The Economist Declares Hong Kong Experiment Over

Great cities are always an accident, in the sense Aquinas would use the term. Rome, London, New York, Hong Kong, none should have been, but all became great.  Talk about being at the right place at the right time: Hong Kong was a rock, a desolate semi-usuable harbor when Britain picked up the Island and Kowloon in perpetuity as compensation for some putative loss the British experienced colonializing China.  Several decades later China ceded the New Territories beyond Boundary Road up to Shumchun to Britain on a 99 year lease.  That lease was up in 1997, and facing reality, Britain returned the whole shebang to the Communist China.

The accidental part was when Britain gained Hong Kong, it was uninteresting enough to turn over to perceived second-string administrators, Scotsmen.  These Scotsmen had received laissez faire ideas from the French, who had inherited the ideas from Spanish Scholastics who were working out a philosophy of commerce and industry, based in natural rights and freedom, and laid the foundation of modern free market economics.

Scotsman Adam Smith was the moral philosopher whose Wealth of Nations is largely assumed to be the fountainhead of free market ideas, but only marginally so.  Smith's magnum opus was a survey of all sorts of economic ideas of various nations, including communism, but it was the relatively new idea of economic freedom that was the exciting part of his work, and especially to those fomenting revolution in US and France.

One problem with economic debate is terms are so wildly adapted.  What to call markets free of government intervention?  Free markets?  Few people using the term admit to non-interference, almost all "free marketers" see some role for government, but that is a contradiction in terms.  Radical free marketers abhor capitalism as much as communism, because one is retail and the other wholesale of the same rotten system.  Shall we call it anarchy? Anarchy is good, but extremely few people use it in its technical sense.  Kropotkin railed against the division of labor, that result of the just distribution of goods and services, the precise measure of true wealth in a free market, so don't expect any unanimity among radicals. Also, just about any true anarchist will settle for panarchy, because it is good enough (and very close to what we have now anyway.)  

Hong Kong was formed about the same time as USA by people with the same philosophy (we now call this branch of philosophy by the specialized term "economics," Greek for household management.)  The difference is Hong Kong stayed on course while USA quickly degenerated into a capitalist nightmare of expansion, colonialism and conquest. (See Morton Horwitz) We all enjoy the fruits of empire, cell phones, nice cars, well-wired homes, but ask the people who came up short in the bargain, like the Iroquois trying to use their passports to play lacrosse in Manchester, and you will learn another side of the story.  USA went too far the last few decades, as all empires do, and invaded Vietnam (a people who defeated Genghis Khan and all comers since) and now the graveyard of empires, Afghanistan.

But Hong Kong stayed true to its founding.  Thomas Sowell in The Economics & Politics of Race notes that as a rule, relative wealth among blacks in USA can be traced back to the colonies from which they migrated.  Those from British colonies are relatively wealthy, those from French colonies are relatively poor.  How come?  The British share power with the locals, the French do not.  Haiti is poor, Bermuda is rich.

What to make of Hong Kong that has surpassed its colonial masters in GDP?  We see a philosophy grounded in a monotheistic image moving across the world westward and ending up in Hong Kong.  With just about every race on earth living in Hong Kong in peace and prosperity, it is not British administration that can be praised, but the idea of free markets, which in Hong Kong is proven to be universal.  No one owns the truth, and the truth is free people live in peace and prosperity.  

Hong Kong is often compared to Singapore.  But one must not forget other countries like San Marino, Lichtenstein, Andorra, Panama, even the Vatican, Switzerland with a population relatively equal to Hong Kong. These are all small countries, relative free, no offensive capability (even if some defensive capability) relatively solid currencies, multilingual, and unlikely histories of formation.  It may be empirical that to be free you must be small and indefensible.

Hong Kong belongs to the world, now under the aegis of the Communist Party of the Peoples Republic of China.  Within the party there are intense debates about what to do with Hong Kong.  Under Deng Xiaoping, circa 1980, the good of Hong Kong was replicated in several special economic zones, and even India followed suit to some degree, recognizing the dynamism of free markets.

