Election Day HK-style

September 4, 2016

I walked out of my apartment building in the Midlevels to the scene below.

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Election Day on Robinson Road

It’s September 4th, which means it’s Election Day in Hong Kong.  However, this is not like the election days we know in the U.S. where you can vote for candidates at the federal, state, and local level.  Today’s election here is only for the Legislative Council or LegCo and while all 70 seats are being contested, only 40 will be chosen directly by the people.  The remaining 30 are chosen by smaller groups of voters representing various industries and social groups, most of whom are thought to support Beijing.  Historically, the LegCo has been comprised of two parties or factions, those pro-Beijing and those arguing for more democracy in Hong Kong.  This election marks the introduction of a third faction, those identifying as “localists” meaning they’re calling for greater autonomy for Hong Kong and at the most extreme, independence from China.  This election is is also being closely watched because it’s the first one since the Umbrella Protests in 2014, which many credit with giving rise to the localist movement and rousing Hong Kong’s youth from their much written-about political apathy.  The outcome of this election is already being discussed as determining the trajectory for Hong Kong as it rides out the remainder of “one country, two systems”, which does not come to an end until 2047.  Such talk may sound dramatic, but the inclusion of any localists in the next LegCo will formally introduce a new dimension to the political debates in this city and if played correctly by those in the chamber, could mean greater gains in future elections.

Something I have written a lot about since moving here is a pervading sense of sadness about the path Hong Kong is on.  They’re damned if they do and damned if they don’t because Beijing ultimately calls the shots.  This election embodies much of what makes me worry about Hong Kong’s future and carving out a path that allows the city to remain dynamic and unique without becoming just another Chinese city.  As I was walking to Hazel & Hershey to compose this post over a very refreshing iced Americano, I was stopped by a woman along the stretch of politicking on Robinson Road. She was HK Chinese, but lived in London and had come back for ten days to canvass for the election on behalf of Alvin Cheng and his Civic Passion party, one of the higher profile participants in the Umbrella Protests who was ultimately arrested and sentenced to 21 days in detention.  She was telling me how the mainland had “parachuted” people into Hong Kong in the past year and applied for them to get permanent resident cards so that they could vote in the election this year and tip the results in favor of pro-Beijing parties.  She proceeded to tell me how she could tell who the Mainlanders were their “style of clothes” and use of Mandarin.  She also told me that a lady had come up to her the other day who was from China and told her she was “ruining China” by campaigning on behalf of Civic Passion.  While there may have been strands of a conspiracy theory in her talk with Beijing sending people to Hong Kong to tip the election, it’s not wholly inconceivable given the embarrassment to Beijing if localist parties win seats and gain a legitimate forum for their calls for greater autonomy and even independence from China and the very noticeable population of Mainlanders living in the city.  Yet what I find even more insightful about this woman’s comments is the “us vs. them” mentality that if we could graph over time, we’d see a steady increase in such an attitude among a growing portion of the Hong Kong population.  Commenting on their dress, physical attributes, and language show a rising awareness of differences between Hong Kong and the rest of China though they are all Chinese.  Once again it mirrors what has happened in Taiwan over the last 20 or so years where the Taiwanese identity has superseded any feelings of loyalty or identity with the mainland.  Or take another city-state with a sizable Chinese population – Singapore – and while many comparisons are made between Hong Kong and Singapore, few raise the idea that while there is a large number of Singaporean Chinese, seemingly very few identify with China or have an emotional loyalty to the country based on their shared ethnicity.  Now Singapore has been an independent country for over 50 years, but what is to prevent Hong Kong from evolving in that direction, at least in terms of forging its own identity distinct from China.  If you read the back of the Civic Passion flyer I received, it’s interesting to note that they are not calling for independence, but something more akin to advancing a Hong Kong identity and safeguarding the city’s autonomy as it was supposed to be when the “one country, two systems” set-up, all through “constitutional reform”.

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Civic Passion’s Platform (of sorts)

Something noticeably missing from the run-up to today’s elections was a spirited debate about the issues.  Part of the problem is that the city has a Chief Executive who is not a part of any party sitting in the LegCo, but effectively put in place to be a puppet of Beijing, so the likelihood of bringing a platform to fruition through cooperation between the legislative and executive branches is low.  I think the lack of debate is also due to the oversimplification of candidates’ positions to either pro-Beijing / establishment or pro-democracy, so with the  introduction of the localists this binary oversimplification becomes harder to perpetuate.  Of course the democrats and localists need to win enough seats to maintain an effective veto, which would require 24 seats to thwart the passage of those acts that require a super-majority.

The debate that did take place in the run-up to the election was mostly relegated to what was happening on the sidelines.  Two weeks ago there was a lot of talk about censoring discussion of independence in Hong Kong classrooms with various comments coming from government officials about the danger of such discussion in the schools and the need to reinforce the notion that Hong Kong is an “inalienable” part of China.  Even the Chief Executive, C.Y. Leung, weighed in stating that “there is little, if any, room for secondary school students to discuss [Hong Kong independence].  Because from perspectives such as historical, political, constitutional arrangements and stipulations in the Basic Law, it is very clear that Hong Kong is an inalienable part of our country. What room for discussion is there?”  Such talk would seem like a clear violation of the freedom of speech enshrined in the Basic Law, but then again these do not seem to be times where the rule of law means all that much in a city where China has been stealthily and steadily encroaching on freedoms.

So I sit here and wait for the results from today’s elections secretly hoping that some of the localists win seats and the pan-democrats, including the localists maintain enough seats to hopefully foster some meaningful discussion in the LegCo about Hong Kong’s way forward in the run-up to 2047.

It’s been quite some time.  Again.  I feel like weeks go by in the blink of an eye out here and I think about all of these things I want to write about, then something else comes up to keep me away from doing it.  But one of the smartest and wisest people I know, my mom, suggested I set aside some time every week or two to write something, which should help me get back into the habit of doing it more regularly.  And it’s not because I have not wanted to write, but more because the demands of work and challenge of disentangling work from what I want to write since often my ideas arise from something I am doing for work has made it easier to just not write at all.  Yet that’s not why I started this blog or in the grander scheme of things, why I cam back to Asia.  I am here this time around because for the rest of my career, I want to help others better understand China. Unfortunately, you can’t understand what’s going on here by just sitting in the U.S. and reading about things.  I wanted to be back on the ground experiencing what’s happening here first hand and hopefully get that much closer to becoming an “expert” on the region.

