Posts Tagged ‘Hong Kong’

Beijing to give Hong Kong a Makeover — “Not Brainwashing Exactly” — Declares power to ‘supervise’ Hong Kong civil servants’ allegiance — Time also to “correct” national views in Hong Kong teens

May 28, 2017

The central government seeks additional ways to scrutinise the city’s affairs, including instructing the chief executive and assessing legislation

By Stuart Lau
South China Morning Post

Saturday, May 27, 2017, 11:28pm

Beijing has made the unprecedented move to declare its power to “supervise” Hong Kong officials based on their allegiance to the country’s sovereignty, prompting pan-democrats and civil servants to question such a standard.

Zhang Dejiang, one of the seven members of the Politburo Standing Committee, said at the Great Hall of the People on Saturday that Beijing would invoke a number of “implicit powers” – which have so far not been paid close attention to during the first 20 years of the city’s handover.

“It should be stressed that [Hong Kong’s] governing teams… must be made up of patriots who respect the Chinese people, sincerely support [China’s] resumption of sovereignty and pose no threat to [Hong Kong’s] prosperity and stability,” he said, referencing late leader Deng Xiaoping.

 Chief Executive, Leung Chun-ying at the forum on the 20th Anniversary of the Implementation of the Basic Law of Hong Kong. Photo: ISD

“The central government is responsible for supervising whether [Hong Kong’s] public officers uphold the Basic Law, and whether they pledge allegiance to the country and [Hong Kong].”

His 50-minute speech came just weeks ahead of the 20th anniversary of the city’s handover.

Chief Executive Leung Chun-ying declined to say whether Zhang’s new order compromised the political neutrality of the city’s civil servants.

“Hong Kong’s civil servants being politically neutral has been our practice,” said veteran China commentator Johnny Lau Yui-siu. “Now, Beijing demands them to be loyal to the regime.”

Leung Chau-ting, head of the Federation of Civil Service Unions, said he was concerned about Zhang’s suggestion that understanding of the Basic Law could carry weight when civil servants’ jobs are assessed.

“The focus should always be professionalism and the willingness to serve the public,” he said.

“It is not our daily work to explain the Basic Law to fellow Hongkongers.”

Zhang also called for a closer look at other powers that the central government could use to scrutinise the city’s affairs, including that of instructing the chief executive and assessing legislation reported by the Legislative Council.

The power to assess legislation has so far been considered a ceremonial power as the National People’s Congress has never objected to any reported laws.

Zhang also urged academics to devote time to study the Basic Law and instil the “correct” national views in Hong Kong teens.

Veteran democrat Martin Lee Chu-ming, who helped draft the Basic Law in the late 1980s, said Zhang’s remarks regarding the “supervisory” role over Hong Kong officials, were not in the Basic Law and they could even deter talent from important roles.

“It is a completely different picture to what was depicted by Deng Xiaoping… also the Sino–British Joint Declaration and Basic Law,” he said.

“Good lawyers would not dare to be judges then…You have to become a puppet [of Beijing] and probably face against the public of Hong Kong,” he said.

China financial wizard urges cautious approach on allowing the yuan to become freely traded — “Next financial crisis could be bigger than the previous one.”

May 26, 2017

The next global financial crisis ‘could be even bigger than previous ones’, he adds, that’s why China must be cautious with its currency

By Enoch Yiu
South China Morning Post

Friday, May 26, 2017, 4:36pm

Joseph Yam Chi-kwong, former head of the Hong Kong Monetary Authority (HKMA), says the next global financial crisis could be even bigger than previous ones – and that’s part of the reason why China should not let its currency to be freely traded, but only allow it to be tradable via monitoring.

“In my opinion, the renminbi should not be freely convertible without monitoring, but the currency should be allowed to be tradable under appropriate reporting and monitoring,” he said on Friday.

He added it would only be safe and appropriate to allow people to convert large amounts of other currencies into yuan, if they report and declare the exact purpose of the usage to the authority, which should also then strictly enforce the use of the money.

“As an example, if someone reports he is to convert 1 billion yuan (US$145 million) to invest in the stock market and three months later he has not invested the money, the authority should order him to take the money out of the country,” Yam said.

Yam, who ran Hong Kong’s central bank from its creation in 1994 to 2009, and who acted as an adviser to incoming Chief Executive Carrie Lam Cheng Yuet-ngor during her election campaign, has a close working relationship with both the mainland authorities and The People’s Bank of China.

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He is a strong supporter of China’s socialist-led market economy, which accepts more market opening up to the outside world under monitoring and controls.

For someone like me, who has always believed in market forces, it [the government’s intervention in August 1998, to defend against currency speculators] felt like being betrayed by a friend

He says that’s how China has been able to weather the recent global financial crises, and achieve better economic performance than many western countries over the past 20 years.

“Please don’t misunderstand me. I still believe in market forces and Hong Kong will never have any capital controls under the Basic Law,” he said.

“But if you look back at the past twenty years, the Hong Kong stock and currency markets were hit hard by the Asian financial crisis of 1997, and the Hong Kong government was forced to take market intervention in August 1998, to defend against speculators.