If Hong Kong was ever an experiment, the results are in, freedom works. That experiment is hardly over, as the contours of freedom are tested by those whose methods are "probe, where there is steel, withdraw." Progressives offer street theatrics like minimum wage to advance their agenda, and arrest freedom's progress. Instead of the seven million people of Hong Kong every day setting a minimum wage as a result of countless transactions, progressives propose several dozen people elected, in a dubious fashion, will decide.  Once society agrees to a small group of people who get to pick winners and losers, what we know as government, the polity will degenerate quickly. Note it is not the poor, young, or immigrant in Hong Kong clamoring for minimum wage, since none of them expect to stay around long at the bottom rung.  It is the liberally educated foreignor, or those locals educated in Western Elite universities, desiring to be relevant to their alma mater, who clamor for "justice" (and a big fat sinecure to lead the poor.) The Russian revolutionaries were distressed to find the poor they so yearned to help were in fact the most reactionary element in society.  If the poor in Hong Kong had any say so, they would not change a thing. Poverty in Hong Kong is temporary, and largely voluntary. Minimum wage is one element of many that locks people permanently into place.

What will save Hong Kong is competition.  At any point during the Maoist era, China could have seized Hong Kong within hours, but Hong Kong was a valuable asset to the Communist Party.  As USA degenerates into an empire of torture, war, secret arrests, snooping, bailouts and so on, USA will need a Hong Kong just as the communist party had one in the original Hong Kong.  Where will the spoilers deposit their ill gotten gains, after alienating Switzerland?  Where will a Dick Cheney get proper heart care now that we have rationing of ever more deleterious service?  Where will Americans go to breathe easy, think clearly, speak freely and relax, in the coming decades, when their poverty makes them unwelcome visitors worldwide? USA will need a new Hong Kong, a Xin Xiang Gang.  I'd say carve out this special economic zone from what some people call Cascadia: Seattle, Tacoma and the Olympic peninsula.  Of course the issue of secession has been settled in USA, violently, so it would have to be so this new Hong Kong would be a negotiated arrangement, a tit for tat, an inescapable conclusion for the powers that be in post-freedom America.   新香港: 乐在此 爱在此!

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Exporting Inflation

Folks,

Below is a cut and paste from part of an article of which I lost the original source, but little
matter... it is a good explanation of how USA can "export inflation" or expressed otherwise,
from Hong Kong's point of view, "import inflation."

Hong Kong is China, so this is a fascinating "alternative case" playing out simultaneously.

What the bad guys among our politicians want China to do, that is for the Chinese to revalue
the currency to harm their economy and help some in USA, Hong Kong does quite regularly.

Hong Kong is finding this more and more difficult to do, so Hong Kong may have to follow
the Chinese method of managing US dollar flows through hong kong in a different manner.

In any case, when the bad policy people tell you all will be wonderful if the Chinese revalue
the Yuan, we can see if they are right (and how they are wrong) by watching Hong Kong.

John


With the $ waning fast and currency pressures across the globe, never has there been a time
when
investors have needed safe-havens for their wealth. At the front of these sits gold and later
silver.
Many feel that the pressure may be short-term, but we believe it is systemic and growing
worse by
the day. As the hemorrhaging of U.S. $ across the world continues, smaller Central Banks
are
fighting to stop their currencies from rising so as to protect the competitiveness of their own
currencies. If the pressure persists these banks will be forced to take more regulatory
measures
such as imposing controls on inflows. The latest reported incident of these is in Hog Kong.