So now that I’ve given some context to my absence, I can write about what’s been on my mind of late.  As you know, I now live in Hong Kong and I am always careful to make a distinction between the city and the rest of China.  I don’t know if others are as exacting about the relationship between this city and the mainland, but as someone who has been coming here since 1998, one year after the handover from the UK to China, and considers himself an amateur scholar of China who has also lived up there, I know that there are major differences between the two territories.  However, of late it seems like those lines get blurred more and more.  The latest incident surrounds Lam Wing-kee’s return to HK after spending nearly eight months on the mainland.  Lam was one of the five booksellers detained in China for selling politically sensitive books in HK, a city that is supposed to have the right free speech, so the publication and sale of these books would not be a problem here.  However, China claims he was selling these books to mainlanders and actually shipping and bringing them to the mainland, which is not allowed.  That right there should give you a sense as to how different the two places are.  I have often written about and remarked on how devoid of what’s going on around them many mainlanders seem to be, existing in a kind of middle world where most of what they know is spoon-fed to them by the government-directed propaganda machine.  Anyway, Lam returned to HK to supposedly get the hard drives with the bookstore’s customers’ names on it and turn it over to the Chinese authorities.  Instead, as soon as he returned at the end of last week he held a press conference detailing his captivity in China, including what the special operations forces made him do.  Now there has been damage control on all sides with the Chinese government and pro-Beijing politicians in the city trying to discredit him and those decrying the dismantling of “one country, two systems” and advocating greater independence holding him up as a hero.  While there may be some inconsistencies in Lam’s story, I attribute part of that to being held in captivity and ill-treated by his captors for months on end.  Anyone’s memory would be a bit hazy at best after an ordeal like that. I am also skeptical of those trying to discredit his story, especially those from the Chinese government or affiliated with it because if there was nothing to hide, this ordeal would not have dragged on for eight months and Beijing would have been forthcoming with details from the get-go.

Yet I digress.  I write about this incident again because I am either asked how I like HK since being back or listen to people visiting for a week or two extol the city’s virtues, of which there are many.  But for someone just dropping in and out or even those expats who live in the pure expat bubble, China’s ever-encroaching shadow over the city wouldn’t register for most of those people.  Perhaps I read too much or it’s just something to which I am particularly attuned because of my background and history with this part of the world. but it’s happening and it’s unclear what the next move is on either side – whether it’s those here advocating for a change in the relationship between HK and China whereby HK has more autonomy or those in Beijing who see any dissent from the people of HK like a baby throwing a tantrum, albeit  very public tantrum that must be quieted.  What I wonder is to what lengths will Beijing go to actually prevent this simmering situation from exploding.  Acquiescing is not really an option for Beijing, so there is either an uneasy tolerance with subversive moves to quiet the dissenters or something more overt and potentially more explosive.

When I am asked about how I feel about HK or listen to people go on how awesome it is, I try to explain that it’s a city that while still cool in so many ways, feels like it’s lost its way. When I first came here in 1998, it felt like a magical place that was a real hybrid between East and West with an incredible infrastructure and everything just seemed to hum.  Now I wonder if the power outages in the MTR stations and rows over the size of garbage bins on the street portend something worse for this city – a place with no leadership and no plan to differentiate itself in the face of a ruler intent on snuffing out the things that made this city so special.  It’s telling that the leader is the Chief Executive (CE) and since the handover there has not been one CE who people would consider to have been an effective leader.  Of course when China is the one effectively picking the CE and so famously pushed off universal suffrage in 2014, sparking the Umbrella Protests, it’s in their best interest to not choose a leader who actually dares to lead too much.  For if they chose a leader with leadership capabilities who could actually serve the people, that same leader might also rally his or her people to turn against Beijing.  So rather than pick someone who could accomplish something or give this city back it’s purpose or raison d’etre, Beijing chooses feckless and ineffective individuals who are basically their puppets to lead this city down a path of meandering mediocrity.  Now don’t get me wrong.  I love this city and think it still has a lot of potential, but without someone at the helm who has vision and actually represents the people, you are going to have a city that merely exists rather than inspires.  On top of that, you have a legislature that is sort of elected by the people and definitely represents elements of the population that would never find a voice in the CE’s office.  But the CE does not come out of the legislature like he or she would in a parliamentary system and the CE is not elected by the people, so you have a figurehead who is also divorced from the rest of the city’s governing structure and ultimately answers to one – Beijing.

I fear I paint a rather helpless picture and at times it feels that way.  There is a resignation underlying most things in this city that HK is damned if it does and damned if it doesn’t. I’d use more colorful language, but I think you get the point.  Resignation is not inspiring and it’s unclear where the city goes from here.  Stay tuned.

Blue Skies and Clean Air

April 17, 2016

This past Thursday, I was fortunate enough to visit a Chinese school and spend some time with middle and high schoolers.  It’s been a few years since I was last in front of Chinese students when I was teaching at Linyi Normal University, so I was excited to get back into an academic setting and see what was going on with the next generation in China.  It was a quick trip to Jinan where I was tasked with presenting our U.S. schools to these students and their parents for study abroad opportunities.  I was then given maybe an hour or so to “interview” 20 or so students, which only allowed for come cursory conversations about why they wanted to study in the U.S. and their favorite and least favorite subjects.

What was interesting about the whole exercise was the motivation of these students to sit down with a random American guy and answer my questions all with the intent of wanting to study in the U.S. next year.  I needed a system that guaranteed some consistency, so I asked all of the students why they wanted to study in the U.S. and quite a few replied that they were drawn to the “blue skies” and “clean air” of the U.S.   Others extolled the quality of the teachers and freedom to do what they want in school, such as extracurricular activities.  Yet others told me that they saw a year in the U.S. as a way to help guarantee the ability to study there for college.

