More threats are likely to surface in the long term amid the intensifying efforts by Washington to cripple China’s ability to produce advanced computer chips, said Lin Han Shen, senior adviser at the Asia Group consulting firm in Shanghai. But China’s traditional strengths in mass production, and its ability toContinue Reading
Getty ImagesLinkedIn has become the latest tech firm to axe jobs, closing 716 roles out of a 20,000 workforce.
The social media network which focuses on business professionals will also phase out its local jobs app in China.
In a letter by the company’s chief executive Ryan Roslansky, he said the move was aimed at streamlining the firm’s operations.
In the last six months, firms including Amazon, LinkedIn’s parent Microsoft, and Alphabet have announced layoffs.
“With the market and customer demand fluctuating more, and to serve emerging and growth markets more effectively, we are expanding the use of vendors,” Mr Roslansky wrote.
He also said the changes would result in creating 250 new jobs which employees affected by the cuts in its sales, operations and support teams would be eligible to apply.
After mostly withdrawing from China in 2021, citing a “challenging environment”, the remaining app called InCareers will also be phased out by 9 August. InCareers only covers the Chinese market.
A LinkedIn spokesperson said the firm will keep a presence in China to help companies operating there to hire and train employees outside the country.
LinkedIn has been the only major Western social-media platform operating in China.
When launched in 2014, the firm had agreed to adhere to the requirements of the Chinese government in order to operate there.
At the time, US senator Rick Scott called the move a “gross appeasement and an act of submission to Communist China”, in a letter to LinkedIn chief executive Ryan Roslansky and Microsoft boss Satya Nadella.
When President Xi Jinping came to power at the 2012 Party Congress, he had to face serious and systemic challenges to the structure of the Chinese state.
Simply speaking, these challenges were branded “corruption.” But it was far more than corruption; it was the complete disruption of the decision-making process of the state coming after years of festering of long-existing problems.
It was unclear who made decisions, how, and through what process; things could be hijacked at any moment for any given reason. The Chinese state was facing unprecedented fissures that could disrupt the country and, by extension, also create significant problems abroad.
This predicament didn’t happen because of ill feelings or the lousy judgment of past leaders but because China was facing new problems the old state structures had not been geared for since the beginning.
In 1949, when the People’s Republic of China (PRC) was established, the new country was facing issues that were unprecedented in its long history.
Unlike other dynasties established through foreign intervention (like the one founded by the Manchu in 1648) or through “popular revolutions” (like the one that put the Ming Dynasty in power in 1368), the PRC didn’t want to brush up and reenact the feudal dynastic past. That is, it didn’t want to reapply most of the toolkit that made the Chinese state reestablish itself over and over again during the past 20 centuries.
The PRC was founded by a Western-inspired Communist Party that believed the old Confucian thinking was the root of decadence. The fall of the past dynasties was due to imperial thinking and imperial statecraft. Therefore, the new state had to be grounded on different rules.
However, these rules were not ready-made. China possibly never suffered a similar situation.
In the third century AD, China was returned after centuries of internal wars that slaughtered most of the population. Amid the vast bloodshed, China also went through an unprecedented cultural and intellectual revolution.
Buddhism came to China from India and radically changed the Chinese way of thinking about the world. After some five centuries of turmoil and strife, and an uncertain power balance, a unitary China was re-established under the Tang dynasty. And the empire was very different than before.
A similar political and cultural shock swept China in the last moments of the Qing empire through the civil war, the Japanese invasion and the foundation of the People’s Republic. China was searching for a new identity, a new way of thinking and a new way of ruling itself.
The PRC underlined its specific nature by calling on “Chinese characteristics.” These Chinese characteristics were to set apart the Chinese Communist Party (CCP) from the Russian Communist Party and claim that the CCP and, therefore, its PRC were to be quite different from the USSR and how it was managed.
In the first decade or so of the PRC, the influence of the Soviets was paramount in China; still, after less than a decade or so, the PRC started to shed the Soviet influence and tried to move in a different direction, which was not that of Moscow, not the example of Western countries, and not the feudal past of China.
It was uncharted territory where only the wisdom and the practical sense of the leaders of the time tried to move statecraft and decision-making along.
Without points of reference, however, the Chinese state soon became engulfed in a messy decision-making process that eventually centered only on Mao Zedong, who ruled by basically issuing statements that were to be followed countrywide.
The fledgling structure of the state set up after the republic’s foundation, the Party design that took shape in the anti-Japanese resistance and then the civil war, and the first attempt to manage the country were de facto destroyed by this method of ruling and the systemic punishment and re-education of Party leaders.
In 1976, at the end of Mao’s rule, the Party and the country were in shambles, and it was not clear how they could move forward. Everybody was disillusioned and didn’t believe in the Party any longer. Fortunately, at the time, China was not under heavy external pressure and the demise of Mao’s rule created new hope in the people.
The country therefore managed to move forward. The big step in moving forward was Deng Xiaoping’s reform and opening up, which provided economic inspiration and real fuel for the nation. It motivated everybody and also held the country together because collectively the Chinese felt that they could get to a better tomorrow.