Hong Kong's de-facto central bank stepped in four times last week to defend the Hong Kong
dollar's peg to the U.S. dollar, injecting about $800 million worth of local currency into the
red-
hot market. The Hong Kong Monetary Authority injected a total 6.2 billion Hong Kong dollars
($800 million) into the market. As the U.S. $ weakens so this intervention will continue.
Under
Hong Kong's currency board system, the Hong Kong $ is pegged at 7.80 to the U.S. $ but is
allowed to trade between 7.75 and 7.85. When the Hong Kong dollar reaches the limits of its
trading band, the monetary authority can be expected to intervene. With the cut in U.S.
interest
rates this week more upward pressure will come onto the HK$. By intervening, Honk Kong
releases
more local currency, so importing inflation and allowing more ‘hot’ money into their system.
Such
investments can leave as quickly as they arrive contracting money supply when they leave,
bringing instability and eventual loss of control over the money supply should such actions
reach
extremes. Inflow Capital Controls are another way of coping with this problem or a strong
revaluation of the currency and a departure from the $ peg.

The Hong Kong $ has been rising against the U.S. $ as investors pour money into the soaring
Hong Kong stock market. The Hong Kong $ hovered near 7.75 to the U.S. $ all morning last
Wednesday before the Hong Kong Monetary Authority began buying greenbacks to keep the
local
currency within the trading range. This week’s moves follow two interventions by the HKMA
last
week, which were its first such actions in more than two years, causing speculation that
Hong
Kong might widen the peg, or drop it all together. The Hong Kong government is "totally
committed" to the linked exchange rate mechanism. This is usually a prelude to actions to
fully
control the situation along the line we mention here.

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Visiting Hong Kong & Freedom

To get to Hong Kong it is likely you will buy a ticket from an airline and fly into Kai Tak Airport, which is publicly traded corporation.  All transportation in Hong Kong is either private or corporate for-profit private business.  Your invitation to the airport, where luggage carts are free, is your airline ticket.  Passing immigration and customs is astonishingly easy, and the welcome very generous. From there you can take the Metro or Busses or taxis or limousines to the cities, where of course you pay for your ride. What is your destination?  A hotel?  A friends house?  In any event, you will pay some property owner, or be the guest of a property owner.

After that you will eat at restaurants, visit museums, do business at offices, all be means of and with private property owners.  There really is not contact with government to speak of.

But then the people of Hong Kong have little contact with government.  The currency, what we call money, is put out by three private companies.  The payment card, the Octopus which accounts for about US$12 million in small purchases everyday is a private payment means.  As long as you do not push force or fraud, you are likely never to encounter the government, except a the post office, but even then, most mail is now in private hands.

Charities are wildly oversubscribed, and the people of Hong Kong are overwhelmingly generous when disaster strikes elsewhere.

Less than half of Hong Kong citizens pay any tax whatsoever, and the rest pay someone between zero and the 16% maximum rate, which extremely few pay.  Yet Hong Kong is remarkably safe, and food and health care and housing and schooling are cheap and plentiful.  The government runs such a surplus, it invests the money in publicly traded companies, for a rainy day. There is none of the deficit spending, since there is no sense that government should solve all problems. Business solves problems. Hong Kong people can leave anytime.  The government does maintain some sports facilities, gardens and even some public housing which it is selling off, but otherwise it is a laissez faire dreamland.

Hong Kong was formed at the same time as the United States by the same enlightenment Scotsmen who formed the United States. The USA changed, Hong Kong remained remarkably constant.  Will Rogers said invest in land, it is the only thing they are not making more of.  Except in Hong Kong, where they make more land constantly.  And build straight up at a rate rarely matched elsewhere.  With property rights, and a weak government with little ability to do public domain, Hong Kong remains remarkably unchanged, except what goes on underground, straight up and on new land.  Since 1977, Hong Kong is the least changed place I've ever visited.

At the same time, the per capita income matches USA and exceeds their previous masters, the UK.  And As USA declines, HK continues to improve.  It has everything the world has to offer, at a wide array of prices.  You can get anything you need, and likely you can afford it.  It is a most polyglot country, with extremely diverse people working side by side.  It is more panarchy than anarchy, you'll find free marketers, communists, capitalists, Buddhists, Moslems, Christians all working side by side in peaceful cooperation.