While it’s hard to make sweeping generalizations about what’s going on across a certain generation in a country as large as China, the numbers behind my day in Jinan support the proposition that more and more Chinese parents see educational opportunities outside of China as more advantageous for their children than staying within the Chinese system.  In 2014, over 450,000 Chinese students studied abroad, up from about 115,000 a decade ago, and that number is sure to continue to grow.  Spending the day in what is really a tier three city, but only tier two because it’s the capital of Shandong province, these kids took time out of their busy day to wait in line to meet with me and other school representatives with the hopes of spending a year or more overseas.

The Chinese government is also aware of this growth in students seeking to opt out of the Chinese educational system and is worried about Western values infecting their students. There has been a subtle shift in certain major cities like Beijing and Shanghai to discourage international education options.  In Beijing, the government has allegedly stopped approving international programs and in Shanghai, the government mandated that some programs to slash their fees closer to the level of ordinary schools, which would make it harder for them to operate.  Motivating the government is the desire to ensure that students remain patriotic, but it’s also a short-sighted attempt that goes against the wishes of large swaths of China’s upwardly mobile middle and middle-upper class that sees these programs as the extra push to get their children into a university overseas and out from underneath the constricted Chinese educational system.  Prevent enough of these parents from being able to send their children to such programs and you have another segment of the population with a grievance against the government, which is not something that they want to happen.  It’s a bit of a catch-22.  Keep students from these international programs to presumably preserve the Party and system, but run the risk that their parents raise bloody hell from being denied the opportunity to send their kids to such programs.  It’s not clear that Beijing can win and as I’ve learned about China, if you block one path, people will simply find another way to achieve the same ends.  And in the meantime, as long as there are enough kids who yearn for blue skies and more extracurricular activities, Beijing is going to have trouble preventing it’s kids finding a way to find such things.

Surprise, Surprise

January 30, 2016

China is getting on my nerves.  The internet the past two weeks has been particularly finicky and not having an IT background, I just imagine someone sitting in a room sifting through all of my chosen websites to browse to make sure I am not looking at anything all that bad before deciding to release them to my screen.  I am sure it doesn’t work like that, but whatever it is, it has become a definite problem and a real sap on my productivity, not to mention pissing off the powers that be at work because emails seem to get lost in transmission.  I know that we’ve been upgrading our network at work to install a building-wide VPN, but even at home or on my phone, I find that the connections cut in and out and my VPN becomes less and less stable the longer I am here.  Putting these frustrations into sharp relief is the fact that I was in Vietnam and Hong Kong the past week where the internet in both places was blazing fast.  I mean I could download an entire episode of the Real Housewives of Atlanta at the Hanoi airport while waiting in line for 10 minutes to board my flight.  Here in Shenzhen I spend whole evenings trying to get through one episode of many an hour-long show.  I read surveys of corporates operating in China and the challenging IT / internet environment with the Great Firewall is one of the top frustrations that comes along with having operations here.  I see it first hand at work with all the difficulties of linking up to our servers in the States and maintaining an efficient network for everyone to use.  When you think about these problems coupled with the fact that there are whole swaths of the internet off limits to Chinese residents without a VPN, one has to begin to wonder what effect all of this has on the economy. Interestingly, the leadership here is placing great hope on the internet and innovation associated with it to lead the next surge in growth, but can it do so when the national network is running rampant with censors blocking anything and everything deemed sensitive or a threat to national security.  It’s the latter category that’s most worrisome because nearly anything can fall within the ambit of a threat to national security.

It’s this continued crackdown on any dissenting voice that only adds to the worry about what happens next in China.  Seemingly every other day there is another story out of this country about arrests of people promoting human rights or a high-level government official being taken down for corruption.  On the human rights front, it’s easier to understand.  Beijing does not want anyone giving voice to people who may feel disenfranchised or wronged because of government policies.  The anti-corruption campaign seems to have no real rhyme or reason when it comes to its targets as it’s been evenly spread across the country.  Though interestingly, through this handy interactive graphic, you can see that Guangdong province has fared the worst of all the jurisdictions in the country, meaning that it’s had more take-downs than anywhere else.  Without oversimplifying too much, Guangdong may stand out more than other places because as home to both Guangzhou and Shenzhen, two of the country’s largest and most economically open cities, as well as it’s distance from Beijing and proximity to Hong Kong, the province has a history of doing its own thing and identifying more closely with its southern neighbor rather than Beijing due to its shared dialect of Cantonese. Historically, China has always been a hard country to govern with the hinterlands (including Guangdong) demonstrating a tendency to disregard missives from the central government.  Viewed with these ideas in mind, Xi’s anti-corruption campaign could be seen as an attempt to prevent history from repeating itself again by taking out those perceived troublemakers.  But the anti-corruption campaign has had the perverse effect of hampering reforms by leaving public officials both scared to implement new ideas for fear of falling into the crosshairs of the anti-corruption campaign and worse for the long term, removing people who could have provided a constructive counter-opinion to those pushing current policies.  All in all, it’s still too early to tell how much of this anti-corruption campaign is PR and a way to take out dissent within the ranks or a real attempt to clean up the Chinese government at all levels.  However, I would still put my money on the former and venture to say that it’s more of an attempt to consolidate power around Xi and his small circle of confidantes rather than a wholesale clean-up of the Chinese government where no one is above the law.  In the end, it’s probably just going to be a smaller group of people who remain above the law – those who tow Xi’s line and support his policies.

Increasingly, I worry for the future of this country.  When I was younger, I was an idealist and thought China was going to show the world how to develop in a different and better model than what had been done in the U.S. or Europe.  Now I fear that the country is heading in a direction that is unsustainable.  It’s not just about the economy, but also about simultaneously creating a real space for a population that is growing ever wealthier to be able to vent and express their opinions.  At this point in time, the government seems to be unwilling to create that space, or if it does, it’s done so in the same way that it tries to micro-manage the economy, from the top down.  One of these days, something is going to happen from the bottom-up and it’s not going to be as a result of the government’s doing and it’s that moment I am truly fearful of because it’s going to catch a number of people by surprise and one thing this government does not like is surprises.

Greetings from Chengdu!  Being the good Jew I am, I decided to head to Chengdu Christmas morning for a long weekend of eating spicy Sichuan food and seeing some pandas.

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Giant panda climbing the IFS Chengdu, yet another luxury shopping mall in China

Okay, not exactly that panda, though the city makes good use of its panda connection by plastering the creatures all over the city.  Upon landing in the airport, many of the information signs were framed by pandas and that theme has been a constant since that point.

