Big Lychee, Various Sectors

Jimmy Lai’s 1,500th day in prison (last Friday) gets attention from such bodies as Hong Kong Watch, CFHK and Independent Catholic News…

Lai, who is now 77 years old, a British citizen and a devout Catholic, is held in solitary confinement and reportedly only permitted 50 minutes of exercise per day. That means he spends over 23 hours daily without natural light, fresh air, or human contact except with prison guards. A diabetic, he has been denied independent medical care and concerns are growing about his failing health.

For over four years, since his arrest in December 2020, Lai has been imprisoned on multiple fabricated charges. These include a 13-month sentence for lighting a candle and saying a prayer at a vigil to mark the 1989 Tiananmen Square massacre and a 14-month sentence for participating in a peaceful protest in 2019, sentences he has now served.

The latest on his trial from HKFP is here: prosecutors are focusing on how much he did or didn’t know about the Inter-Parliamentary Alliance on China in mid-2020. Last week, judges admonished him for being ‘riled, excited [and] emotional’ towards the prosecutors.

Foreign Affairs looks at how China hopes to manage the risks and opportunities posed by the incoming Trump administration. The conclusion is that Beijing will try to ‘weather the storm’. 

Does China have much to worry about? Consider the following…

Despite tough talk, Donald Trump is clearly nervous about putting big tariffs on China, preferring to pick on the US’s own allies, including Taiwan. He is also protecting TikTok. Elon Musk, dismantling the federal bureaucracy as if it’s Twitter, owns a ‘Gigafactory’ in Shanghai making EVs for the local and export markets. Kash Patel, nominee for firing 1,000s of FBI agents, owns stock in the holding company of controversial Chinese clothing company Shein. Attorney General Pam Bondi will ignore foreign interference. The near-abolition of the US’s foreign aid system would be a godsend to China in terms of soft-power rivalry. Cuts in science funding could boost China’s relative technological competitiveness. Measures to reduce use of renewable energy sources would weaken US energy security. Added to that, intelligence nominee Tulsi Gabbard is blatantly pro-Putin, and health nominee RFK Jr is dedicated to spreading disease throughout the US. And there’s more. 

Maybe it’s just a coincidence, but if you join all these dots you get an administration of people inclined to appease Beijing working to undermine the US as a society and a global power in ways that benefit China in its pursuit of global dominance. 

And this is at a time when China is facing serious economic challenges. A time when targeted US measures to maintain its international credibility and force China to rebalance its economy could leave Beijing’s leadership having to reconsider their superpower ambitions.

As an aside, an NYT article describes how insiders – no prizes for guessing who they would be – made millions by pumping and dumping Trump’s cryptocurrency memecoin on cretins dumb enough to buy them…

In those first minutes, a crypto wallet with a unique identification code beginning 6QSc2Cx secured a giant load of these new tokens — 5,971,750 of them — at the opening sale price of just 18 cents each, starting a surge in the $Trump price that would soon reach $75 per token.

This early trader, whose identity is not known, walked away with a two-day profit of as much as $109 million, according to an analysis performed for The New York Times.

…Whether people made or lost money, it was stellar business for the Trumps. Nearly $100 million in trading fees have flowed to the family and its partners, although most of that has not yet been cashed out, the Chainalysis data shows.

President Trump set off this scramble three days before he was inaugurated, triggering a rapid boom-and-bust sequence that has now raised broader questions about the speculative dangers of so-called memecoins, a type of cryptocurrency based on an online joke or celebrity mascot.

He promoted the coin on his own social media platform, as well as Elon Musk’s X, saying: “Join my very special Trump Community. GET YOUR $TRUMP NOW.”

And purchases from China seem to have contributed to the token’s pump.

The government issues data on ‘restaurant receipts and purchases for the fourth quarter of 2024 and whole year of 2024’. Stats geek Joel Chan provides the summary above.