On the other hand, as a system of rule, Deng Xiaoping and his comrades established a new arrangement that tried to bring new order to Mao’s previous autocratic personal rule. They set up an agreement by which Deng was the first among a group of Party veterans called to make important decisions through consensus. This method created some confusion because it divided the power of the party, the power of the state and the power of the army without clear boundaries between their competencies and attributions.
In some Western countries, power is attributed to different parties but each has some borders on its strengths. In the United States, for example, the Federal Reserve can intervene in money supply, but the president cannot. There are some gray areas, but if somebody steps into them, there is a whole array of institutions and procedures to sort them out clearly and fairly quickly.
Yet borders of attributions of power were unclear in China at the time. This lack of clarity contributed to the situation of 1989, when confusing and contradictory orders came from the top to the ordinary people. People didn’t know what to obey and they chose to follow what they liked.
It was also a time when different ideas came from society, and it was unclear how the central government should respond to them. From the late 1970s to maybe the early 1990s, there was talk of the fourth modernization: democracy.
Until the late 1990s, there were strong voices in the Party—supported by Qiao Shi, then-chairman of the National People’s Congress and president of the Central Party School—claiming that the rule of law should be paramount and should be followed by the Party, and that the Party shouldn’t be above the law but subject to the law.
These drives and confusion over the lack of clear borders in the top leadership led, after 1989, to the decision to concentrate power in one man, Jiang Zemin. At the 1992 Party Congress, he had all the levers of power in his hands. He was president of the state, general secretary of the Party and chairman of the military commission.
Still, this concentration of power was largely formal and not totally real because power was still distributed among elderly veterans who could have influence and essential sway over the decision-making process of the Party and the government.
Meanwhile, the push for putting the Party under the law never quite worked out, as it conflicted with the notion that the Party had a role in the ultimate leadership of the country. This was difficult to reconcile with the idea of subjecting the Party to the rule of law.
For a spell, Jiang Zemin managed to have greater power than everybody else. After the death of Deng Xiaoping in 1997, he was the unchallenged paramount leader of the Party. Still, the decision-making process remained unclear.
Because of the rules the Party set up in 1997, Jiang Zemin was supposed to retire in 2002; however, contravening those rules, he stayed officially in power until 2004, and actually he carried on having influence and authority even after that year.
It created a situation in which the following top leader, Hu Jintao, although officially the head of the party, the state and the army, had to juggle different pushes and pulls from Jiang and retired leaders, and also pushes and pulls from members of Politburo and the Standing Committee of the Politburo.
The decision-making process became even more chaotic, confused and disorderly than before, leaving ever-more significant loopholes for corruption and profiteering that were pillaging the country’s wealth. The process was accompanied by massive economic growth, creating unprecedented wealth for everybody but at the cost of growing social disparity, ballooning internal debt and ample chaos in the organization of the Party and the state.
On the surface, it produced the phenomenon of corruption for ordinary people. Junior and senior officials took large amounts of money in return for favors granted to private or public companies. Corruption was just a superficial sign of a much deeper issue: a profound disruption and the messy situation of the decision-making process in China.
How could one make decisions? Ideas come from below and from above, findings come from sides and everything was total mayhem. The two episodes of the ex-Chongqing Party chief Bo Xilai and ex-chief of the Party general office Ling Jihua showed that senior leaders were not following the rules at a very senior level, the Politburo level.
The condition was messy and difficult to understand, let alone set in order. Not only was the Party not subjecting itself to its rules and regulations, but senior leaders were shunting all laws in the name of their pursuit of personal power. It was breaking the Party and the country apart. If the state crumbled, there would be no business opportunities either. It would simply be a time for pirates plundering the spoils.
Xi Jinping came to power with this tricky situation in the background. His answer, correctly so, I believe, was to concentrate power in his hands and establish direct and clear lines of communication and decision-making in the country, bringing borders and limits where the situation was getting muddled and entirely out of hand.
Perhaps even worse than during the time of Mao and the establishment of the PRC, for Xi there were no clear precedents and no clear examples to use. He apparently tried to find some inspiration in the imperial past, but knew very well that the imperial history was just an example, an inspiration, and not something that could be used fully in the new China.
The other ready-made tool, known to himself and his cadres was the old communist, Soviet-era party organization. The imperial past culture and the Soviet precedent were the two instruments for his consolidation and reorganization of power in China.
Democratic institutions were not present, nor was tradition and thinking. Conversely, some parts of the Party, looking at the present situation in China compared to the United States and India, the latter a democratic country similar in size to China, didn’t understand democracy and came to believe it was unsuitable for China’s dimensions and traditions.
Xi was facing issues that China possibly had not seen since the fall of the Zhou dynasty sometime in the 7th or 8th century BC—that is, the fall of an old “imperial” order and the creation and the birth of hundreds of independent states , each claiming its own tradition and hierarchy.
It was a situation of permanent war when states were destroyed and entire peoples were annihilated. Then different pundits tried to bring order by setting clear rules of engagement between existing states, as, for instance, seen under the Confucians or the Mohists.
Eventually, the Qin state managed to eliminate all competing states and established a short-lived tight order that lasted only a few years before plunging the country back into chaos until the Han strenuously managed to piece together a different set of rules in a newly unified empire. That empire became the paragon and example for all realms in the future.
