’s behest, kicked out one Financial Times editor for a minor thought-crime. Now, the CCP decides your senior management team for you.

The Big Four accounting companies are now under pressure to punish staff for their political beliefs.

One easily foreseeable consequence is that companies’ employees (or simply people claiming to be staff) can now retaliate against Beijing or the companies by publicly supporting the protest movement. How can Hong Kong’s service industries operate if fear and suspicion ruin relations between companies and staff?

Then there’s the reputations (whatever they may be already) of these professional firms. How can clients and the public have faith in companies that bend to the political will of the CCP? And hello, law firms.

Meanwhile, the Hong Kong government is angry at all you naughty marchers dampening Allan Zeman’s rents.

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25 Responses to How to damage the HK business environment

  1. Four O'Clock Blow Sir says:

    “…..and rebuild social harmony after Hong Kong has burned down.”

  2. Curious that the dire consequences we are so often warned of if this goes on (lower commercial rents, fewer mainland visitors) are things that may worry Allen Zeman and his cohorts, but will be regarded as a blessing by many Hong Kongers.

  3. Cassowary says:

    “Then there’s the reputations (whatever they may be already) of these professional firms. How can clients and the public have faith in companies that bend to the political will of the CCP?”

    Simple, they price the risk and then decide whether it’s still profitable enough to do business under these circumstances. Multinationals have long operated in all manner of nasty and corrupt countries. From now on, operating in Hong Kong will be seen as risky and unpleasant as say, Saudi Arabia without the religious fundamentalism. They’ll still do it if there’s enough money there.

  4. Stanley Lieber says:

    So if I identify my employer and say I support the protests, the CCP will fire my big bosses?

    Groovy.

    (I work at HSBC and I support the protests, but please don’t tell anybody.)

  5. Cassowary says:

    In addition, ” How can Hong Kong’s service industries operate if fear and suspicion ruin relations between companies and staff?”

    They’ll probably decide that it’s safer to replace their local staff with employees from the Mainland. That’s how.

    Moreover, if these accounting firms are pressured to flatter SOEs with dodgy accounting, everyone will be perfectly happy to handwave it away as long as the money looks like it’s going to keep rolling in for the next quarter. When it all goes pear shaped they’ll take the golden parachute and run.

  6. Pathe Cathartic says:

    I wonder how much Hogg and Loo were really pushed, and how much they jumped to avoid the poison chalice and then Beijing just owned it after the fact as “we pushed them”.

    Jumping would appear to be a smart move — Cathay (and perhaps by extension Swire) is royally shafted as most of the 27,000 Hong Kong staff will be pro-protest. If Beijing works that out, they’re going to have to sack hordes of unionised aircrew on very dodgy grounds legally. Good luck with that not being expensive. Then they’ll have to hastily train a whole new set of aircrew. Talk about compromising safety.

    Even if Beijing doesn’t/can’t work that out itself, the unions who have had serious beef with Cathay for years now have Cathay by the short and curlies — “give us our demands or we’ll all come out in support of the protest movement”.

    The new Cathay CEO is apparently hated by the chairman. Can’t think why the chairman chose him to accept the poison chalice…

  7. Reactor #4 says:

    Quibble over numbers? Yes I will. If you have four people occupying one square metre (such an arrangement would not be very pleasant for anything beyond a a 20-floor lift trip or a Jeffrey Epstein-arranged sexual encounter), then 1.7 million people will fill a square with sides 651 metres in length. If you look at the occupiable area of Victoria Park north of Causeway Road is as near as damn it 420 m x 380 m, i.e. there is enough space for just under 640,000 tightly packed people. That, though, ignores the spaces taken up by features such as the boat pond, tennis complex and a numerous small scale utility structures. Therefore, based on various aerial views, I reckon 250,000 people were out there yesterday. This is less than 4% of the population. Of those, around 1,000, but definitely no more than 2,000, are “commiteds”. Those in power know the numbers, which is why they will simply sit tight. It’s game over.

  8. thuggish beaver says:

    A business world managed by the chinese is a business world without law. The CcP is a thug gang pure and simple.

  9. old git says:

    On Thursday, the Airport was empty of both demonstrators and PRC individuals with the exception of 3 PRC emigrant workers, baffled by the Immigration Department machines. Airport shops had no customers to speak of.

    Bangkok’s Suvarnabhumi Airport Immigration Desk for PRC travelers had no takers either, coming or going.

    There were perhaps a total of 500 red, green and blue taxis and HK Airport yesterday, with no queues and perhaps 10 riders in 10 minutes.

  10. Mary Melville says:

    On a sideline, compare the hoo haw over the mainland journalist at the airport and the ‘now you see him, now you don’t’ appearance of the public security officer who, going by media shots, appears to have have been more harshly treated.
    Discharged from hospital and not a word since then. Of course any focus on him might have turned the spot light on the issue that he appeared to be part of a group of infiltrators.
    Will he come forward as a witness? This is one for the bookies.

  11. Stanley Lieber says:

    @Pathe Cathartic

    1. They were fired.

    2. Mr. Swire chose Mr. Tang.

    3. Mr. Slosar is next.

  12. Mr Miyagi says:

    Call it the CCP’s new and improved globalised social credit system…

  13. Joe Blow says:

    Al Semen’s tower has seen a drop of 40% in business. I am sure we can do better than that.

    BOYCOTT LAN KWAI FONG.

  14. Stephen says:

    @Stanley Lieber

    The HSBC CEO has already been “fired” and the Panda’s paw prints are all over it.

  15. Gerald says:

    Reactor No 4’s estimates are correct but overlook two other factors. There were at least the same number outside the park and throughout the entire period there was almost continual circulation of people entering and leaving.
    I doubt the 1.75 million number quoted but it could not have been less than 500,000 and quite likely more.
    And to suggest only 1-2,000 were ‘committed’ – what does that mean?