“For someone like me, who has always believed in market forces, it felt like being betrayed by a friend.”

The 2007/2008 financial crisis was, he added, rooted in speculative activities by Wall Street investment banks which introduced sub-prime and other complicated products to investors.

“That was a very bad, greedy culture which led investment banks to carry out their businesses with the sole purpose of benefitting themselves, not the public or their investors,” he added.

“For many freely traded currencies, 95 per cent of trades are done by speculators, with only 5 per cent done by those who need the currency for business purposes. This is not healthy.”

But Yam said the damaging speculative culture in the world’s biggest financial market has not changed, and the monetary easing policies in the US since 2008 have simply led to trillions of dollars flooding the markets.

“These problems, together with globalisation of economies, means the next financial crisis could be bigger than the previous one,” he said.

“Hong Kong needs to make sure its system is prepared for that, while China also needs to adopt a safe approach to open up its market and internationalise its currency.”

Common interest of Singapore and China greater than any difference of views: DPM Teo Chee Hean

May 24, 2017

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Singapore’s Deputy Prime Minister Teo Chee Hean (Center)

By Charissa Yong
The Straits Times

SINGAPORE – The common interest of Singapore and China in building a peaceful and growing region is much greater than any occasional differences of views between them, said Deputy Prime Minister Teo Chee Hean on Wednesday (May 24).

Both countries have a broad and longstanding relationship, share similar views on most issues and have worked well together to advance these common interests, said Mr Teo, who is also Coordinating Minister for National Security.

“But even among close neighbours and friends, there might be different perspectives on some issues, given that the countries are of different sizes, and have different histories, vulnerabilities and geographical locations,” he said.

He was speaking at a public forum titled “China in a Transitional Global Order”. It was organised by the National University of Singapore’s East Asian Institute to mark its 20th anniversary.

Singapore and China’s fundamental position is that they share a common interest in the peaceful growth and development of their countries and the region, and that remains the same, said Mr Teo.

“Singapore will continue to be a strong and principled supporter of China’s peaceful development and constructive engagement,” he added.

o also gave his reading of international relations and domestic politics in East Asia, and spoke on the economic, social and political aspects of China’s rise.


Mr Teo’s speech came amid perception from some quarters that Singapore-China ties are going through a rough patch following media reports speculating why Prime Minister Lee Hsien Loong had not attended the One Belt, One Road summit in Beijing last week.

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Singapore was represented by National Development Minister and Second Finance Minister Lawrence Wong.

In his speech, Mr Teo highlighted recent high-level exchanges between the two countries.

In February, he and Chinese vice-premier Zhang Gaoli co-chaired the 13th Joint Council for Bilateral Cooperation meeting in Beijing. Last week, Mr Teo and Mr Zhao Leji, a Politburo member and Central Committee Organisation Department Minister, both led the 6th Singapore-China Forum on Leadership in Singapore.

Said Mr Teo of the forum: “We had a wide ranging exchange of views of common interest between our two countries. Such dialogues reflect a high level of mutual trust between our countries, and our mutual desire to learn from the experiences of each other.”

He added that the forum is a unique dialogue which Singapore does not have with any other country.

Singapore is optimistic that China will develop a productive economy, as a prosperous and stable China benefits the region and the world, said Mr Teo.

China is also playing a more significant role internationally, with its two key initiatives to connect countries across regions: its One Belt One Road planned infrastructure network, and its Asian Infrastructure Investment Bank to fund infrastructure along trade routes.

Singapore supports both initiatives, which will encourage further economic integration and infrastructure development, said Mr Teo.

“I’m optimistic about China’s potential to continually reinvent itself and play a greater leadership role in the region and globally,” he added.


Mr Teo also reiterated Singapore’s position on Taiwan and Hong Kong.

“Cross-strait relations have become more complicated as the politics in Taiwan become more complex,” he noted.

“Singapore has always maintained our One China policy,” he said, adding that it is an old friend to both sides and will continue to support the peaceful and stable development of cross-strait relations.

Turning to Hong Kong, which recently elected a new chief executive, Mr Teo said that its stability and prosperity are best assured under the “one country, two systems” framework.

“We wish Hong Kong well and will continue to seek partnerships and exchanges with Hong Kong,” he added.

China’s Cybersecurity Law takes internet censorship to a new high.

May 23, 2017

China’s new Cybersecurity Law takes effect on June 1. Together with regulations issued over the past month by the Cyber Administration of China (CAC) — including on news reporting and commentary — the new legal landscape threatens to tighten what is already one of the world’s most restrictive online environments. What happens next will depend on a combination of Chinese government actions, citizen pushback, and international readiness.

Past experience suggests that the government’s enforcement of the regulations will be uneven and selective but a worst-case scenario would include three features.

First, social media accounts would be closed on a large scale across multiple platforms. This has already been taking place in a more piecemeal fashion. Since 2013, online opinion leaders with millions of microblog followers on Sina Weibo have had their accounts shuttered. In March 2014, dozens of public accounts on WeChat that shared information on current affairs were closed or suspended. More recently, some journalists and academics have reported having their personal WeChat accounts shuttered. Under the new rules, millions of social media accounts sharing information on even apolitical news topics could be subject to such censorship.