It’s my first time here and a city I have wanted to visit for a very long time. The original motivation was my love of Sichuan food (川菜), but lately everything I have been reading about China mentions the relatively newfound prosperity of its inland cities, which would include Chengdu and Chongqing.  Having only been here for 24 hours, I attest that Chengdu definitely appears to be on the up-and-up.  The IFS above is home to Prada, Gucci, Louis Vuitton, Zegna, two Starbucks, Muji, Uniqlo, a bookstore where I could buy new English books, a huge Western supermarket that is part of a Hong Kong chain, the requisite ice skating rink, and even a bowling alley.  The inside is your typical white marble, soaring ceilings, and the cleanest floors I have ever seen, probably due to the ever-present crew mopping and sweeping as you’re moving around the mall.  However, IFS is just one of many luxury malls in this area of Chengdu, which also includes the retail-filled pedestrian streets of Chunxi Lu (春熙路) and Imperial Examination Alley (正科甲港), an Isetan department store, a number of other Western luxury brands, and numerous Chinese brands.

I guess it makes sense given that Chengdu has become one of the richest cities in China.  The Milken Institute released a study this fall of the best performing cities in China and chengdu came out number one, beating Shanghai, Shenzhen, and Beijing.  Putting aside studies and government statistics touting GDP growth and per capita incomes, just the feeling I get walking around the city is that it’s one of growth and possibility.  Now one may argue that most of China feels like this and many places do, even in spite of the recent slowdown of the economy, but having spent the past month and a half in Shenzhen, I can sense a different energy here. Shenzhen is right next to Hong Kong and was created to rival its neighbor to the south and serve as a laboratory for economic liberalization on the mainland, so its people are used to being favored and there is also relatively seamless mobility between Shenzhen and Hong Kong, obviating the need to replicate a lot of the shopping in HK north of the border.  I mean, one would think that Shenzhen would have had it’s own Kiehl’s store before Chengdu, but you can only find it at the Shenzhen airport in duty free.  Chengdu has one in the Isetan by the IFC.  Not that Kiehl’s is a barometer for economic development, but the fact that a company like that went to Chengdu after Shanghai and Beijing says something about the city and its place in China’s economic hierarchy.

Chengdu is an inland city and only part of a central government push within the last ten years or so to promote growth inland away from the coasts.  With that promotion, an economic tiger was released as the city promoted its lower labor costs to attract global manufacturers in the aerospace and electronics sectors, including Foxconn, which produces Apple’s iPhone.  Anyway, not to devolve into a boring economics lesson, but the takeaway is that Chengdu has a buzz that is not always as readily apparent in some of China’s larger, more established Tier One cities.

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View of central Chengdu from my hotel

Of course this still being China, I marvel at how well the central government has been able to wall off the country from the rest of the world.  I’ve written a lot about the mystery behind Chinese people becoming more global as they travel the world, but seemingly bringing nothing back from the travels except luxury goods and souvenirs. Forgetting that when you fly domestically in China, you’re not allowed to turn on any electronics, I was left watching some bizarre Korean movie on my flight from Shenzhen to Chengdu.  When I arrived, I thought I would either be given or be able to buy a Financial Times or Economist at the Ritz Carlton or find another hotel with a gift shop at which I could buy one of these publications to read on the way back to Shenzhen, but to no avail.  Even the Page One, where I eventually found English books, had a magazine section with only Monocle and In Style in English, neither of which I was particularly interested in buying.  Putting the availability of Western media aside, I am sitting here in a Starbucks (where else?) in another new luxury mall called The ONE and it’s one of Starbuck’s new Reserve locations with pour-overs and siphoned coffee.  The place is packed with young and old, alike, and many on iPhones or Macs enjoying coffee, pastries, and quiche.  At this particular moment I feel like I could be anywhere.

Yet, with all of that said, there is something about Chengdu that reminds me of the China I knew 15 years ago.  Perhaps it’s the layout of the city with back alleys still filled with little stores and food stalls or the mix of old and new buildings that co-exist side-by-side, though I have the feeling that won’t be the case five years from now since so many look like they’re being readied to be torn down for new construction.  I guess Chengdu is a city that while growing rapidly, still retains elements of what it was.  It has long had the reputation of being one of China’s most laid-back cities and for a city of nearly 8 million people, still moves at a remarkably more languid pace than Shenzhen.  Maybe it’s part of a next wave of growth where people won’t be in such a hurry as they modernize and seek to retain some of what makes a particular place unique?  Or perhaps it’s as simple as the fact that unlike Shenzhen or even some of the other Tier One cities like Shanghai or Guangzhou, Chengdu is a city filled with people who are actually from here or the surrounding areas, which would go a long way to preserving those qualities that make the city special.

As I was leaving my hotel this morning, I was chatting with one of the members of the concierge staff, Roland, asking him for restaurant recommendations while I was here.  He told me that he had just transferred from Beijing two months ago because his wife was pregnant and they wanted to escape the pollution,, traffic, and mayhem of Beijing.  I asked him how he liked Chengdu so far and he remarked that it was more laid-back than Beijing.  He attributed this to the fact that home prices were so much lower than Beijing, so people didn’t have to work so hard, thus they had more time to relax and enjoy life.  Probably the most interesting reason of all for why Chengdu feels so different, yet one that not only makes the most sense, but is very telling as to what is potentially being lost as the country rushes to modernize. As an American, I know all about a country that does not seem to have enough time for leisure as our workweeks get longer and longer and people fear taking holiday because they may fall behind at work.  Let’s just hope that Chengdu doesn’t go the way of the rest of the country and lose what makes it special.

Power to the People

July 3, 2012

Just a quick word before heading to bed.  After a wandering around Central in a suit for meetings with law firms and quick jaunt to Jordan across the harbour to see my tailor, Louis, I met up with friends to go to a 川菜 (Sichuan) private kitchen in Wanchai and then a Taiwanese dessert place in Causeway Bay for some shaved ice.  The good food aside, my first meeting this morning was in the building (and quite possibly the same floor) where Salomon Smith Barney’s offices used to be when I was an investment banking analyst.  Walking down the escalator and across the overpasses this morning towards the harbour was kind of trippy because I used to do the same walk over ten years ago.  The feeling wasn’t quite deja vu because I was fully present in the moment and could easily link it back to the past event, but it was one of those moments when you realize in some ways how far you’ve come and in others you are still very much the same person you were all that time ago. with just a touch more awareness.