In 2012, there was little or nothing of practical use for Xi and his allies to apply in the new situation. But the example from 25 centuries ago may illustrate the kind of confusion that he was facing. The risks were perhaps not as dangerous, but the intellectual challenges to produce something new without any script to follow were there.
Of course, Xi was not literally facing the disintegration of the state, but the process of its meltdown was in place. He responded that while working on the integration of the state, he had to concentrate power and establish clear channels of organization and decision-making processes.
The anti-corruption fight was the superficial reason for this process, but the deeper reason was the reorganization of the state along more efficient lines. He decided to do that along contours that the official Chinese bureaucracy managed to understand. He took inspiration from the imperial past and ideas from the Soviet tradition.
Both are part of Chinese political culture and could help China quickly reshape itself into an effective administration. Other paths could have been more challenging and might have taken longer with uncertain results.
Xi did it: He uprooted corruption. He established a new set of rules that led up to him and his decision-making, and therefore created an organized system for facing internal and external problems. The system externally may look like the old imperial system. In it, everybody is subject to the law, except the top leader, who can move the needle of the law, if necessary, in one direction or another.
But nobody else can, and therefore he managed to reinforce and isolate power.
However, this seems to be a process that has not been ultimately ended. There are clear challenges to this effective yet rigid way of ruling the country. China established an immense bureaucracy grounded on the 97 million member-strong Party.
While in the imperial times the official bureaucracy organized by Beijing didn’t go below county levels, in modern China, we have two new phenomena. Bureaucracy goes down to the village level, a community which may have only 2,000–3,000 people. They were for millennia ruled by affluent families of landowners who contributed massively to the national treasury with their taxes. Now, private hoarding of land has disappeared.
Moreover, for the first time in Chinese history, the countryside itself, for centuries home to some 95% of the population, is being wiped out. It is happening in two ways: by moving peasants and farmers to the cities, which are now home to over 60% of the population; and by urbanizing the countryside, so that most counties have urban facilities and organization.
These elements created a bureaucracy that is far greater in size than any other bureaucracy in the world in a country with a population far more significant than at any other time in Chinese history. And despite the aid and the support of critical new technologies such as electronics and computers, there is only so much, or so little, that the top leadership can do and decide in any given day.
The challenge for the future is, how can you make the Chinese bureaucracy responsible and proactive in performing its duties?
One answer, of course, is motivational—through political education. However, this may not be enough because of the fear of making mistakes or of doing something wrong. There is also a lack of upside—that is, there will be few or no prizes, or prizes will be extremely rare or questionable if something goes right.
Therefore, these de facto elements push officials to be loyal but not to take initiative because they don’t know how the top leadership thinks or how they will judge their performance.
Any judgment at the time could be wrong in the future, and the idea of guessing the intentions of the top leadership could also be risky as it could create conflict and friction with other middle-ranking officials.
It creates new challenges for the present government. However, each new policy solves some problems and, in the longer run, creates other problems. Since ancient times, the Chinese political tradition recognized politics as like timely rain.
It cannot rain too much; it cannot rain too little. Sometimes it does not need to rain, and sometimes it needs to rain a lot. That is, new policies create new problems, which must be addressed in a new way, opening up new solutions and perspectives for the country.
Xi has effectively concentrated power and has made decision-making cleaner and more direct. However, in directing internal and foreign problems, which are growing more and more complex, he’s facing not wrong decisions, not corruption, but inertia because it is simply tricky to act in such a substantially rigid system.
The lack of proactivity in a country could be tolerated and digested if two other elements did not pressure the country. One factor is that the domestic market economy needs proactive pushes by entrepreneurs and government officials to make decisions on the spot and take risks.
But if taking risks routinely results in punishment, nobody will take risks. De facto entrepreneurship will subside, and at the same time, the market economy will become less vibrant, with a massive impact on the overall economy.
The second challenge is external. The external situation for China is highly volatile, complex and complicated. Countries around China and Western countries are increasingly dissatisfied with China and defy China with new issues almost daily.
These issues should be handled systemically and we cannot wait for the top decision-maker to call the shots and move ahead. These internal and external elements were very different two or three decades ago and were extremely important for the development and growth of China’s economy, society and politics.
The vibrant internal and dynamic external markets made it possible for China to open a new road and contribute to the world with great wealth.
It means that the opening internally and externally is essential to China’s welfare and well-being and has contributed to the rise and consolidation of power of President Xi. Therefore, the future of the Party and Xi’s rule is to adapt this Party structure to something that can fit both the internal and external situation.
If, conversely, it pulls out from the international free market and suppresses the vibrant internal market, the country and the Party will suffer greatly.
The challenges then are how to adapt fast to the internal and external pressures. This is a task that Xi already faced in 2012, coming from unprecedented decisions, and now the Party should study deep and hard, and dare to have bold ideas and make bold decisions that can project the country into the future.
Here, there is an exciting element in Xi’s reforms. He created a clear division of powers between officials and enterprises for the first time. Deng’s reforms transformed all officials into entrepreneurs. In the name of “getting rich is glorious,” some officials ran their administrations, and at the same time, they ran their businesses.