Enjoying this article? Click here to subscribe for full access. Just $5 a month.Second, there would be an increase in arrests of ordinary users, including based on private information obtained by Chinese security forces from internet companies. The foreign business community and internet freedom advocates have expressed concern regarding the Cybersecurity Law’s requirement that user data be stored on servers inside China, which would make users more vulnerable to having their private communications seized or used for prosecutions.

The Chinese authorities have made clear that they are willing to imprison ordinary citizens based on content shared or viewed via social media. A February 2017 Freedom House study on religious freedom found that Falun Gong practitioners had been jailed for posting messages about the spiritual group or human rights abuses to WeChat or QQ, and that young Uyghurs had been imprisoned for viewing online videos about Islam. Last month, Wang Jiangfeng of Shandong Province was sentenced to two years in prison for referring to “Steamed Bun Xi” — a banned nickname for President Xi Jinping — in a group message on WeChat.

Third, full enforcement would mean greater government control over private media companies and news portals. The CAC rules promulgated on May 2 significantly restrict the space for investment and editorial input by foreigners, requiring editors in chief, for example, to be Chinese passport holders. They also mention “special management shares.” According to former journalist Feng Kecheng, now a media studies doctoral candidate in the United States, private web companies that provide news may have to issue such special shares to the government and possibly grant it a seat on their boards.

These provisions reflect Chinese leaders’ attempts to bring the online news industry into closer alignment with the domestic print and broadcast sectors, in which all outlets are owned by the state or party. Yet some Chinese media observers remain cautiously optimistic, since it is doubtful that the CAC will close millions of WeChat, Weibo, and QQ accounts or imprison tens of thousands of people for sharing “unlicensed” news.

Meanwhile, online businesses and news websites, which must still compete for users, are likely to continue dragging their feet on compliance and might engage in outright defiance. In August 2015, following deadly chemical explosions in Tianjin, several news portals produced original reporting about the cause of the blasts, although they were technically barred from doing so even under previous regulations.

Netizens, technologists, and their counterparts outside China will continue to develop ways to disseminate uncensored information on important topics and protect user privacy. Last month, Radio Free Asia reported that as local governments in Hebei and Guangdong provinces stepped up monitoring of public WiFi hotspots, a free mobile application called WiFi Master Key — which encrypts user activity — was downloaded over 900 million times. Similarly, after Apple was pressured to remove the New York Times mobile app from its stores in China, downloads for a less easily blocked Android version continued unobstructed.

China’s internet is still a contested space. Indeed, regime insecurity about this contestation is precisely what is driving the latest effort to consolidate control. “Online, the government is fighting like a cornered beast,” says journalist Zhu Xinxin. “They can’t exercise total control over online public opinion.”

Xi is facing simultaneous political and economic pressures, raising the stakes of the struggle, but it is precisely during times of crisis that Chinese netizens have shown a greater tendency to seek out uncensored information. This occurred in 2012, amid a national scandal centered on Chongqing party boss Bo Xilai; in 2014, when Instagram was blocked at the height of Hong Kong’s Umbrella Revolution; and in 2015, following the Tianjin explosions.

All those with an interest in Chinese people’s access to information — whether they are foreign governments, technology companies, civil society groups, or ordinary citizens — should be prepared with contingency plans and funding to support circumvention tools and other means of getting uncensored news into and out of China at critical moments.

With a major Party Congress approaching in the fall, environmental problems multiplying, and North Korea advancing its nuclear program, the next moment of crisis in China might be just around the corner.

Sarah Cook is a senior research analyst for East Asia at Freedom House. She directs its monthly China Media Bulletin and is author of its recent report The Battle for China’s Spirit: Religious Revival, Repression, and Resistance under Xi Jinping.


Manchester concert suicide attack prompts security rethinks world

May 23, 2017


China stocks set to end week flat amid regulation, economy woes

May 19, 2017


Fri May 19, 2017 | 1:08am EDT

The Chinese flag flies with the Pudong skyline in the background

* SSEC -0.1 pct, CSI300 flat, HSI 0.3 pct

* China’s rebound triggered by market-soothing remarks fades

* Tencent poised to close at record high

SHANGHAI, May 19 China stocks were little changed on Friday and poised to end the week flat as a rebound triggered by policy gestures to ease liquidity concerns faded amid lingering worries over tighter regulation and economic growth.

The blue-chip CSI300 index was unchanged at 3,399.47 points by mid-day break, while the Shanghai Composite Index lost 0.1 percent to 3,088.46.

The market had posted five consecutive weeks of declines on concerns over Beijing’s stepped-up campaign against shadow banking and that efforts to de-leverage could sap liquidity and hurt the economy.

Although market-friendly rhetoric from government officials last weekend helped drive an early-week rebound, sentiment turned bearish again.

“Market sentiment remains fragile,” said Yang Hai, strategist at Kaiyuan Securities.

“De-leveraging remains the direction of Beijing’s policy. Nothing has changed (after the rhetoric).”