In real terms, restaurants saw a 2.4% drop in revenues in 2024. Given that there were no wars, major disease outbreaks or other horrors, this doesn’t look good. GDP grew 2.5% last year and 3.2% in 2023.  All else being equal, you would expect spending on dining out to roughly track economic growth – though perhaps not when times require unsustainable government stimulus. 

The government provides separate data for what it calls ‘Chinese’ and non-Chinese’ restaurants. They have probably done this since the 1850s or something. It would be more interesting to see separate figures for up-market and cheap places regardless of the types of cuisine. Yet there is a noticeable drop in trade for the ‘Chinese’ outlets. I’d guess middle-class emigration has hit the pricier places, and everyone else – including Mainland tourists – is tightening their belts or changing consumption patterns post-Covid  where cheaper shops are concerned. Equivalent figures for Shenzhen would be interesting.

The numbers for ‘non-Chinese’ places look better, though Outback Steakhouse wouldn’t agree. Of course, receipts do not equal profits. Nor do the stats indicate how reliant restaurants are on customers who are highly paid civil servants.

Fast-food purveyors are seeing faster than average growth, which also suggests belt-tightening. The 13% inflation-adjusted drop in income for bars points to an exodus of boozy expats or a shift to drinking at home. Or both.

The government statement says…

Looking ahead, business of restaurants will continue to be supported by the various measures by the Central Government to boost the Mainland economy and benefit Hong Kong, the SAR Government’s proactive efforts to boost market sentiment and promote tourism, and increases in employment earnings…

Whatever happened to strong consumer demand?

Ultimately, it’s structural. The old days are over.

HKFP lists retailers who have recently downsized or pulled out of Hong Kong. The article blames the 2019 protests and Covid, which spurred middle-class emigration and changed consumer habits – including a trend of leisure spending in far more affordable Shenzhen. Some F&B and other sectors have never recovered.

But will the victims be missed? Among them are the somewhat grotty supermarket chain DCH Food Mart, which I occasionally (as in maybe twice) bought things from. Then there is the MCL Plaza Hollywood cinema, Outback Steakhouse restaurants and CR Care health products stores, which were all places I vaguely knew of but never set foot in (NOKD). And then we bid farewell to Eggslut sandwiches, Flash Coffee, Garrett Popcorn and clothing/cosmetics outlet Paul & Joe – none of which I had ever even heard of. They sound trashy or at least ill-advised. The market is saturated with coffee and fashion brands. Anything called ‘Eggslut’ deserves to die. And how do you pay Hong Kong rents selling popcorn?

Former Transport and Housing Minister Anthony Cheung calls for a civil service pay freeze to help solve the government’s budget deficit. He notes that fiscal reserves of HK$1.1 trillion in 2018 are now at HK$570 billion. Much of that went to make up the shortfall during the economic shock of Covid – the ‘rainy day’ scenario officials have always used to justify the accumulation/hoarding of surpluses in the past. But with the economy now probably stuck with slower growth (basically a reflection of China’s own post-bubble slowdown), the deficits look structural.

Officials obviously hope to find new ways to boost growth. But all they can think of is more and more tourists, plus fanciful ideas for tech/bio/whatever hubs. Ultimately, Hong Kong needs to make some big adjustments. Assuming the currency peg will remain, the whole city needs to re-price itself. That means accepting lower housing and business rents as a good thing that will boost economic activity. And it means reducing the cost of government, most of which is salaries (and redundant infrastructure projects).

(Cheung warns that actual cuts to civil service pay would undermine consumption. Actually, a pay freeze is a cut, over time. But this is an old argument. If the economy is so dependent on public-sector employees’ household spending, that’s all the more reason to bring things back into balance.)

Easing into Snake Year gradually. Yesterday’s Standard reports Financial Secretary Paul Chan’s suggestions for tackling the government’s budget deficit…

Financial Secretary Paul Chan Mo-po has put forward potential areas for cost-cutting within education and health care and says adjustments will be made to the HK$2 fare scheme for the elderly and disabled in response to the fiscal deficit.

