Hong Kong and the Renminbi

This ABC News article looks at China’s moves to internationalize the renminbi and Hong Kong’s role in the process.

More on the Hong Kong-Shanghai Dynamic

You may wish to read this 10 December Reuters article that looks at the impact that Shanghai’s rise may have on Hong Kong.

Exam Review

Please remember that the exam review session is on Friday, 4 December, from 11 am to 1 pm in T7 Meng Wah. We will end earlier than 1 pm, but I will be available for questions after the session is over for as long as necessary.

UPDATE: Debacle in Dubai

This column by Indian academic Ajay Shah originally published in Financial Express offers some interesting analysis on the debt debacle in Dubai. You may also wish to read this extensive April 2009 report by Johann Hari, a commentator for The Independent newspaper in the UK.

A good airport, port, glass office towers, and computerized trading floors do not an international financial center make. The hardware may have been in place but lacking has been the critical software, particularly the rule of law, transparency, accountability and the free flow of information. Dubai’s party lasted two decades. The question is whether its ambitions to be a global financial hub can still be realized. There are lessons for Hong Kong in this tale of “puffery” so suddenly deflated.

UPDATE: Ronald Arculli on the BBC’s HARDtalk

The BBC interview show HARDtalk recently came to Hong Kong. The Chairman of Hong Kong Exchanges and Clearing Limited, Ronald Arculli, who is a member of the Executive Council, was a guest. You can view a clip from that program here. For a limited time, you can listen to the entire interview here.

Consultation on Electoral Reform

The Hong Kong SAR Government must be concerned about the outside world’s perception of its political system and development. Monica Chen, the Director of the Hong Kong Economic & Trade Office in New York, just sent out this e-mail letter to contacts in the US:

Dear Friends,

On November 18, the Hong Kong SAR Government started a three-month public consultation on the method of selecting the Chief Executive and for forming the Legislative Council (LegCo) in 2012.

This is an important exercise as we listen to the aspirations of Hong Kong people and seek common grounds to advance democratic development in Hong Kong.

As pointed out by Hong Kong Chief Executive Donald Tsang, the administration is “determined in advancing Hong Kong’s democratic development in 2012, paving the way for universal suffrage elections for the Chief Executive in 2017 and the entire Legislature in 2020. We are doing so with the greatest sincerity. Our job is to broaden the scope of political participation and increase substantially the democratic elements in the 2012 elections in accordance with the Basic law and the decision of the Standing Committee of the National Peoples’ Congress in December 2007.”

The consultation document sets out a number of key issues for consideration:

To enlarge the scope of political participation through an expansion of the Election Committee for electing the Chief Executive and by increasing the number of seats in the LegCo;

To increase the democratic elements within our political system by electing all District Council (DC) seats in the election Committee and LegCo from among elected DC members; and

To maintain the current nomination threshold for the Chief Executive Election and LegCo and not expand the traditional Functional Constituencies in the LegCo.

The British Consulate-General (BCG) issued a statement of the United Kingdom’s reaction to the public consultation, following the release of the document. (http://ukinhongkong.fco.gov.uk/en/) It says, “The timetable for universal suffrage in 2017 and 2020 is now in place. The 2012 elections could then be significantly more democratic than those held in 2007 and 2008, preparing the way for full universal suffrage as envisaged in 2017 and 2020.”

Noting that Hong Kong’s stability and prosperity are underpinned by its rights and freedoms, the BCG believed “that these can best be guaranteed by Hong Kong moving to a system of universal suffrage in 2017/2020, as envisaged by the NPCSC decision of 2007.”

It is the common aspiration of the HKSAR Government and the community to further democratize Hong Kong’s electoral system. We sincerely hope that various sectors of the community will give us their views actively. With the collective wisdom and determination of the people of Hong Kong, we can bring real democratic progress to the electoral methods for 2012.