Investors are also worried that China’s economy could witness renewed slowdown as a recovery – triggered mainly by government stimulus – peters out, Yang said.

Indeed, an official survey published this week showed Chinese stock investors’ confidence fell for a second straight month in April, to the lowest in seven months, dented by economic concerns.

Most sectors fell on Friday, with industrial and tech being the worst performers.


Hong Kong stocks were firm on Friday, as Chinese money continues to flow into the city’s share market, while index heavyweight Tencent is on track to hit an all-time high.

Sentiment was also aided by an overnight recovery on Wall Street amid political turbulence in Washington.

The Hang Seng index added 0.3 percent to 25,215.45, while the Hong Kong China Enterprises Index was unchanged at 10,274.56.

The indexes are poised to end the week up roughly 0.3 percent.

(Reporting by Samuel Shen and John Ruwitch; Editing by Sherry Jacob-Phillips)

China-Hong Kong Bridge to Unity, or Tentacle of Beijing Control? — Plus: Taiwan’s Failure to Face the Threat From China

May 19, 2017

PEARL RIVER ESTUARY, China — As a 19-mile bridge between Hong Kong and China across the Pearl River estuary nears completion, Chinese officials are hoping it will bring more than economic integration at a time of growing tension between the two sides.

The bridge that snakes out over the blue estuary with soaring pylons, viaducts and towers using more steel than 60 Eiffel Towers, was first proposed in the late 1980s.

Image result for Hong Kong Zhuhai Macau bridge, photos

But it was opposed at the time by Hong Kong’s British colonial government, which was wary of development that might draw the city closer to Communist China.

Since Hong Kong returned to Chinese rule in 1997, however, there has been a flurry of projects integrating the port city with the Pearl River Delta’s manufacturing and urban sprawl, and stoking some unease in Hong Kong.

Wei Dongqing, a Chinese Party official and the executive director of the Hong Kong Zhuhai Macau bridge Authority, one of the leaders of the project, sees the bridge, linking the former European colonies of Hong Kong and Macau with Zhuhai city, as promoting unity, both physically and mentally.

“It’s psychological. It joins three places,” Wei told Reuters on a media-trip bus speeding along the half-finished, six-lane bridge, with the facades of Macau’s casinos glimmering in the distance.

“We have confidence for the future … a united market, a united people … that’s the dream.”

After nearly eight years of construction, the cost of the bridge and tunnel project has ballooned to some $19 billion, at the last estimate.

Critics see it as a white elephant, that will struggle to become viable and be unlikely to draw the 40,000 or so vehicles a day as forecast.

While most construction is expected to be finished by year-end to allow the first vehicles to cross, Wei said he “wasn’t sure” when full operations – including toll booths, customs and immigration facilities – would be ready.

“We are facing new challenges after the bridge is completed … how to operate it, make it efficient, and really benefit the whole area,” he said.

The Hong Kong Transport Bureau, which oversees the Hong Kong end of the project, gave no specific response to questions on whether more delays and cost-overruns were expected, but said it was confident construction could be completed by the end of the year.

Final arrangements were being decided by the three sides, it said in an email.

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Mainland and Hong Kong officials have long stressed the bridge’s economic importance at a time when tension in Hong Kong has escalated, with protests in 2014 over Beijing’s refusal to allow full democracy, and suspicion of creeping mainland interference despite a guarantee of autonomy.

Some in Hong Kong, apart from questioning the huge sums that could have gone into health, housing and education, are worried about what they see as an erosion of Hong Kong’s independent identity in China’s increasingly extensive embrace.

“You see a kind of network trying to blur the border between Hong Kong and China,” said pro-democracy lawmaker Kwok Ka-ki.

“In the coming 10 to 15 years, when all these infrastructure projects are completed, you will see Hong Kong is only part of China because you cannot see a clear border.”

Another project – a multi-billion dollar high-speed rail link – sparked an outcry over plans to allow Chinese immigration facilities to operate on Hong Kong soil.

Critics say that undermines Hong Kong’s autonomy under a “one country, two systems” formula, under which the city returned to Chinese rule.

“I don’t think many Hong Kong people mind to be integrated … but what we want is to do it democratically,” said Eddie Chu, who led protests against the rail link and is now an elected lawmaker.

“Behind all the protests in the last 10 to 15 years, the core idea is democracy and it’s an extension of the democratic movement, whether we have popular control over the direction of economic development and town planning.”

But project leader Wei, dressed in gray overalls and a white hard-hat, celebrates the integration that the critics decry.

“It’s actually one bridge, three systems. It’s about the law, policy, transportation policy, customs policy,” said Wei.

“The bridge is becoming a new icon.”

(Additional reporting by Venus Wu; Editing by Robert Birsel)


TAIPEI, Taiwan — China’s aggression in the Asia-Pacific region has been met with little tangible response from the United States and other countries. China’s neighbors have acquiesced to Beijing’s claims to the airspace above the East China Sea and have stood by as it embarked on a long-term project to militarize the South China Sea. The security balance in Asia is shifting under the weight of a resurgent China.