They did it personally at first. When limits and rules were introduced, they did it through family, friends and supporters—and administrative and financial chaos resulted from the system, which went on unregulated and undisciplined.
Again, there is also a continuity between business and administration abroad, and solutions are not clear-cut and definitive. Still, long-term practices and regulations limit what can and can’t be done. In China, it was far more confusing.
Along with foreign experiences, Xi’s reforms have ruled that officials can’t take a direct role in business, and businesses have only clearly marked venues to deal with officials. This division of competence is one of the hallmarks of modernity. It could be one of the essential venues for solving the new issues emerging from completing the first part of Xi’s reforms.
In the imperial past, private wealth was subject to the goodwill of the emperor, but there was a basic guarantee – imperial power didn’t get down to the county level. Therefore, if someone were only rich at a lower level, the emperor would guarantee “basic affluence.”
Now the Party can go down to the village and, in theory, strip anybody of all his means. One can lose everything for doing the wrong thing at the wrong time, even inadvertently.
Moreover, modernity sets up laws and institutions that secure the safety of one’s property and market actions. Without these securities, no significant economic activity can take place.
Foreign and Chinese entrepreneurs can get these securities in other countries and thus expect to get them in China if they have to risk their capital. Otherwise, they can idly spend their money or invest elsewhere, where they can calculate their risks more clearly.
During past “corruption times,” risk calculus was somewhat clear. Short of a clean and transparent investment environment with laws, institutions and procedures, an investor had to get the protection of a significant power broker and know the ropes in navigating the system complex like a jungle.
The main challenge was finding the right broker and guide in the jungle to provide timely access to necessary permits and ways forward—someone who knew who’s who and how’s how. It was a market for opportunities and people.
The old ways have been banned but no transparent market institutions and guarantees exist. Without them, it could take decades, if ever, to have a large number of entrepreneurs eager to risk again their capital on something that could change overnight, as happened with the Covid crisis, at its onset and end.
There is a trust deficit between the state and entrepreneurs. The trust deficit is presently managed if businesses are already in China and can’t really pull out of the country or if people have access to the top leadership and personally trust them. These are limited numbers and can only increase at a limited speed.
As such, even resorting to a return to the old “corruption ways” could not really solve the present trust deficit. It would lead back to the old risks of state and Party dissolution.
Deng realized the Party’s power was proportionate to the wealth it generated. He let it happen openly, with the direct involvement of Party officials in economic activity, which created chaos that was spoiling wealth creation. Xi addressed the mess, but he cannot put wealth creation at risk. The necessity for orderly process and proactive enterprise must be somewhat reconciled.
Plus, the foreign environment has dramatically changed, which is conditioning the domestic investment climate. Before, it was favorable and relatively easy; now, it has grown more complicated and hostile. For this, China can hope to invent something completely new or just adapt what is already there.
This essay first appeared on Settimana News and is republished with permission. The original article can be read here.
SINGAPORE: The former divisional president of mainboard-listed Trek 2000 International – the tech firm behind the invention of the thumbdrive – was on Monday (May 8) sentenced to two months’ jail for falsifying accounts and cheating.
Foo Kok Wah, 52, was earlier convicted of two charges – for conspiring with three former Trek 2000 executives to cheat the company’s auditors and for instigating another employee to falsify documents.
His sentencing is the final of four cases involving Trek 2000 founder Henn Tan, former executive director Poo Teng Pin and former chief financial officer Gurcharan Singh.
They received a jail sentence of between nine months and 16 months.
Investigations by the Commercial Affairs Department revealed that Tan, Singh and Poo conspired to falsify the company’s statements for the financial year that ended on Dec 31, 2015, by recording a fictitious sale worth US$3.2 million (S$4.2 million) to Taiwanese manufacturing firm Unimicron Technology.
When the company’s auditors Ernst & Young (EY) raised concerns about the purported sale and requested supporting documents, the trio decided to inform EY that Colite Technology, not Unimicron, was the counterparty to the fictitious sale.
Foo’s role was to address EY’s queries on the fictitious sale.
He conspired with Tan, Singh and Poo to deceive EY into believing that the sale was genuine, and that Trek 2000’s FY2015 financial statements had been drawn up accurately.
They also prepared a document setting out a false chronology of events relating to the fictitious sale.
“To lend credence to the false chronology of events, Foo further instigated an employee to create a false tax invoice and delivery order reflecting that a sale was made to Colite,” said the police.
The prosecution said the offences affect the integrity of the financial markets, involve an abuse of authority, and were planned and premeditated.
Foo held “substantial authority” in his position, the prosecution said.
“When asked to assist to cover up a fraud, he should have declined and reported the matter to the authorities,” it added.
“Foo gravely abused his authority and breached the trust imposed in him.”
SINGAPORE: The Singapore Food Agency (SFA) on Sunday (May 7) rejected a report by Indonesian media outlet Antara that said it was ready to sanction the import of pig carcasses from Indonesia’s Pulau Bulan, calling it “inaccurate”. The import of live pigs from the island has been suspended since last month afterContinue Reading
Thirty years of being headquartered in London is proving to be very disorienting for HSBC Holdings Plc.