  16. Irritated Observer says:

    What a pleasant change from Reactor #4, a math/science based substantive argument instead of his usual condescending whining. Still wrong of course, and with flawed logic, but at least there is something to debate.
    The listed size of Victoria Park is 19 hectares, and your estimate appears close enough, as one hectare is 100m by 100m. I do not see the structures of which you speak in the aerial photographs, although admittedly I am no expert on Victoria Park, but being conservative, we take a 10% deduction on max occupiable space.
    Your initial estimate of 4 person per square metre, which you describe as unpleasant, is undoubtedly true, but given you clearly have not been participating in these events firsthand, perhaps you are not best placed to judge how realistic that is.
    http://www.gkstill.com/Support/crowd-density/CrowdDensity-1.html
    Based on the link, I believe it is arguable, but anywhere between 3.5-4.5 people a square metre seems a reasonable estimate.
    Taking 19 hectares with occupiable space of 90% and density of 4 person/square metre gives an attendance of 684k people in Victoria Park itself. Even halving the density still gives you upwards of 342k people. Your 60% deduction seems arbitrary and perhaps justifiable only to yourself.
    Leaving aside the actual occupancy of the park itself, the biggest flaw in your argument is that there were many people unable to enter the park, stuck in subway stations, or walking from Wan Chai and North Point at the peak, precisely why the organizers wanted a march and not a rally, and why they started leaving the park at 3pm, to allow more people to actually enter the park. It would seem to me that you would be fundamentally undercounting the many participants unable to physically enter the park by simply assuming they didn’t exist.
    https://www.google.com/url?sa=i&source=images&cd=&ved=2ahUKEwjurs3wsY7kAhVPM94KHQb1DfgQjRx6BAgBEAQ&url=https%3A%2F%2Ftwitter.com%2Fhashtag%2Fhomekong&psig=AOvVaw0Ti3yM06X0hRhZmRH0HvZk&ust=1566285304864293
    As for the core participants, rather than assuming how many are “committeds”, maybe you should consider having a gander at the numbers that briefly occupied Harcourt Road yesterday.
    You may very well be right that the protests die away, and in a sense for the sake of the participants as well as the general public, I half-hope they might, but I do think you are doing everyone an injustice to be slyly repeatedly suggesting that the protest situations is simply because they have too much time on their hands rather than fighting oppression and police brutality.
    If the government makes no concessions, let’s see whether your insult to the values-based public stands up when school resumes. The pragmatist in me almost hopes you are right.

  17. Irritated Observer says:

    One additional remark, I have always wondered who the government and police hoped to deceive with their blatant manipulations (like banning the march) and nonsensical public releases (“some people” for the Yuen Long attacks), but clearly there is some appetite for simple-minded thinking out there.

  18. truculent beaver says:

    irritated observer: the government manages data and information for itself. nothing to do with advancing public insights.

  19. C.Law says:

    That quote from Bill Bishop merely serves to demonstrate his naivete. That has been going on since western accounting firms went into China, known to all (well, not quite all, obviously) and ignored so long as people are making money.

    Just as the New York, London and HK stock exchanges have turned a blind eye to the State-mandated presence of CCP reps on the boards of PRC companies (State and “privately” owned) listed on their exchanges. Even the BBC managed to challenge Ren Zhengfei of Huawei on this in their much-touted exclusive interview a couple of months ago, though the interviewer did not further challenge the answer that the CCP rep was merely there in some kind of HR capacity.

  20. reductio says:

    Reactor #4 and Irritated Observer. Very interesting discussion here. Though you’d think that a species able to solve Schrodinger’s wave equation, find the Higg’s Boson, and send New Horizons to Pluto after a 10 year trip would be able to accurately determine the size of a crowd. This must be something that statisticians, operational researchers etc. have techniques for.

  21. Control rod says:

    @Reactor 4
    That’s as mathematically sound a guesstimate as claiming you’ve only ever drunk one pint in your entire life, because that’s all a pint glass can hold.

  22. Irritated Observer says:

    @reductio

    Unfortunately even statisticians are not free from bias. Just for laughs though, as a reference point, Tamar Park is 1.76 hectares, i.e. more than 10 times smaller, with the rally organizers estimating 476k attendance, and the police giving a 108k estimate.

    Same police estimate turnout at 128k at Victoria Park? Asia’s Finest indeed. lol

    Quibblers really should take more notice of details, or it’s not just their grasp of the situation in doubt, but their credibility, assuming we assigned any in the first place.

  23. old git says:

    On page 8 of Appendix A to the HK GOVT BUDGET it is noted that HKD480 billion is to be paid in pensions of the Civil Service during the next 10 years

    This sum is repeated without analysis on page 13 of the Appendix

  24. Cassowary says:

    The exact numbers in Victoria park are not that important. It was a buttload of people. It’s the third protest in 11 weeks drawing a buttload of people. The number of comparable protests during the past 16 years is about 5, and most of those were in 2014. By any yardstick, people are in scientific terms, really pissed off.

    A protest is not a public opinion poll. You do not measure a people’s support for its cause merely by dividing the number of attendees by the population. That’s daft. 250,000 people showed up at Martin Luther King’s March on Washington in 1963, out of a US population of 189 million. If you apply the blind arithmetic, you would conclude that almost nobody cared about racial equality at the time.

  25. dimuendo says:

    Reactor #4, Irritated Observer etc

    As usual Reactor #4 is way wrong, not least because he totally ignores the roads were jammed with people. Indeed the flyover, both lanes, had quite a lot of people on it, which in 10 plus years of observing demos I have never seen before.

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