Beijing’s belligerence presents an existential threat to Taiwan, a country that Chinese leaders have long vowed to take by force if they deem necessary. For years, the political establishment in Taipei has delegated responsibility for responding to Beijing to the United States. Still, with China’s military advances and unchecked assertiveness, we Taiwanese could be headed for a compromise over the fate of our country on China’s terms.

Whether Taiwan eventually falls to Beijing depends on the choices we make now. Taiwan needs a new approach for its security: The political leadership must correct decades of mismanagement of the military and accept ultimate responsibility for the defense of the country.

Taiwan’s capitulation to Beijing would not only destroy the way of life for the 23.5 million Taiwanese — who have become accustomed to personal freedom and democracy — but it would also harm the interests of the United States and its allies. China would be emboldened to consolidate its claims to the surrounding skies and seas, destabilizing the entire Asia Pacific. With full control of Taiwan, Beijing would gain access to ports and airfields uncomfortably close to Okinawa, where over 20,000 American troops are stationed.

Support from the United States has long played a critical role in Taiwan’s defense, beginning in 1949 when the Nationalist Party, or Kuomintang, was defeated in the Chinese civil war and retreated to the island. Even after Washington severed formal diplomatic ties with Taipei in favor of the Beijing government in the 1970s as part of the “one China policy,” it continued to support Taiwan through arms sales, in accordance with the Taiwan Relations Act.

Before our first democratic presidential election in 1996, China launched missiles into our waters to show its disapproval of the leading candidate, who was seen by Beijing as insufficiently supportive of eventual unification of our two countries. To put an end to the intimidation, the Clinton administration dispatched two aircraft-carrier groups into the region.

Since that crisis, China has become an economic powerhouse focused on building its military, investing in thousands of ballistic and cruise missiles that can damage Taiwan’s ports and runways many times over, neutralizing our navy and air force. These missiles have the range and accuracy to cripple American bases on Okinawa and Guam. This capacity — combined with a buildup of submarines, “carrier killer” missiles and advanced air-defense systems — has all but ensured that the United States would be reluctant to interfere again on behalf of Taiwan in China’s backyard.

Taipei’s political leadership has failed to address this growing threat. Our leaders have gutted the military and continued to base defense planning on the assumption that the United States would always come to the rescue. Policies put forward by the Kuomintang and the independence-leaning Democratic Progressive Party have left the military understaffed and in a state of low morale.

Taiwan has reduced its active force from 400,000 in 1996 to well under 200,000 (the exact number is classified). The nearly two million reservists exist in name only: They are underequipped, not assigned to actual units, and most have not been called up for retraining. We’ve acquired advanced weapons platforms that are impractical against the threats we face. (For example, we have slow-moving warships and tanks vulnerable to Chinese missiles.) We have neglected logistics and shortfalls in munitions. Training and education have become low priorities.

Taiwan also effectively abolished conscription. Since 2000, the leaders have cut the length of mandatory service from two years to just four months and introduced “alternative services” to allow young men to fulfill their obligations at civilian ministries and private enterprises. In February, we began an alternative program for competitive video gamers. In March, alternative services were expanded to include trainee positions at chain restaurants and 7-Eleven.

We seem to expect American sons and daughters to risk their lives to protect our home, while relieving our own of that very duty.

Taiwan’s defense policies are largely a result of deep distrust between the military and politicians. The military has struggled with scandals ranging from abuse to graft to espionage. (In November last year, more than 30 retired generals caused a public uproar when they were shown on Chinese state television at a speech in Beijing by the Chinese leader, Xi Jinping.)

It is also burdened by its past as a pillar of the former authoritarian regime: For 40 years, before the democratic transition, the military carried out surveillance of activists and court-martialed dissidents — many of whom now hold political office.

After democratization, military officers went from being feared to being disrespected. Force reductions and pension cuts have further alienated them from the political process. A common refrain among officers is that “democracy ruined the military.”

This mutual suspicion has prevented policy makers from embracing military affairs. The Democratic Progressive Party’s landslide victory in the 2016 elections was recognized as a rebuke of the Kuomintang’s pro-China policies, yet only one lawmaker in the 113-member Legislature initially signed up to serve on the defense committee.

The lack of engagement of our politicians is in contrast to the views of most of the people. In a 2015 survey, 60 percent of respondents agreed that conscription should be reinstated to enhance military strength. In 2016, the support for national service rose to 83 percent.

President Tsai Ing-wen and other elected officials must rebuild our armed forces by first restoring the trust between civilian and military leaders. They must also correct the misconception that Taiwan stands no chance against China’s military without help from the United States. A country outnumbered and outgunned can still mount a formidable defense with the right strategy, an adaptive military and a hardened population.

As commander in chief, Ms. Tsai must articulate to the military that its sole job is to prepare to fight — and win — wars. We must ensure peace between Taiwan and China on our terms.

The Taiwanese public’s resolve is clear. Our elected leaders must follow.

China’s overseas acquisition spree has mysteriously cooled — telltale signs of recklessness are now emerging

May 18, 2017


Mergers and acquisitions by Chinese entities have fallen off sharply in the first four months of the year, underscoring a shift in the economic and political climate

By Peter Guy

South China Morning Post

Thursday, May 18, 2017, 5:08pm

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Novelist Margaret Drabble once said: “When nothing feels sure, everything is possible.”