Posterity will question the wisdom of the behemoth’s 1993 decision to move its headquarters from Hong Kong to the UK. Anyone who couldn’t see then that Asia would be the bank’s true profit center decades later — it generated 78% of pre-tax profit in 2022 — wasn’t paying attention.
But today’s tussle between HSBC and Shenzhen-based Ping An Insurance — its biggest shareholder — raises a question everyone knew was coming: whether HSBC is an Asian bank or a global one.
Ping An is pressuring HSBC CEO Noel Quinn to admit it’s the former and create a separately listed Asian business headquartered in Hong Kong.
Michael Huang, CEO of Ping An, says it’s the clearest way to fix what he views as HSBC’s lack of competitiveness. And, as Huang puts it, to “crystallize multiple benefits” from a “strategic restructuring” that better reflects Asia’s contributions to the bank’s bottom line.
Odds are, however, Huang will be disappointed. A shareholders meeting in Birmingham seems likely to side with Quinn, who has time on his side. And a recent dose of healthy financial results is sure to dampen calls for radical change.
Thing is, Huang isn’t exactly wrong. With its 8.3% stake in HSBC, Ping An is well within its rights to agitate for change. There’s certainly an argument that management has “drained HSBC Asia of dividends and growth capital” to smooth out underperformance elsewhere.
Indeed, dramas abroad appear to be preoccupying HSBC’s top management in London. HSBC’s interests in France, for example, have gone awry. Hopes to sell that unit back in 2021 appear to be going nowhere.
Huang probably looks askance at the time and energy spent on the purchase of Silicon Valley Bank’s UK operation in March. Quinn’s team called it a win for HSBC’s global growth strategy. To Huang and his fellow detractors, the SVB deal is yet another distraction from the real game in Asia.
Still, Quinn’s argument to stay the course got a big boost from a barnburner of a first-quarter report.
Earlier this week, shareholders learned HSBC generated a 19.3% annualized return on tangible equity. It was a performance in league with Singapore giant DBS Bank and in a different stratosphere than the single-digit gains normally experienced by HSBC shareholders.
Jefferies analyst Joseph Dickerson notes that the quarter was characterized by “strong capital generation. Revenue showed strength notably in non-interest income.”
Hence Huang’s “timing” problem. Quinn’s team can argue its restructuring strategy is working. Why risk changing course now?
Already, HSBC brass can counter, the bank has pivoted away from low-yielding businesses in Canada and parts of Europe. And that, for all Ping An’s griping, the bank is indeed gravitating more and toward prioritizing Asia.
All this helps explain why advisory group Institutional Shareholder Services wants investors to vote down Ping An’s proposals. ISS told Reuters that Ping An’s strategy “lacks detailed rationale.”
Advisory firm Glass Lewis recommends the same: “We do not believe that realizing improvements in returns and value necessitates a breakup or spinoff of HSBC’s Asian business at this time.”
As Quinn told Bloomberg this week: “We have said all along that we believed the fastest and safest way to get increased valuation, increased profit, increased dividends, is by focusing on the current strategy. These results show that the strategy is working.”
Another reason the time might not be right is the intensifying banking crises that have global markets in near-panic mode. In the US, the collapses of SVB and Signature Bank made headlines anew this week as First Republic Bank hit a wall.
After being seized by regulators, California-based First Republic was sold to JPMorgan Chase. The news triggered investors’ PTSD over UBS having to save Credit Suisse from the financial abyss.
As such, Huang’s odds of convincing other top HSBC shareholders that now is the time for a risky breakup of a US$150 billion lender — one that regulators on a few continents would want to micromanage — are falling by the day.
There’s also the danger of the biggest HSBC shareholder essentially yelling “fire!” in a traumatized financial theater. SVB’s downfall, remember, was precipitated in part by tech billionaires ragging on its management over social media. Many believe, likewise, that intemperate comments from Saudi National Bank pushed Credit Suisse over the edge.
In such a fragile environment, Huang’s Ping An doesn’t seem to be reading the room. There’s no doubt that Chinese leader Xi Jinping would be thrilled to see HSBC heed Huang’s demands. Having a truly pan-Asian giant headquartered in Hong Kong would be a boon for a city watching its banking jobs pivot to Singapore.
Though Huang is speaking for Ping An, this financial cold war of sorts, the extent to which things have broken down entirely between him and HSBC, may fan concerns over China’s increasing hold over Hong Kong and its future status as a global financial center.
It’s intriguing to view this standoff as a microcosm of the East-West divide upending the global economy. More than arguably any other banking giant, HSBC finds itself squeezed between two great powers – China and the US –wielding financial leverage wherever they can find it.
For HSBC, it hardly helps that it relies on the US dollar to clear trades at a moment when Beijing is working to internationalize the yuan. After all, HSBC’s ability to access deals in Hong Kong and China — and rack up massive profits — comes at the pleasure of Xi’s Communist Party.
The outsized role that China’s growth played in the $13.7 billion pre-tax profit HSBC reported in the first quarter makes this a delicate dance.