…He said the HK$2 fare scheme for the elderly cannot remain unchanged indefinitely as its current model is not financially sustainable.

…Regarding proposals to reduce or freeze civil servant salaries, Chan highlighted the importance of considering their impact on the private sector, particularly given the low unemployment rate.

With declining student numbers, maybe there are ways to trim education expenditure. But how can he cut health spending when public hospitals are already under-resourced? 

Assuming big tax hikes are out of the question, the only real options are: axing big infrastructure projects; and reducing civil service costs. 

Any justification for the huge Lantau reclamation went out the window when officials found that there is in fact space for several hundred thousand apartments in the New Territories (thanks to the miraculous disappearance of land ownership and other problems). And a public-sector pay freeze to bring government salaries into line with the private sector is long overdue.

Chan’s reported comments that lower civil service salaries would ‘impact the private sector, particularly given the low unemployment rate’ are puzzling. A tight supply of manpower will prevent private-sector employers from using government pay cuts as a pretext to reduce their workers’ pay (if that’s the undesirable impact he claims to foresee). Conversely, a mass exodus of government staff would prove that public-sector pay levels are in fact as low as they can get.

The real problem is that civil servants would whine like crazy. Maybe a threat to bring in Elon Musk would focus their minds.

The year ends with a strong smell of NatSec. A Twitter post…

Hong Kong pro-democracy politician / activist Lee Cheuk-yan (李卓人) — who’s being jailed for organizing protests/ rallies in 2019 — was seen restrained in chains like a felon and boxed in by at least 6 correctional officers in Queen Mary Hospital…

What a performance. (How many feet of chain did they bring?) If he was really a dangerous criminal – a murderer, say – he would not be seated among the rest of the public in a hospital waiting area.

And PORI pollster Robert Chung is (reportedly) taken in for questioning again in connection with ‘absconder’ Chung Kim-wah …

…Chung Kim-wah’s wife and son, his three siblings, and at least two PORI staff members had also been questioned by national security police.

…Police have issued a HK$1 million bounty for information leading to the arrest of Chung Kim-wah, as well as [18] others on the wanted list.

Bloomberg reports that Hong Kong bans are feeling the effects of the fall in prices of commercial property…

Average prices of office buildings, shopping malls and other properties have fallen more than 40% from their highs in 2018, eroding the value of the collateral backing many bank loans. Defaults are also rising as more property owners and developers run into cash flow difficulties.

Banks with soured loans and mortgages have been reluctant to sell the underlying real estate assets at a loss — but that is changing…

“Banks are realizing that if they don’t sell their commercial properties, the values will go lower and lower,” said James Mak, chief sales director at Midland Commercial Realty Ltd., a property brokerage. 

…Close to 40% of the HK$34 billion in Hong Kong commercial real estate transactions in 2024 were distressed sales or capital loss deals, where owners — including banks — sold properties for less than what they originally paid, according to data from Colliers International.

…The November sale of Cheung Kei Center caused seven lenders, including two Chinese banks and Hang Seng Bank, to realize a total of HK$2 billion in losses on a HK$4.6 billion mortgage they made in 2019, according to land records. 

I remember three or four guys who were pooling their money to buy one floor of an office building in Central. They mentioned the sum of roughly HK$100 million. That was around, um, 2018. 

Some other reading for anyone at a loss for something to do as Snake Year slithers in…

HKFP op-ed on the Hong Kong government’s obsession with appealing against court decisions recognizing same-sex marriage in overseas jurisdictions.

Is this fundamentalist Christians in the bureaucracy at work, or Beijing loyalists guessing this is what pro-natalist Mainland policy requires?