As you all know, there were protests this weekend in Hong Kong against many things including the swearing in of the new Chief Executive, the environment, housing prices, human rights on the mainland, education, jobs, and practically any other social, political, or economic cause that you can think of.  When I asked Hong Kongers I know how they feel about things here, they express a lack of trust in C.Y. Leung, the new Chief Executive, but there is also a resignation that nothing is going to change anytime soon.  I don’t know if that resignation comes from the wisdom (or jadedness) of older age or from a very practical view that as long as China calls the shots from Beijing, change in this city is not going to come anytime soon.

I read an interesting op-ed piece in Monday’s South China Morning Post by Lau Nai-keung, who is a member of the Basic Law Committee of the NPC Standing Committee.  What this means is that Lau is on the committee that makes sure that the Basic Law is being follows. The Basic Law Hong Kong’s mini-constitution that enshrines its freedoms and way of life until 2047.  One could argue that Lau is a Beijing sympathiser and his op-ed piece is not the most clearly written, but it tries to lay out an argument that pro-democracy forces in Hong Kong are looking to use people power to both weaken the government’s hand and force Beijing to allow universal suffrage for the Chief Executive in 2017.  The piece also seems to argue that the pro-democracy forces are just waiting for China to collapse so that Hong Kong can go its own way as a truly autonomous city-state more akin to Singapore with real elections.  While it’s an interesting notion to think about Hong Kong as an independent city-state, I am not quite sure what Lau is arguing for except that if the pro-democracy forces keep pushing people power, then the chances that a national security law will be implemented as required under Article 23 of the Basic Law will be nil.  It sounds to me like Lau wants this law passed as one who has been ordained to uphold the Basic Law, warts and all.  It also sounds like he remembers quite well what happened when the Hong Kong government tried to pass a national security law in 2002 and sparked the largest protests to date on Handover Day in 2003 with upwards of 350,000 marching in protest of the law.  The man is afraid of what the people might demand and what Beijing may decide when pushed to the brink, but yet he does not offer any real solution to the problem except to almost blame pro-democracy forces of “peacefully subverting the system” as provided for in the Basic Law. 

I need to give this some more thought, but I have been thinking about it since it’s so timely and sometimes half a thought is better than none.

I’m sitting here in a restaurant/cafe/space called Oolaa on the border of Soho and Sheung Wan.  It’s the kind of place that did not exist in Hong Kong ten years ago or even five years ago.  They have good coffee, a brunch menu reminiscent of New York bunch, and free wifi.  Today is a Special Administrative Region holiday celebrating the 15th anniversary of the handover of Hong Kong from the U.K. to China.  Hu Jintao, the Chinese president was in town to swear in the new chief executive, Leung Chun-ying, who is replaced every five years.  Keeping in line with the theme of succession issues on the mainland that have dogged this year’s transition, the swearing in and concurrent anniversary in Hong Kong were anything but smooth.  There were protests in the streets, hecklers at the swearing in ceremony, and a general dissatisfaction with Beijing.  I’ve often remarked over the years that the city felt different since the handover in 1997 with more and more Chinese influences creeping in, but being here this time things feel yet again different.  It’s as if a pendulum is swinging in another direction, a direction Beijing is not happy with.  I was first in Hong Kong in the summer of 1998, a year after the British handed the city back to the Chinese.  Right up to the handover there was fear for Hong Kong’s freedoms and whether Beijing would come down with a heavy hand on the relative laissez-faire attitude that prevails in this city.  People made plans to flee if that happened by getting Canadian, Australian, and British passports and moving assets offshore.  After the handover and when Hong Kongers realized that the sky was not falling, aided by the massive inflow of money from the mainland, people began to relax about being under China’s control.  However, in recent years as the gap between haves and have-nots has widened and China plays fast and loose with its promise to let Hong Kongers elect their own chief executive, people have begun to sour again on Beijing’s rule.  The protests and botched chief executive selection process this year have only exacerbated these feelings.  I’m not sure what’s going to happen, but there has been a steady awakening of Hong Kongers political consciousness over the years and it’s only going to increase with time.  Will Hong Kong demand independence and try to go the Singapore route?  Doubtful, but the city will continue to be a thorn in Beijing’s side.  Complicating matters is the fact that Beijing uses the One Country, Two Systems model in effect here as possible enticement for Taiwan to return to the motherland’s fold.  Thus, Beijing is in a bind because to show that it is serious about maintaining Hong Kong’s autonomy until at least 2047, it has to carefully balance this commitment with the desires of the Hong Kong people, which may make for some interesting compromises in the future.

On a different note, last night I had dinner with an old colleague and friend from my investment banking days.  He and his wife moved here from Europe and we were talking about the increasing number of Europeans that I have noticed in my travels throughout the region, whether it’s here, Beijing, or Shanghai.  He said that the most pronounced increase has been in the number of French people abroad and mentioned that there’s something like 100 new French people arriving in Hong Kong each month.  The number sounds small, but that’s over 1000 people a year.  It’s such a phenomenon that even the New York Times picked up on it.  I knew this was a trend, but to have some confirm it based on his own experience was extremely interesting.

For now, I am just glad to be here and enjoying the sunshine, but not the humidity.  I guess it will prime for my eventual return to New York.

Here are some pictures from Shek O that I took yesterday just to remind everyone that Hong Kong is more than skyscrapers and malls.

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Houses of Cards

June 27, 2012

A short while ago, an email came in with a link to an article that is an interview with Chen Guangcheng on the New York Review of Books’ blog.  Chen is the blind dissident who left China recently to study at NYU Law School in New York and is actually from Linyi.  To be more accurate he is from Dongshigu, one of the villages that is overseen by the Linyi city government.  When I write about all of these new high-rise towers that keep sprouting up further and further from the center of the city, the land for the towers were formerly villages annexed and cleared by the city government to continue the city’s growth.  Before Linyi grew into the city that it is today, it was really a collection of small villages with the town of Linyi at the center.  To fuel economic growth and boost the profile of local leaders, villages began being annexed and the high rises you see in my pictures are the result of the city’s growth.

