To the cabbal of real estate developers who run Legco and Hong Kong:
They that sow the wind, reap the whirlwind
You guys have had it pretty good the last decade or so. Post SARS the government surfed a wave of Chinese growth and real wage growth was enough to cover the pernicious rise in housing costs, food and energy. Regardless, while lining your pockets the man on the street was doing well enough - not great, but not terribly - to keep quiet and take the view that so long as China kept on throwing up business opportunities he might catch a smaller wave and ride it to comfort and prosperity and in some way imitate your success.
From 2009 though you all seemed to forget that the social compact with Hong Kong’s people and the detente with China was a fragile one. It was founded upon real wage growth for the median and bottom quartile Hong Kong resident and a sense of openness and real mercantile opportunity, thus ensuring that there was no will for constitutional or political change. You allowed wages to stagnate especially when compared to housing costs whose rise can be charitably described as completely insane. You allowed a lot of useless capital flows to come in from China to be laundered in your property market making life utterly unaffordable for most people in Hong Kong and lining your pockets. It worked well - until now.
Now, without putting too fine a point on it, you are screwed. You assured Beijing you had the situation under control and that you could keep simmering discontent under control. You patently have not and are no longer credible in Zhongnanhai. You played running dogs to Beijing and allowed an enormous growth in inequality in Hong Kong and played the patriotism card and now cannot run to your own Cantonese people. Maybe you can just pull all your wealth offshore and run - no doubt many of you will - but your days of being credible are over. Worst perhaps, is that the best way for Beijing to gain credibility among the average Hong Konger might be expropriate some of your wealth and impose a sales tax and perhaps property controls like Singapore, as well as assisting in locating illicit funds squirreled away in apartments in Central.
You’ve ruined Hong Kong, and perhaps the only way for Beijing to not have to harm civilians is to harm your commercial interests. May well they do so.
So there is plenty of discussion this weekend about cutting Russia off from SWIFT. This is not something to be done lightly, ever. It is the equivalent of a utility cutting off your power or a telco cutting your phone line. Generally speaking, its the last straw before military intervention. In this case, I am all for it.
My criticism of Germany in particular here is that they have let their Green left antinuclear faction run an energy policy which led to their chemicals and energy sector selling its soul to Gazprom. Oddly, I see no shuffling of feet nor do I hear any clearing of throats by these groups that would indicate they are rethinking this position - if they did, BASF and the broader German industrial complex might be a little more constructive regarding the prospect of doing the right thing and making it clear that Europe cannot let these acts of aggression go unpunished. For now, German polity has allowed their energiewende to stall and to put themselves in a painful position of having to choose between their economic interests and showing some backbone. It did not and does not have to be this way.
Merkel should at this point use this situation to wedge the Green left and make it clear that sometimes in life you have to choose between overcoming deeply irrational emotive fears and enabling dictators. Europe as a whole should harden up and push for a radical re-engineering of their energy system towards more renewables, nuclear, and less gas use.
Some might say this would be costly, hard or expensive. Two things on this point: firstly, Europe is in deflation and is suffering a chronic deficit of aggregate demand and investment. Secondly, construction and investment in large scale infrastructure generates a lot of jobs and demand. Now I know the German public is irrationally opposed to deficit spending and has been fairly intransigent on this point to date but a massive investment program in Germany and Eastern Europe - one which could be sold as nation building and a fight for what is right - would probably go across pretty well at this point in time. German autos appear to be on the cusp of rolling out a wide range of electric car models. German corporates have extensive expertise in renewable technologies. If building a lot of wind turbines is bad for Siemens and nuclear plants is bad for Areva someone needs to tell me how because for the life of me I cannot figure it out.
This really should be Europe’s moment - a time at which we see Europe come together and unite against an evil that is similar to the evils that Europe once fought together and which formed the nascent pan-European consciousness.
Get it together guys.
This story from the AFR about Australia’s 888 investor visas caught my attention recently. Australia now has an investor Visa program where by if you invest $5mm into just about anything in Australia then you can get permanent residency and a sure shot line of sight to citizenship. Canada has recently cancelled their program, much to the discontent of many people who were hoping to move there.
I am by no means opposed to investor visas but I am opposed to the Australian public not getting their money’s worth. Current requirements of the 888 Visa only require an investment of $5mm in one of a mix of the following:
- Australian funds whose investment focus is Australia
- Australian proprietary companies
- Government bond programs, in particular, in NSW the Waratah bond program
We have no idea how well this program is audited. Could investors be placing $5mm at Platinum and then pulling it once the visa is approved? Probably. Do we have any reason to believe that is not the case? No - because I cannot find any financial products listed that lock funds in for 5 years in this way aside from the NSW Waratah bond program. Australian proprietary companies are another matter - there is no reason you could not have an immigration agent set up a shell company, acquire it, and then use it to acquire a lot of property. There seems to be some disquiet about this already and countries like Singapore have already put in place major restrictions to stop foreigners buying so much property that it creates acute inflationary problems. In Singapore if you want to buy citizenship now you have to invest in SMEs and startups through long term investment programs like Spring - not just bag a bunch of property or shares and then flick them as soon as the Department of Immigration is not looking.
My advice to Australian policymakers wondering why this Visa is doing so “well” is to point out that maybe, just maybe its popularity is due to this type of citizenship for sale program is being sold too cheaply. Requiring funds get invested into long term vehicles or ensuring that proceeds are rigorously audited or go towards cheapening government funding may not be a terrible idea. The last thing Australia needs right now is more upwards pressure on its currency and housing markets.
Addendum: the program Singapore admits people under an investment visa can be found here. Note that the industries that can be invested in are listed below, one can only wonder at what such tight rules would do for, say, Australian startups and venture capital rather than the inner city apartment market.