Monica Chen
Director
Hong Kong Economic & Trade Office, New York
Website: www.hketony.gov.hk

Next Week: Professor Amy Tsui

Our guest next week – our final class – will be Professor Amy B.M. Tsui, a Pro-Vice-Chancellor of the University of Hong Kong. We will discuss education reform in Hong Kong and the SAR’s efforts to promote innovation and creativity to ensure that it remains competitive in the global economy. In advance of the class, you may wish to read this briefing paper on curriculum reform in Hong Kong.

Does Taiwan Hold Lessons for Hong Kong?

In March last year, Zoher Abdoolcarim, the Asia editor at Time magazine who was our guest the other week, wrote an essay on the Taiwan elections and the rise of Ma Ying-jeou, the island’s Hong Kong-born leader. Can Hong Kong learn anything from how Taiwan’s politics have developed?

Even though the “worst-case scenario” for Beijing happened in 2000 – the election of the DPP’s Chen Shui-bian – the sky didn’t fall and the Taiwan Strait didn’t become a war zone. A reinvigorated Kuomintang, with Ma as their standard bearer, clawed their way back to power in 2008. This was in many ways a more important milestone for Taiwan than Chen’s election as President. And now, Chen is in jail sentenced to life in prison on various charges of corruption. Critics of the former president say that this shows the maturity of Taiwan’s political system. Others argue that Chen has been persecuted for political reasons and that the witch hunt demonstrates the flaws of Taiwan’s democracy.

What do you think? Does Taiwan hold any lessons for Hong Kong?

Press Freedom in Hong Kong

The Paris-based group Reporters Sans Frontières (Reporters Without Borders) has just released its Press Freedom Index 2009. Hong Kong is ranked No. 48 (up from 51 in 2008), just ahead of Italy, Romania, Turkish Cyprus, the Maldives and Mauritius and just below Argentina, Slovakia and Spain. Topping the ranking are Denmark, Finland, Ireland, Norway and Sweden. (What is it about the cold Scandinavian countries all having a very free press?) At the bottom: Myanmar (171), Iran (172), Turkmenistan (173), North Korea (174) and Eritrea (175).  A low ranking does not necessarily mean that journalists are not free to report what they want, but may be an indication of the conditions in which reporters work and the threats they face. So for example, the Philippines, where the media can be quite active and vocal, comes in at No. 122, somewhat lower than one might expect, because some reporters there have been killed or threatened in the line of duty.

Reforming Hong Kong’s Capital Markets

While Hong Kong has emerged as an international financial center, critics say that the SAR isn’t doing enough to maintain that position. In particular, they argue, the rights of minority shareholders have to be strengthened and protected.

David Webb, a former investment banker, is a shareholder rights activist who has been campaigning for better corporate governance in Hong Kong for years. He serves on the Takeovers and Mergers Panel of the Securities and Futures Commission.

Webb runs a website which monitors corporate governance developments and other issues of concern to investors in the Hong Kong market. In this recent article, he examines the general issue mandate and the decision by Hong Kong Exchanges and Clearing Ltd not to amend its listing rules. He writes:

“Investors continue to factor Hong Kong’s weak protections into the price they are willing to pay for stock. We can’t expect Hong Kong to achieve a competitive advantage in capital markets, in the form of higher pricing to attract issuers, unless we give investors a more trust-worthy market structure with appropriate laws, regulations and enforceability. It’s time for the Government and regulators to start thinking about the long-term future of the Chinese capital market – one in which the RMB will be an international currency and large, widely held national and multi-national companies would vastly outweigh the small, tycoon-dominated companies of Hong Kong. In such circumstances, what will be Hong Kong’s competitive advantage? HK’s rule of law is often trumpeted (relative to the government-controlled and corruptible mainland judiciary), but it’s seldom of any use to investors. The rule of law isn’t worth much if the rules are stacked against you.”

Take a look at other articles on the webb-site if you wish to get an idea of some of the critical governance and regulatory issues on which Webb has been focusing.