In February, lawmakers from Britain’s All-Party Parliamentary Group accused HSBC and Standard Chartered Bank of being “complicit” in China’s “gross human rights abuses of Hongkongers.” At issue: barring customers’ access to their pensions after they fled the city amid anti-mainland China protests in recent years.
“These banks cannot continue to act with impunity, and the UK government must act to assist those… who are suffering from the impact of these anti-democratic laws,” says Alistair Carmichael, co-chair of the APPG for Hong Kong.
In a statement, HSBC retorts that the bank has “an enduring commitment to Hong Kong, its people and communities. It is where we were founded nearly 160 years ago. Like all banks, we have to obey the law, and the instructions of the regulators, in every region in which we operate.”
Yet Ping An’s real problem is that it hasn’t pulled enough HSBC shareholders its way. Here, activist shareholder Ken Lui is proving to be an ally.
He recently submitted a resolution calling on HSBC to plot ways to restructure its Asia business. Lui seeks “structural reforms including but not limited to spinning off, strategic reorganization and restructuring” of HSBC’s Asia unit.
Of course, Huang’s company has other options for betting on giant lenders focused specifically on Asia. Selling its HSBC stake is always an option. After all, it hardly seems that Quinn’s inner circle – or that of chairman Mark Tucker – is about to announce a giant U-turn in strategy.
Quinn’s office claims it’s already stress-tested what Ping An is requesting and argues Huang’s ideas would do more to reduce than boost shareholder value. Goldman Sachs has reportedly made similar arguments.
Though Huang is not wrong that HSBC should be more present in Asia, physically, the recalibration he seeks at a moment of fragility in the global banking system seems a non-starter.
Huang might have better luck getting shareholders to prod HSBC to restore dividends. For Quinn’s team, that might be the easier way to defuse this shareholder cold war.
Follow William Pesek on Twitter at @WilliamPesek
Strengthening the EV supply chain is a goal.
During subsequent conversations in Washington, DC, the US and Thailand decided to expand energy assistance.
The US Department of State’s Office of the Spokesperson released a combined press statement earlier this year regarding the third US-Tahie Energy Policy Dialogue, which will take place between April 18 and 20, to explore ways to strengthen power cooperation between the two nations.
Geoffrey Pyatt, Assistant Secretary of the Bureau of Energy Resources ( ENR ), and Kulit Sombatsiri, Permanent Secretary for Energy of Thailand, participated in the discussion, and both nations agreed to create a mechanism to advance clean energy cooperation over the next year.
The ENR oversees the State Department’s efforts to create and carry out foreign energies policy through diplomatic and program engagement that fosters economic wealth through green, affordable, and dependable energy access as well as a future of low emissions for the US and its allies and partners.
In response to pressure from the global and local power markets, both nations talked about bolstering Thailand’s energy security, fostering free trade, and lowering barriers to the development and trade of clean energy, the statement said.
Both parties pledged to boost energy capacity, strengthen clean power supply chains for electric vehicles and their chargers, and take advantage of US Inflation Reduction Act opportunities for energy-related commitment and trade.
The delegations reviewed progress under the Japan-US-Mekong Power Partnership ( JUMPP ), which included the April 6 release of the JumpP Action Plan and the US Vice President Kamala Harris’ November 2022 announcement requesting up to US$ 20 million( 676.1 million baht ) in additional funding for Juppa from the U.S. Congress, as well as a path forward for accelerating renewable energy investment through the Clean Energy Demand Initiative.
JUMPP provided technical support for Thailand’s plan to increase cross-border energy trade, solar energy and power storage implementation, electric vehicle strategy, market transparency, and more through the ENR power sector program. Previous discussions on exploring programs under the Japan-US Clean Energy Partnership were already advanced by the two sides.
The 2022 US – Thailand Energy Policy Dialogue on carbon capture, utilisation, and storage ( CCUS ) cooperation in support of Thailand’s emissions reduction goals was also acknowledged by both nations.
On April 19, the ENR released its initial statement on US involvement with Thailand’s Department of Mineral Fuels over the previous 12 months regarding CCUS through the Commercial Law and Development Programme of the US Government of Commerce.
On Tuesday, Senior Minister of State for Sustainability and the Environment Koh Poh Koon said that operations at the local abattoir have resumed with shipments of live pigs from Sarawak in Malaysia.
Pork sellers at Tiong Bahru Wet Market said they have had to pay about 30 per cent more for the new stock from Sarawak, and the higher costs will be passed down to customers.
Mr Sunny Lee, owner of a fresh pork stall at Tiong Bahru Wet Market, said: “Only they have the stock, and if they quote you a price and you don’t take it, there’s nowhere else for us to go. We have no choice.”
Some pork sellers said it could take at least four months before live pig imports from Indonesia resume.
But they added that the stock from Malaysia is only a temporary solution for them.
HONG KONG: Asian markets rose on Thursday (May 4), shrugging off the sour mood surrounding the Federal Reserve’s announcement that it was raising interest rates yet again and likely keeping them high for the foreseeable future. All three major US indices declined along with the dollar after the Fed’s hike,Continue Reading
As Yoon Suk Yeol loses momentum on reforming South Korea, it’s time to ask whether his presidency will be remembered for ushering in a lost economic decade.