From ChinaFile, why US law firms are leaving China…

A big [risk] is that of data security. Global law firms like to have their offices interconnected so that staff in one office can access digital records in another. What happens if the gentlemen from the Ministry of State Security come to your Beijing (or Hong Kong) office and demands access to your computers so he can access your files in New York? “No, thank you. We’d rather not” and “See you in court!” are not going to cut it. This concern led Latham & Watkins last February to cut its Hong Kong office off from unfettered data access—a measure it had already taken with its Beijing office. And concerns about data security were also a reason behind the Dentons-Dacheng breakup in 2023.

In addition, communications may not be secure. While firms may use VPNs, they must be from government-approved VPN providers, raising the very security concerns that VPNs are supposed to mitigate.

A second risk is that of attorney-client confidentiality. Chinese law does not recognize any attorney-client privilege. If an attorney possesses information about a client the state wishes to know about, they are under the same obligation as anyone else on Chinese territory—citizen or foreigner—to reveal it. The fact that doing so might violate a foreign attorney’s legal or ethical obligations in their home jurisdiction is irrelevant.

As are other firms – from the FT…

The annual survey by the American Chamber of Commerce in China found 30 per cent of respondents were exploring alternative sources for goods and relocating manufacturing out of the country last year, or had already done so — double the percentage in 2020. 

Michael Hart, AmCham China president, said that while the majority of US companies were not moving, the trend towards relocation was unmistakable. 

“I don’t see any reason to think that bilateral investment will increase in the next couple of years,” said Hart. “Companies [are] pivoting or bolstering their supply chain by making investments somewhere else.

“Definitely . . . I would be concerned if I was in charge of Chinese investment policy,” he said.

On other matters, a great read (if you find this stuff interesting) on Donald Trump’s pre-inauguration venture into crypto scamming. Especially read the footnotes (scroll over the little number). EG…

If you put on your tinfoil hat though… it kinda looks like TikTok just paid Trump a massive bribe by buying up his memecoin in exchange for getting the ban lifted. It looks kind of a lot like that, actually.

Of the suckers who buy Trump, Melania etc memecoins and lost their savings, he says…

You should never feel bad for these people. What happened to them is exactly the thing they were hoping to do to someone else. Just laugh at them and move on with your day

Is it just me or is the world is going totally nuts. People are ‘investing’ real money in fake currencies, from Bitcoin to Melania-coin. People with no medical qualifications think they know better than experts and are avoiding vaccines and drinking unpasteurized milk. Leading figures in and around the US government are openly siding with Russia, the CCP and Nazis. Grifters, bots and cranks, egged on by algorithms, peddle deranged conspiracy theories on social media to millions of inadequate young men who believe it all. Communications cables around the Baltic and Taiwan are mysteriously being cut. I could go on, but Gung Hei Faat Choi!

Getting Covid shot number 8, and hoping that Snake Year will bring good health to all…

We need something relaxing and wholesome. Just a quick link to a Zolina City Mag guide to all the places in Tai O where you can see whale bones. That village is just packed with them.

If you insist on serious nastiness… I am distressed to hear that people clicking on the recent link to see the Lego (or whatever) models of a doctor lancing a boil on Regina Ip’s inner thigh (never thought I’d string those four words together), only to find the post removed or on a site they can’t see. And they are sorely vexed. The content is still sitting in my cache. So do I upload it, or let the whole thing pass? The answer is here. As a public service, in the interests of art. (Warning: this is nightmarishly repulsive and hard to forget. It is to scenes using dolls what the late David Lynch’s Eraserhead is to Disney.) 

Hong Kong officials respond to former US VP Mike Pence’s comments about Jimmy Lai at a business summit in the city…

A government spokesperson said Pence’s comments were intended “to influence the fairness of the trial with malicious intent”.

This was “a shameless interference with the course of justice and on Hong Kong’s righteous efforts in safeguarding national security”.

US politicians should not “make use of business activities for political manipulation in a vain attempt to challenge the rule of law in Hong Kong”, the spokesperson said.