This characterises the current China international acquisition scene. Bankers are supposed to be enjoying the golden age of international mergers and acquisitions by deep-pocketed mainland Chinese companies seeking expansion.

But even major deals that look closeable from a distance are sinking like they were built on quicksand.

According to Bloomberg data, China set an outbound takeover record of US$246 billion in 2016. However, in the first four months of this year, international acquisitions have dropped 67 per cent.

But beyond the data lies a treacherous landscape for deal making and telltale signs of recklessness are now emerging.

Mainland companies are willing to bear the substantial transaction costs that come with grandiose deals

Capital controls have clearly discouraged China’s outbound M&A activity. Chinese companies, especially those that are domestically listed, will likely have a much harder time funding purchases, particularly if they have not developed offshore financing vehicles or access to offshore banking sources.

Foreigners have always faced challenges completing deals with mainland Chinese companies. Gaining mainland regulatory approval, extensive due diligence on your local partner or senior manager were only their initial hurdles.

If your Chinese counterpart said, “Trust me” in order to make a deal work, it was usually a signal to run away. Now, if they say, “Don’t worry, we have the money to close the deal,” you better be prepared for the deal to die a slow death.

Even Chinese buyers who possess funding have been thwarted. The US$1 billion purchase of Dick Clark Productions by billionaire Wang Jianlin’s Dalian Wanda Group was called off in March as authorities appeared to oppose the acquisition. However, Dalian Wanda Group was willing to pay Eldridge Industries, owner of Dick Clark Productions, a US$50 million breakup fee after the deal fell apart.

 Wanda Group chairman Wang Jianlin. Photo: AFP

Whether or not that is the exception or the rule showed that mainland companies are willing to bear the substantial transaction costs that come with grandiose deals. However, if they didn’t pay breakup fees, it might impair its ability to approach other Hollywood players for future business.

According to bankers, break up fees have ballooned to as much as 10 per cent to cover the considerable cost of investment bankers, lawyers, pre-acquisition auditors and consultants who must be employed before the acquisition is completed. But, penalty fees may not be worthwhile especially if your mainland client refuses to pay them and forces sellers to sue them in a Chinese court.

Bankers ignore almost science fiction fantasy levels of financial ratios that defy gravity and credulity. Ultimately, if the seller is politically connected to government authorities and a Chinese bank is willing to overlook the lopsided ratios, any deal can theoretically be done.

Yancoal Australia, a unit of state-owned Yanzhou Coal, has bought Rio Tinto’s shareholding of Coal & Allied in New South Wales, Australia, in a strategic move making it one of the largest coal miners in Australia. However, reports say that it is expected to take much of 2017 for the deal to be settled.

One of the ominous signs is that the client doesn’t immediately appear to have the funds for an over-geared deal. Yancoal Australia, likely needs to raise high levels of debt or equity to close the deal. Its net debt levels are currently sitting around US$5 billion. With 2016 EBITDA of US$185 million, Yancoal has a net debt to EBITDA ratio of about 26 times. This is far in excess of its peer, ASX listed, dedicated coal miner Whitehaven at four times, who analysts remarked was over leveraged. Investment grade ratings require a ratio of less than three times.

Bankers could demand stricter proof of funding in the form of showing offshore account balances or a letter of credit before beginning acquisition talks. But, even if a Chinese buyer demonstrates that Beijing authorities can veto a deal for any or no reason.

Chinese buyers tend to sign agreements and ask for long closing periods in order

to shop the deal around for lenders or investors. On the other hand, most financial advisors and serious buyers push for a fast closing so sellers cannot find a reason to back out or renegotiate the terms.

Part of misperception over the last 20 years arises from mainland companies, in particular, state-owned enterprises masquerading as international private sector companies. It creates the illusion of endless cheap financing. But, it usually results in reputation risk for everyone involved as deals collapse. Yet, financial advisors have no choice but to entertain what appear to be substantial and serious buyers willing to pay high valuations and lucrative fees.

Peter Guy is a financial writer and former international banker

Snowden lashes out at Hong Kong for rejecting refugees who helped him evade authorities in 2013

May 18, 2017


© GETTY IMAGES NORTH AMERICA/AFP/File | Fugitive whistleblower Edward Snowden hit back at the Hong Kong government for rejecting the protection bids of a group of refugees who sheltered him while he was hiding out in the city

HONG KONG (AFP) – Fugitive whistleblower Edward Snowden hit back at the Hong Kong government Thursday for rejecting the protection bids of a group of refugees who sheltered him while he was hiding out in the city.

The impoverished Philippine and Sri Lankan refugees helped the former National Security Agency contractor evade authorities in 2013 by hiding him in their cramped homes after he initiated one of the largest data leaks in US history.

They have spent years hoping the Hong Kong government would recognise their cases and save them from being sent back to their home countries where they say they were persecuted.

But the family of four, a mother and her daughter and a single man saw their protection claims rejected Monday by the city’s immigration authorities, which said there were “no substantial grounds” for believing they would be at risk if they went home.