There were some things that really stood out in the interview because of the fact that I am sitting here writing from a hotel that was probably built on part of a village that no longer exists.  The massive Linyi University campus was probably also one or more farming villages at some point in time, but are not part of the city proper.  The interviewer asks Chen if he thinks urbanization is beneficial because then people can move off the land to get jobs in the city and earn more money.  This was his response:

No, I don’t think it’s beneficial. Right now it’s a blind urbanization. Cities grow up naturally over time. Now they’re trying to do it all at once. The main thing about urbanization now is to make the economic statistics look good—to build and pump up economic activity.

Chen basically backs up a lot of what I have been thinking and writing about when I look at Linyi’s development, especially versus cities like Shanghai or Beijing that have a more solid economic foundation because they are home to headquarters of large companies, the creative classes, or are seats of government power.  He continues on saying that many times when these villages develop into towns and cities, the people who resorted to more traditional ways of making a living are often left out in the cold as the real estate developers, banks, and government officials profit:

I think for those who go to the city and work there’s a benefit. But the current way of villages being turned into towns—I don’t think there’s an advantage to that. People in the village often rely on ordinary kinds of labor to earn a living, like working in the fields, or raising geese or fish and things like that. So now what happens? They turn a village into one high-rise apartment building and that’s all that’s left of the village. Then the land is used for real estate projects controlled by the officials. Where are the people supposed to work? How is that supposed to function?

I often wonder what people do in a city like Linyi.  Aside from the typical service jobs that exist in any city – salespeople, waiters and waitresses, tellers, barbers, etc. – there are only so many people who work in offices who would earn enough money to be able to afford the thousands of new apartments being built.  Others I have spoken to here say that businessmen who travel to Linyi for work will purchase an apartment to stay in rather than stay in a hotel and those people with enough money will buy two or three apartments as investments.  Fine.  Even with those people purchasing apartments, the fact remains that such housing remains out of reach for many who used to live in a village and are now having urbanization shoved down their throats.  I think of the manager in the Binhe Hotel, where I stayed last time I was in Linyi and his tale of how he works multiple jobs and still did not have enough money to buy an apartment.  There must be many more like him than the people who can afford two or three apartments or the businessmen who fly in from Shanghai or Beijing and would rather stay in an apartment than hotel.  I read Chen’s words as a warning that this haphazard urbanization without the necessary jobs to support it could be a disaster as people become increasing disgruntled about being shut out of life in the place where they are supposed to be living.  

The corollary to this point is the number of shopping malls being built.  If people cannot afford apartments, how are they going to shop in all of these luxury malls that are springing up all over the city.  Just coming off a weekend in Shanghai, my mind is boggled by the amount of conspicuous consumption in that city, but at least the jobs are there to support that consumption to some extent.  I am not saying that there is not money in Linyi, just not the type of money to sustain the level of future development envisioned for this city.  I even wonder if Shanghai can support all the new malls that are going to come into existence in the coming years.  As my friend Paul put it, part of the gamble as a retailer is picking the mall that is going to be a success.  With more and more malls that increasingly look alike, we begin talking about high-stakes Vegas odds because the development is not being carried out with any thought to the local population and what the people may want.  It’s still very much a “build it and hopefully they will come” mentality.  

The building of malls divorced from what makes business or economic sense is a problem in the Chinese economy at large and something I’ve thought about since college.  Many economic decisions made at the top are divorced from what may be good for the macro-economy.  Rather these decisions are made because of political forces that trump the economic, thus there is a heightened likelihood of a degree of failure.  At the most basic level, the need to maintain a certain level of economic growth to ensure that the population remains happy, the implicit social contract that drives China’s economy, is a policy for political survival that does not always jive with economic realities.  How many new airports, coal mines, highways, and train stations does this country need?  The Linyi airport is lovely, but barely has any flights to justify what I am sure was a hefty price tag.  However, the airport is a fixed asset investment and can be counted in the GDP numbers reported by local officials, which in turn get reported up the chain to Beijing and make the economy look like it is humming along.  We were actually joking at dinner last night that the speed and quality with which these projects are constructed ensures that they will have to be rebuilt in a few years so then the government can just count the project again.  That statement was made slightly tongue-in-cheek, but it’s kind of true.  It may take ten years or more for a new airport to be built in the States, but at least when that airport is up and running, it is built to last 50-75 years or longer.  In China, so many new buildings begin to look like they should be condemned only a few years after going up.  I think of the campus of the university here.  It was only a built a few years ago and already the fixtures outside the buildings are rusting, the doors inside are warped, and there are cracks in the walls all over the place.  I can only imagine what a lot of these new apartment towers look like, especially those that are half empty.

Economic policy divorced from economic reality is not sustainable.  It’s easy when you have money to pump into capital improvement projects, but it’s much harder when you need to affect rational human beings.  It’s why the authorities in Beijing have been more successful at building high-speed trains (success in building them, but not necessarily in operating them safely) than getting consumers to open their pocketbooks and re-orient the economy towards more domestic consumption and away from export-led growth.  Having the government build an airport or train line that is eventually going to be run by the government does not require rational policies because all the players’ interests are aligned by the desire to make money, which travels in a vicious circle and rarely trickles down to the average person.  However, getting people to change their shopping behavior requires rational thought because for all of the government’s attempts to control the people, some things are so intrinsic that they cannot be controlled by a higher power.  A person worried about having enough money for health care, retirement, education of their children, and to put a roof over their head and food on the table is not going to automatically start buying more discretionary items just because the government tells them to do so.  For that to happen, rational policies are necessary like state-subsidized health care, better education at a lower cost, safeguards for retirement, and the like.  While the government talks about such social safety nets and academics write papers urging the government to begin using some of its largess to build such programs, they are still not being being created.  Why?  Because such programs will not bear dividends until much later in time and the government thrives on short-term gain in the form of easily obtainable economic growth to justify its existence.

Chen is spot on when he points out that the development path China is currently on is not sustainable because for all the wealth sloshing around in Beijing, Shanghai, Guangzhou, and other large cities, there are huge swathes of the population unable to partake in this life and the government is not taking the necessary steps to bring them into the fold because they are blinded by their own desire to protect their positions of power.