Granted, the risk of South Korea bumbling into a Japan-like malaise has been known for many years. Yoon, who next week wraps up his first of five years in power, marks the fourth leader in 15 years who has pledged to avoid this dreaded outcome.
Each took office with bold plans to ease regulations, support startups, increase productivity and reduce the dominance of family-owned conglomerates known as chaebols.
Yet when each saw the scale of the task — and the determination of vested interests to protect the status quo — they pivoted to other priorities.
Twelve months in, odds are rising that Yoon’s will be the fourth administration in a row to avoid the hard work needed to recalibrate growth engines, increase innovation and boost competitiveness.
Surprises can happen, and Yoon has four more years to turn things around. But so far he hasn’t put a single impactful reform win on the scoreboard.
He’s slow-walked steps to loosen labor markets, support young entrepreneurs, make it easier for overseas investors to take bigger stakes in a wider array of companies or trade the won outside of specific time windows.
Yoon has also put geopolitics ahead of economics. In his determination to improve ties with the US, Yoon is siding with Seoul’s leading strategic ally Washington over top trade partner Beijing.
Yoon’s security arrangements with the US could complicate the balance of nuclear weapons diplomacy amid China’s support for North Korea.
“Given the growing threat from North Korea, Yoon has sought to revive US extended nuclear deterrence on the peninsula, requesting and receiving greater deployments of advanced US weaponry such as aircraft carriers, long-range bombers, and nuclear-powered submarines,” says Eurasia Group analyst Jeremy Chan. “Joint military exercises have likewise been expanded in number and size, and increasingly include trilateral drills with Japan.”
At the moment, says Fitch Ratings analyst Jeremy Zook, South Korea’s macro trajectory is stable.
“Korea’s rating balances robust external finances, resilient macroeconomic performance and a dynamic export sector against geopolitical risks related to North Korea, lagging governance indicators and structural challenges from an aging population,” Zook says. “Economic growth is likely to decelerate in the near term, but credit and policy buffers remain sufficient to manage these pressures.”
Still, economist Ha Keonhyeong at Shinhan Securities Co, expects just 0.8% growth for Korea this year. “Despite the rebound,” the economist says, “it’s hard to expect a trend recovery.”
Yet few of Yoon’s recent maneuvers will endear his economy to its biggest customer. Decoupling from Chinese tech makes for a great political slogan at home. But it may limit Korea’s ability to raise its semiconductor game and increase sales to Asia’s biggest economy.
One irony of Yoon’s efforts to cozy up to Tokyo, too, is that his policies risk hastening Korea’s Japan-like trajectory.
In late December, Yoon stressed the centrality of the semiconductor industry to the Korean economy.
“Strategic technologies, such as semiconductors,” Yoon said, “are a national-security asset and our industries’ core technology, so I would like the finance ministry to actively consider ways to additionally expand tax breaks for national strategic industries, including the semiconductor industry, in consultation with relevant ministries.”
Yoon must pick up the pace, policy-wise. Korea is home to the world’s two leading memory chip manufacturers — Samsung Electronics and SK hynix. Both faced cyclical downturns in late 2022 into early 2023.
Yet sliding global demand is a shorter-term problem. South Korea’s failure year after year to execute upgrades at the government level to enliven the industry is creating bigger headwinds. And self-induced ones at that.
Perhaps the best lens through which to view Yoon’s failure is the Shinzo Abe era in Japan. In 2012, Abe returned to the premiership for a second time, pledging a Big Bang of supply-side reforms to take on an ascendant China.
His plans to slash red tape, modernize labor markets, rekindle innovation, support startups, recalibrate energy policies, empower women and restore Tokyo’s role as Asia’s top financial hub excited voters.
Abe also had, from 2012 to 2020, three political benefits no other Japanese leader ever had before: a strong popular mandate; a clear economic blueprint; and plenty of time to engineer major change.
But Abe did surprisingly little to remake Japan’s rigid economy. He left it to the Bank of Japan to reinvigorate growth. By driving the yen 30% lower, the central bank produced healthy growth at times. A dearth of structural reform from Abe’s government, though, dissuaded companies from fattening paychecks and kicking off a virtuous cycle of demand-led growth.
Today, the late Abe is remembered less as Japan’s Ronald Reagan or Margaret Thatcher than as a cautionary tale of a powerful Asian figure who had all the tools needed to remake his nation’s economy — and failed anyway.
In Seoul, Yoon must heed these lessons. The biggest, perhaps, is that new leaders must get big things done very early in their tenure — when they enjoy healthy public support and the benefit of the doubt from populations craving change.
As Abe demonstrated, waning popularity forces leaders to lower their sights and grasp for low-hanging fruit gestures. In Abe’s case, it was modest upgrades to corporate governance. They included a UK-like stewardship code meant to increase turns on investors and prod shareholders to demand change.
Yet more than a decade after Abe promised the world, corporate Japan is still punching far below its weight. Behemoths like Toyota Motor are falling far behind in the electric vehicles race. On the other side of the corporate food chain, Japan is losing the race to create tech “unicorn” startups to Indonesia.