They now face deportation.

“These are good people that were driven from their homes by torture, rape, abuse, blackmail and war, circumstances that are really difficult for us to imagine,” Snowden said in a video released Thursday.

“Now what they’re facing is a transparent injustice from the very people that they asked to protect them,” he said.

“Someone in the Hong Kong government has decided that they want to make these families disappear immediately, no matter the cost,” Snowden added in the video in which he spoke against a plain white background.

He has been living in exile in Russia since the summer of 2013. Russia’s immigration service in January extended Snowden’s residency permit to 2020.

After leaving his initial Hong Kong hotel bolthole for fear of being discovered, he went underground, fed and looked after by the refugees for around two weeks.

Their stories only emerged late last year.

The refugees’ lawyer, Robert Tibbo has called the decision by Hong Kong authorities “completely unreasonable”, and said he had less than two weeks to submit appeals before the families were deported.

He said there was a risk his clients could be detained and their children placed in government custody.

Hong Kong is not a signatory to the UN’s refugee convention and does not grant asylum.

However, it is bound by the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (UNCAT) and considers claims for protection based on those grounds.

One of the refugees, Vanessa Rodel from the Philippines, who lives in Hong Kong with her five-year-old daughter, broke down over the news of the decision.

Another of the refugees, Ajith Pushpakumara from Sri Lanka, told AFP the government had “taken his whole life”.

Lawyers for the Snowden refugees have separately lodged an asylum petition with the Canadian government and are calling for to be expedited.

The video of Snowden can be seen here:


How China’s demand for a $30K fish bladder drives poaching, trafficking and wildlife extinction

May 18, 2017


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A boat full of totoaba and its crew took the illegal catch to shore while being photographed with a Sea Shepherd drone. (photo courtesy of Sea Shepherd Conservation Society)

An hourlong flight east of Hong Kong in the Chinese port city of Shantou, traders cater to affluent businessmen quietly looking to drop up to $30,000 dollars on a single fish bladder.

While these transactions are punishable by large fines and even time behind bars, a covert investigation by a nonprofit advocacy group has found that weak, perhaps corrupt, law enforcement allows fishermen, import-export companies and perhaps drug cartels to profit in an international supply chain that stretches from Asia back to Southern California and Mexico.

Chinese culture has believed for centuries that the organ — known locally as gold coin fish maw — has lifesaving properties. While science has yet to prove the health benefits, the dried bladder is often kept for emergencies — for use as part of a medicinal soup. It’s also gifted and displayed in homes as a status symbol.

“In Shantou, gold coin fish maw is usually treated as the priceless treasure of a shop, so they are not labeled a price and not on sale (openly),” a local trader in March told an undercover investigator with the Los Angeles-based Elephant Action League, a recently established organization that gathers intelligence on wildlife crimes.

This week, the nonprofit issued its report exposing the illegal fish-bladder trade in China and its consequences thousands of miles away. The league said it intends to expand its watchdog work on this issue in the coming months.

By the mid-20th century, Chinese demand for certain fish bladders had eviscerated stocks of the giant yellow croaker, which once thrived off China’s coast. If a person is lucky enough to catch one of these rare fish today, it can fetch as much as half a million dollars on the black market.

Enthusiasm for fish bladders went unnoticed for decades by many in the West. However, in recent years that has changed as desire for the illicit product has led to the near extinction of the vaquita porpoise, which lives in Baja California and is the most endangered marine mammal on the planet.

The totoaba, a 120-pound fish found in the Upper Gulf of Mexico, has a bladder that resembles that of the croaker’s — making it a prime target of poaching. It’s suspected that drug cartels pay local fishermen in the region to catch the fish and deliver the prized organ.

While the six-foot-long totoabas are then dumped back into the sea, their dried bladders are shipped to Asia. At retail pricing, each bladder can fetch from $6,700 to more than $30,000 depending on its weight and other characteristics.

A gold coin fish maw at a store in the Chinese port city of Shantou,

In the process, the nylon gillnets used to catch totoabas in the murky waters off of the fishing village of San Felipe in Baja California also ensnare and suffocate a number of other wildlife species, including whales, sharks, sea turtles, dolphins, rays — and those imperiled vaquitas.

Scientists with international conservation groups estimate that fewer than 30 vaquitas remain today, down from about 567 two decades ago. The totoaba is also considered by international treaty to be endangered. It’s unknown exactly how many are left.

The Elephant Action League’s undercover team, which includes retired law-enforcement officers from around the globe, visited more than two dozen shops in Shantou, China and the surrounding region in March. The area is believed to be a main trading hub for the bladders.

“They pretend to be buyers or traders,” said Andrea Crosta, executive director and co-founder of the league, which employs a handful of full-time staff members and a network of about a couple dozen contractors around the world. “They wear undercover cameras. We come back with audio and video that back up our words,” he said.

Many shop owners at first hesitated to speak with the league’s investigators, but eventually opened up and displayed their priciest fish maws. After the Chinese government began paying more attention to the illicit trade in recent years, many merchants responded by selling only to trusted customers and behind closed doors.