I’m back in Linyi after a three day weekend in Shanghai and determined to finish what I started over five hours ago over a coffee at a Wagas in Shanghai and then tried to finish in the airport, but to no avail when my flight actually left ten minutes early.

When I exited the airport in Linyi, there was a row of taxis just sitting there with the engines off and the drivers gathered in a circle talking.  Unlike taxis at airports in the States, these guys were just waiting to screw around with me.  I went to the first taxi in the queue and he offered to take me to my hotel for 80 renminbi.  I knew the trip to the airport last Thursday was only 45 renminbi, so there was no way I was going to pay nearly double for the same trip.  I went down the line and asked if they would use the meter and they said they would, but then would quote me an exorbitant price.  Frustration setting in, I found a cabbie who was honest and willing to take me to my hotel with a meter running.  The cost to get back?  30 renminbi.

I am beginning my final week of teaching tomorrow and it’s not even a full week because Thursday is going to be wrap-up/review and Friday I am giving my final.  Then it’s off to Hong Kong Saturday.  But that’s next weekend, so I am going to focus on sucking up as much of Linyi as possible in the remaining days.

Shanghai was great for a quick weekend getaway.  My time in the city felt so disconnected from the previous two weeks in Linyi and even different than the few days I spent in Beijing at the start of my trip.  Having already seen two of China’s “showcase” cities, I am going to end my time away in Hong Kong, arguably the third such “showcase” city.  What’s interesting is that two of the three have strong historical foreign influences (Shanghai and Hong Kong) and today remain meccas for expats looking to set up shop in Asia, so whenever I am in places like Shanghai or Hong Kong, I am always wondering how Chinese these cities really are.  Having not been back in Hong Kong for nearly two years, I am going to reserve judgment on that locale, but will most certainly weigh in once I am there.

Before I launch into my Shanghai thoughts, I must say I am amazed at how prevalent wifi is in China.  Two years ago Starbucks, hotels, and a few trendy cafes would have offered it.  But now it’s everywhere.  Hotels offer for free, most restaurants and cafes have networks set up, and even in the lobby of my hotel in Linyi, I can get free wifi.  One thing that’s interesting, but not surprising is the arbitrariness of having to register to use the network.  The government has made a big deal about stepping up its efforts to police the internet and monitor its users.  The previous incarnation of this overbearing policy was the crackdown on internet bars, which now seem like a quaint part of the not-so-distant past with the advent of smartphones and the ability to get online wherever and whenever you want.  In public places like airports, Starbucks, and hotels you either need to register with your mobile phone number (airports and Starbucks) or click through policies in a browser window and agree to abide by certain policies (hotels).  However, many cafes and restaurants dispense with identifying who is using their network, which is in violation of the law and makes it impossible to trace back users of those networks.  Just a little musing on the whimsical nature of law enforcement in China, much akin to how mobile phone providers are supposed to take a copy of your ID when buying a sim card, but yet someone like me can wind up with four sim cards and not once having had to show my idea to procure them.

With that said, I have a lot of thoughts running through my head about Shanghai, China, the future of this country, and being a rock star expat and not all of them will make down on this page because I am still processing. I made it clear the other day that I am more of a half-assed expat flying in and out of Chnia, but walking through Xintiandi earlier this afternoon with Amy, we stumbled upon a bunch of white guys screaming on stage as they played their instruments.
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These guys were screaming so loudly that it was impossible to tell if they were singing in Chinese or  English. They also were not very good, yet drew quite a large crowd. If these guys were playing in Sydney, London, or New York, they would have been a nuisance. But in Shanghai expats and locals were bopping along with little kids dancing and everyone enjoying the ruckus.  Shanghai has that feeling of a city where anything is possible. People leaving behind their lives back home to start over. I noticed this in Beijing, too, but Shanghai is a far more comfortable city to live in than even Beijing.  Beijing is more comfortable with being Chinese and could be seen as more provincial when compared to Shanghai, which is open to the world and can come across as seeking to be anything but Chinese. These white guys rocking out in Xintandi, the expats we saw out at the bars and clubs last night, the 外国人 (white guy in Chinese – waiguo ren) with the local girlfriend, or the European or American with a business idea, there are so many people who have converged on this city to try and make their dreams come true.  Such a convergence gives the city a surreal feel because the energy is really unlike anywhere else, even New York with its constant influx of people trying to make it there.

Shanghai feels like it is still on the expressway of development and in the four years since I was last here, new buildings and fads have popped up creating new wants and desires.  I’m sure in four more years, there will be more new buildings and fads, but is this change deeper than just new buildings?  I’m not sure.  The changes I saw this visit are for the most part on the surface, including this massive construction site just south of Nanjing Xi Lu being developed by the same people who did Sanlitun in Beijing.  Seeing a site like this one makes me wonder not only who is going to make use of this planned mix-use development, but what it all means for a city and country that seems to be preoccupied with the next best, brightest, and biggest thing.
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But the deeper question that hangs over all of this development is whether all of this development will be accompanied by something longer-lasting such as a change in mindset.
Last night’s dinner was a fairly international crowd. Five out of six were American, with some of Korean and Chinese/Taiwanese descent, as well as a native Korean and myself. All but two were or are lawyers and four currently live in Shanghai with Amy and myself coming from Tokyo and New York, respectively. With the scene set, I can now discuss one part of the conversation that stuck with me.  I was talking about my students and how they were struggling with the objective theory of contracts and the reasonable person standard that is so common in American law because it leaves room for case by case analysis.  Such analysis creates a gray area, as opposed to the black and white answers I find my students are more comfortable with.  One of my dining companions was talking about providing legal advice to his Chinese clients and how even when he raises the the possibility that something may not go as planned when drafting an agreement, his clients merely respond that it will get done the way they want it to get done because that is how it is going to get done.  There is no room for the possibility of contingencies and caveats, which require thinking hypothetically and creatively about a problem.  The other people at the table generally agreed with the assessment that in China it can be hard to get people to think about this gray area when posed with questions or problems.  It’s like when I ask my students a question and they start to give the wrong answer and I encourage them to explain the logic behind their answer, even if it’s wrong.  I can see that they do not want to continue down this path if they think the answer is wrong and quickly back down rather than try to make a case for their answer.  When I have given short answer questions on tests, my students ask what would be be the right answer and I tell them that there is no right answer.  I swear that you can see the wheels turning in their head as they try to comprehend this reply.  I then try to explain that their grade will depend on their reasoning, not if the answer is right or wrong.  It’s a mindf&$k for them and I know it does not register when I explain.  I am not saying that no one in China thinks this way because that would be an absolute statement and there is no such thing as an absolute when it comes to matters like this one.  However, I will say that such thinking is endemic to Chinese society because it is the way the education system is designed and perpetuated in the workplace, village, and other social settings.  Thinking outside of the box would be anathema to the government’s attempt to control the flow of information and the thoughts formed from such information. I think back to all of my encounters with students and the difficulty they tend to have with critical thinking. It’s what I also hear from U.S. law firms with whom I speak when they are recruiting in Asia – the holy grail when hiring Chinese lawyers is someone raised in China who received their law degree in the States, or even better their undergrad and law degrees in the States. The rationale is that such people are more able to seamlessly go back and forth between Chinese and western clients because they can easily switch their mindset.
Shanghai gives off the impression that it wants to be anything but Chinese with an outlook towards the rest of the world instead of inward towards the rest of China, but is this orientation enough to change what lies beneath – a way of thinking that does not readily tackle problems flexibly and critically?  There is certainly going to be some more unpacking of my action-packed weekend in Shanghai, but now I must get prepare for the week ahead and catch up on my sleep after staying out too late the previous night and dabbling in the city’s rock star expat scene.