In Korea’s case, creating unicorns is less the problem than a corporate system geared toward legacy family-owned conglomerates that tower over the place. With politically-connected giants like Samsung, LG, SK and Hyundai calling the shots, startups are often deprived of economic space to thrive and disrupt a deeply conservative corporate culture.
Since 2008, four different presidents have arrived promising to level the playing field. First, Lee Myung-bak pledged to generate more economic energy from the ground up. Voters hoped that, as a former CEO of Hyundai Engineering and Construction, Lee had the know-how to shift growth engines away from exports toward domestic demand.
Lee demurred, siding with the family-owned conglomerates, or chaebols, that produced him.
Next came President Park Geun-hye in 2013. It was a milestone moment. Not only was she Korea’s first female president, but also the daughter of former national leader Park Chung-hee, who built the chaebol-led model that still dominates today back in the 1960s and 1970s.
Park Geun-hye took office with grand plans to dismantle her father’s economic system. She talked of devising a more “creative” model of entrepreneurship and shifting tax incentives toward startups.
Park also planned to strengthen antitrust enforcement and penalize big companies for hoarding profits that could be used to boost paychecks and fund new cutting edge research and development (R&D).
At the heart of her father’s export-led development scheme was prioritizing preferential loans to outward-facing businesses and insulating domestic industries from global competition. The strategy borrowed from the “Asian tigers” playbook Japan had written.
Over time, though, Korean governments were captured by the home-growth giants Park Chung-hee’s policies created. But once daughter Park Geun-hye settled into the presidential Blue House, 38 years after her father’s assassination, she too decided change was too difficult and risky.
Months after taking office, Park Geun-hye held a public meeting with the heads of the top chaebol families to ask them to increase investments to help boost growth.
Among them was the late Samsung chairman Lee Kun-hee. He was the father of Samsung leader Lee Jae-yong, who in 2017 played a direct role in Park’s arrest on bribery and influence peddling charges.
It meant that rather than upending the chaebol system, Park got co-opted by it. By 2017, she was impeached and jailed in a scandal involving Lee Jae-yong. Both have since been pardoned, much to the dismay of many Korean voters.
Enter Moon Jae-in, who was elected in 2017 to restore faith in Korean government. Moon began with a bold plan to champion “trickle-up economics.” It included higher corporate taxes to better distribute wealth and job opportunities.
Moon’s emphasis on enriching the middle class was the flipside of the strategies championed by Abe, then-US president Donald Trump and Reagan decades before. Yet Moon, too, saw the magnitude of the task of taming Korea Inc — and he backed off.
By December 2021, Moon even found himself pardoning Park. At the time, Moon’s office said pardoning her would “overcome unfortunate past history, promote people’s unity and join hands for the future. I hope this would provide a chance to go beyond differences in thoughts and pros and cons, and open a new era of integration and unity.”
Since then, Yoon has gone on his own pardoning binge. First came Samsung heir Lee Jae-yong, who was convicted along with Park in 2017. Two months later, in December 2022, Yoon pardoned former President Lee Myung-bak, who was serving a 17-year sentence for a different corruption scandal.
Lost in all these political machinations, though, has been attention to desperately needed economic reforms. What’s more, Yoon’s team seems keener on treating the symptoms of Korea’s challenges than the underlying problems.
Case in point: Yoon’s lobbying efforts for Korea be included on MSCI’s developed market index, which would open it to an entirely new galaxy of global institutional investors. Winning their money is key to ending the “Korean discount” that has long undervalued stocks.
This annual dance between Seoul and MSCI has played out since 1992, when Korea joined the indexer’s emerging markets grouping. Last year, MSCI CEO Henry Fernandez said that “for now, we have not yet seen significant action. So that’s obviously the reason why there was no inclusion in June.”
In 2023, Yoon is pledging to raise Korea’s financial game. He telegraphed steps to allow foreign investors to take bigger stakes in Korea Inc, change “outdated regulations” and extend currency-trading hours. Yoon’s economic team has even hinted at ending the ban on short-selling.
Trouble is, big talk has not been matched with big action – or even a vague plan or timeline for upgrades. In doing so, Yoon suggests he’s not going to be the leader to steer Korea onto a more innovative and productive path.
Yoon should be leaning into the entrepreneurial energy that began to sprout up during Park Geun-hye’s tenure. For all her flaws, Park’s efforts to increase the flow of cash to innovators helped morph Korea into a top-10 global incubator of “unicorns.” Wisely, Moon expanded the program.
Yet big businesses – chaebols – still monopolize the economic oxygen startups need to grow into larger entities that can disrupt the status quo. Nor does Yoon appear to have a plan for raising Korea’s dreadful gender equality rankings.
For years, development economists called Korea underutilizing its female workforce a big own-goal. Studies from the International Monetary Fund to the Organization for Economic Cooperation and Development show that nations and companies that empower women are the most innovative, productive and vibrant.
Yoon, who ran on an “anti-feminist” platform, has yet to address this chronic problem. Or others, for that matter, that might halt the Japan-like trajectory Korea seems to be inviting leader after leader.
Follow William Pesek on Twitter at @WilliamPesek