However, this level of caution wasn’t universal.

“Chinese laws on illegal wildlife trafficking are very harsh, but the problem is the implementation,” Crosta said. “It’s not enough to just have the laws. They have to be enforced.”

China’s government launched a campaign last fall to educate merchants on Chinese and Mexican laws banning totoaba fishing and bladder sales. Still, none of shop owners interviewed by the league could recall any seizures by law enforcement in their region.

On Nan’ao Island, a historical trading hub for fish maws just off the coast of Shantou, an investigator probed a dealer for information.

“If it’s illegal, why do you put them on display?” the investigator asked.

“Because (when) the government comes to check, they call and inform us earlier, and we will hide them when they come,” the merchant explained.

Several shop owners advised the investigators to purchase only the most expensive gold coin fish maw to use as an important business gift or to bribe a government official for an especially lucrative contract.

Investigators found a steady flow of totoaba bladders coming from Mexico into China, and many traders said that’s because they’re betting on a collapse of the species. The merchants frequently said people buy the gold coin fish maws as investments, speculating that demand will eventually outpace supply and dramatically drive up market values.

A primary smuggling route for totoaba bladders is believed to be from Mexico into the U.S. and then to Hong Kong and China, according to the new report. Thailand, which critics said also suffers from lax enforcement, is thought to be another key stopover for some shipments.

Shop owners in Shantou said most of the fish bladders were coming from a port on the U.S.-Mexico border, transported in shipping containers alongside legal products such as codfish bladders.

Mexican and U.S. officials have called the totoaba bladder “aquatic cocaine.” In fact, it’s often more expensive, with about two pounds of dried bladder routinely selling for as much as three and a half pounds of the powder drug.

Wildlife trafficking in general is big business, with an estimated annual value of $2 billion in the U.S. and up to $23 billion globally, according to a 2015 report from the nonprofit Defenders of Wildlife in Washington, D.C. It is routinely ranked among the top illicit trades worldwide.

Moving illegal animal and plant products has drawn the attention of organized crime. In Baja California, drug cartels have been blamed for paying local fishermen to poach the totoaba bladders and then smuggling the contraband.

The value of totoaba bladders in Mexico is approximately $1,500 apiece, according to some law-enforcement agencies. The pricing surges to about $5,000 per bladder after the organ is smuggled into the U.S.

It’s thought that trafficking of totoaba bladders attracts a lot of opportunists because it’s lucrative and relatively low-risk. Even people on the front lines moving the product rarely face consequences in China, Mexico or the U.S., judging by the scant number of prosecutions in those countries.

“The number of cases have (recently) decreased,” said Michelle Zetwo of San Diego, a special agent with the law-enforcement division of the National Oceanic and Atmospheric Administration. “That either tells me that the demand is down in China or they’re beating us coming across the border somehow. Or they’re shipping it directly from Mexico to China.”

The most high-profile totoaba case involved the prosecution of a man, Song Shen Zhen, caught crossing the border from Calexico into the U.S. with several of the bladders. After he was let go, Border Patrol agents trailed him to a house where they discovered more than 200 other dried bladders, estimated to have a total street value in China of more than $3.6 million.

The U.S. Attorney’s Office Southern District of California announced in 2014 that Shen Zhen was sentenced to a year in prison and ordered to pay the Mexican government $120,500 in restitution. Under the law, he could have received up to 20 years in prison and a $250,000 fine.

In another case, Los Angeles-based furniture dealer Kam Wing Chan received probation and was ordered to pay $55,000 in restitution for, among other things, possession of several dozen swim bladders.

Fishermen in Baja California who catch totoaba largely have escaped serious fines and incarceration.

“Most of the illegal fishermen are not motivated by a little fine. It’s so lucrative,” said Oona Layolle, who heads an advocacy operation in the Upper Gulf of Mexico for the U.S.-based Sea Shepherd Conservation Society. She oversees two boats that patrol the area, pull up banned gillnets and call in potential poaches to the Mexican navy.

“Every night we see 20 (illegal) fishermen around our ship on the radar, and I know they only arrested seven people in the last two years,” she added.

Mexico’s law-enforcement leaders are promising to step up efforts again the unsanctioned fishing and smuggling. Last month, its Congress voted to make such poaching a felony, and a boat with three or more people found catching totoaba can face charges of organized crime.

So far, these measures haven’t seemed to slow down fishermen in the upper Gulf, who sell totoaba bladders to middlemen in and around the town of San Felipe, said Sean Bogle, an investigative filmmaker with the nonprofit Wild Lens.

“A fisherman will go out and fish for totoaba, and they’re usually removing the bladder in the boat,” he said. “When they hit shore, there is an individual waiting for them, someone involved in an organized syndicate of sorts.”

Bogle recently directed the documentary “Souls of the Vermilion Sea,” which chronicles the impact of totoaba poaching on the dwindling vaquita population. In the process, he interviewed anglers and government officials close to the supply chain.

“From what I understand, going through the U.S. is the most common (smuggling) route,” Bogle said. “There’s definitely reports of it going out of San Diego, particularly on container ships.”