Aspirational

June 21, 2012

Week two has come to a close.  It’s a national holiday tomorrow to celebrate the Dragon Boat Festival (端午节).  The festival only became a national holiday in on the mainland in 2008, having not been celebrated since the 1940s.  Since it’s a three-day weekend, I am off to Shanghai to meet up with a friend and check out the changes that the city has undergone since I was last there in October 2008.  It should definitely be insightful to check out China’s largest and most outward looking city.

I’ve been thinking a lot about Western companies trying to crack the Chinese market.  As growth slows down in many companies’ home markets, China and it’s potentially massive market looks more and more attractive.  Some Western brands have been here for decades and for some companies, China is an important driver of revenue.  However, for every company that is profitable in China, there are many more that have not figured out the market.  The New York Times may have been reading my mind when the published an article yesterday about how more companies are moving executives to China.  It used to be that companies had a branch office or subsidiary in the region, but the top executives remained in the company’s home country.  The article describes how that is changing as companies move some of their top-level executives to the region with the belief that being on the ground may make it easier to crack the China market.

Having sent a few days in Beijing before arriving here in Linyi, I was able to see first-hand how foreign companies have tried to crack the China market.  Retailers that would not be out of place on any London High Street or in Soho abound in Beijing.  The stores are not overrun with only expats, but Chinese consumers who have embraced these brands.  There are also many Chinese brands that one can find in cities all around China, brands that one has never encountered in the U.S. such as Meters//bonwe (casual clothing), Li-Ning (athletic wear), Septwolves (clothing), SPR Coffee (like Starbucks), and Dicos (Chinese fast-food akin to McDonalds and KFC).  Will these brands move beyond their national borders to open flagships on Fifth Avenue in New York and Harajuku in Tokyo or will they remain exclusively Chinese brands.  Will foreign brands such as Uniqlo, GAP, H&M, Zara and Starbucks overrun the country because they are seen as more aspirational than local brands?  It’s this idea of aspirational buying that I find most interesting.

Take Apple.  The first Apple Store opened in Beijing in Sanlitun to coincide with the 2008 Olympics.  Walking by the Apple Store when I was there a few weeks ago, the store looked like an other Apple Store – thronging with people checking out and playing with the company’s latest offerings, taking advantage of the store’s free WiFi, and just hanging out.  Once again, it was mostly locals in the store even though it is located in one of the city’s expat havens.  

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Apple Store in Beijing, complete with live music

Apple fascinates me because it is a company that does very little advertising and relies almost exclusively on word of mouth and it’s iconic stores to generate traffic.  There is no Apple Store in Linyi, but the distinctive Apple logo is everywhere.  Every China Unicom and China Telecom shop has it prominently displayed in their windows indicating that they sell the iPhone.  There are also numerous licensed sellers of Apply goods that were not here two weeks ago.  One of the retailers is located in a mall by People’s Square.  I pass by the store whenever I head to the supermarket down there and it’s amazing to watch people playing with the iPhones, iPads, iPods, and Macs as if they were in a real Apple Store.  Apple has managed to penetrate a fifth-tier city like Linyi without even opening a store.  I can only imagine what it would be like if one day Apple does open a store here.  I must say that Apple goods are priced on par with what they cost in the States and it’s not like their products are cheap in the States, so you can imagine that for a lot of Chinese people, their items are still considered aspirational.  

So I go back to this idea of an aspirational good.  What makes an aspirational good and how does a foreign company go about positioning their goods in such a way?  Starbucks, which has huge growth plans for China and is a brand that I would consider aspirational since their drinks are so darn expensive here, even more so than in the States, is trying to prime the Chinese market beyond the first and second-tier cities where it was stores.  How?  Their VIA instant coffee and pre-packaged Frappuccino drinks are going to be their calling card in markets where they do not have a physical presence.  Chinese people do drink instant coffee and like sweet coffee flavored beverages, and it costs less to take up shelf space in a supermarket than it does to open a full-fledged Starbucks.  So Starbucks is planning on introducing these products to smaller cities and whet their appetite for a free-standing Starbucks sometime in the future.  It’s a smart idea and saves Starbucks a lot of logistical headaches in the process.  

Perhaps other Western brands can go the pop-up route much as they have done in new markets elsewhere in the world?  I must get ready for Shanghai, but I think another market that has proven hard to crack for foreign companies is in the services sector, which is something I will blog more about in the future.

For now I leave you with a picture I snapped on my walk home from the gym.

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As I have mentioned before, Linyi has some nice river walks akin to the Hudson River Park in New York.  However, right off one of the paths was this random toilet that someone had just left there.  It would be like finding a toilet bowl on the side of the path while going for a run on the West Side Highway in New York.  Imagine.  Till later . . .