The government wants Hong Kong to be a ‘hub’ for conferences and other events – until a participant says something disagreeable.

Is malicious intent in the eye of the beholder?

A little flurry of pre-Chinese New Year NatSec activity…

A man is arrested on suspicion of posting ‘seditious’ items on social media – ‘knowingly publishing publications that had a seditious intention’…

According to a legal document, the defendant is a bus technician named Li Chun-kit. The defence did not apply for bail. He will be detained in custody until his case is next scheduled to be mentioned in court on March 3.

Li was accused of “publishing statements, photos, and/or pictures on Facebook with an intent to bring people into hatred, contempt or disaffection against” Hong Kong, and inciting violence or unlawful acts between March 29 last year and January 21.

Two brothers and a sister of wanted former pollster Chung Kim-wah are taken in for questioning…

Tuesday morning’s questioning comes after Chung’s wife and son were last Tuesday taken to police stations. The previous day, PORI CEO Robert Chung was questioned and the pollster’s office was searched.

And Lam Cheuk-ting’s lawyer pleads for a shorter prison term after being found guilty of trying to help victims of a mob attack – aka ‘riot’…

At the District Court on Wednesday, defence counsel Catherine Wong asked district judge Stanley Chan to consider that Lam believed he had a duty to de-escalate tensions at the Yuen Long MTR station on July 21, 2019, when more than a hundred men dressed in white stormed the station.

The attack left 45 people injured, including journalists, protesters, and commuters, as well as Lam, who was last month found guilty of rioting alongside six others after Chan ruled that he had tried to take advantage of the attack to benefit politically.

…At Wednesday’s mitigation hearing, Wong said the fact that Lam was a known public figure did not have anything to do with the rioting case and should not have any bearing on his sentence.

Lam had ‘tried to take advantage of the attack politically’. What exactly does that mean?

Government inspectors testing foodstuffs imported from Japan find no evidence of dangerous levels of radiation – for the 18th month running. They have processed over 111,000 samples, the majority seafood, since August 2023, and found that every single one was ‘satisfactory’. (Not to say delicious. Some inspectors were caught eating the samples rather than throwing them away.) The Geiger counter does report high levels of anti-Japanese political charade.

Analysts are already expecting US President Trump to shy off from imposing high tariffs on Chinese exports. From a Bloomberg story…

Some people familiar with the decision cautioned that Trump often quickly changes his mind on strategy and could decide again to push forward with his original plans to target China. Still, Monday’s actions suggest a more deliberate approach than the fiery rhetoric about tariffs Trump offered during his campaign last year.

One bright side to Trump’s backtracking on campaign promises: he presumably won’t order the Treasury to buy Bitcoin, $Melania and other cryptocurrency for the US reserves. The Russians and Chinese would be wetting themselves laughing if the world’s number-one economy started buying worthless digital fake money.

Yippee, can’t wait: The Chief Executive forecasts 1.4 million Mainland arrivals over Lunar New Year. The Guardian looks at the impact of tourism on housing, retail and quality of life in Spain…

Cities across Spain tell a similar story of slow transformation at the hands of property speculation and a boom in tourist flats – of high rents driving out residents and traditional businesses, and of neighbourhood stalwarts ceding to global chains, souvenir shops, burger joints and nail bars.

The statistics that explain Spain’s housing crisis are equally jarring. Rents rose by 80% over the past decade, outpacing wage increases, and a recent Bank of Spain report estimated that almost half of the Spain’s tenants spend 40% of their income on rent and utility bills, compared with an EU average of 27%.

The crisis – aggravated by the rising cost of living caused by property speculation and the boom in tourist flats – has become Spaniards’ biggest worry, and the focus of the latest policy duel between the governing socialists and their conservative opponents in the People’s party (PP).

You really, really do not want to see this: an AI/Lego/something portrayal of Regina Ip getting hospital treatment for her abscess. 

(I warned you.)