People say less government leads to Somalia.  No, less government leads to Hong Kong.  Notice how the visitor depends on the goodwill of property owners ever step of the way in Hong Kong.  Should you decline to pay, your option is to leave.  There is no US-style welfare in Hong Kong, although plenty of charity.  But for people who do not care to produce, the charitable thing is to send them back home.  Note: if you manage to make it to Hong Kong, you must produce or go home.  If you manage to make it to USA, you are guaranteed welfare.  Relatively speaking, Hong Kong has open borders and no welfare.  USA has open borders and welfare.  USA is closing its borders.  It need only eliminate welfare, and respect property rights, especially those in other countries.  Perhaps then there would not be so much immigration.  This is more just.

Another feature of free markets is that the mega-welfare queens have no opportunity to indirectly mulct from the society in which they reside. Hong Kong is the only place where WalMart has failed.  On the other hand, Apple is booming in Hong Kong.  WalMart depends on WelFare.  Apple depends on customers.

It has some oddities: the only gambling permitted is horse racing, and the profits go to charity.  Chinese people are strictly limited access to Hong Kong.  How strange!  It is under the aegis of the Communist Party of the People's Republic of China.  Wow!  If a "public servant" cannot explain how he came by his assets, he can be prosecuted, at any time, whether while working or after retirement.  It's the law.  www.hkma.gov.hk/media/eng/doc/.../code_of_conduct_eng.pdf

Someone asked me how come I don't move to Hong Kong?  Why should I?  This is my country, not the criminals who make war and bail out banks and torture and murder citizens and spy on me and search me in airports.  The judges, the politicians, the cops, the welfare queen big business captains. They are the ones who have to leave, not me.  Why would I leave.  They can go.  Then USA will improve.

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Hong Kong Watch

Good things don't last forever, but they do seem remarkably resilient.  The disintegration of Hong Kong post-handover has not happened as anticipated, but some very ill-advised ideas are being advanced.

First, a good professor is advocating expanding mandated welfare in Hong Kong:

This is why Hong Kong needs a redistribution policy, and the latest Policy Address by the ChiefExecutive said: "... despite the protection offered by the statutory minimum wage, manygrassroots workers, as the sole breadwinners of families, still bear a heavy financial burden.Providing them with suitable assistance and encouraging them to remain employed will help keep them from falling into the CSSA safety net."

Now, Hong Kong has plenty of examples of government-provided welfare, their prestigious sport center network is home to admirable advancement of many of the physical arts.  And no one, except the Church of England, has ever owned land in Hong Kong, and it was the Colonial Governor who set up a public housing scheme that solved a basic requirement for Hong Kong's development, housing for the deserving poor.

The "war on poverty" in the USA was hailed as expressly as a means to end people being on the dole, a war to end poverty.  It is now a war on the poor, but stated goals were precisely what is cited in the article.  We do know where this goes.

Hong Kong always has had an excellent redistribution mechanism: charity.  Hong Kong's charitable giving is second to none in the world, and savvy charity-pimps target Hong Kong assiduously.  Hong Kong charities are rich with resources, I cannot think of any place on earth I'd rather be poor (or busted) not so much for the helping hand I'd get, but for the immanent opportunity Hong Kong offers anyone in its polity.

So much so the irony is Hong Kong is a very welcoming place to people world wide, except for Chinese.  Hong Kong's benefits would drown in immigration if allowed, so Deng Xiaoping exported Hong Kong to China, in the SEZs.  An unpredictable outcome.

As to income in equality, no one is more afraid of that than the rich.  Let the rich redistribute their wealth, they will get it to where it is needed far better than any political process.

Next, Hong Kong as a colony was an ephemeral place, and this would be out of character 50 years ago.

HONG KONG - The Hong Kong government on Wednesday declared a sanction against the Philippines since Manila failed to make a formal apology and meet all other demands by families of victims died in a hostage crisis three years ago....
Spokeswoman of China's Ministry of Foreign Affairs Hua Chunying said in Beijing Wednesday that the central government supports the SAR government's endeavor to properly handle the aftermath of the hostage crisis and urged the Philippines to show more sincerity to resolve the problems which affects Chinese people's feelings....
The injured and families of the victims have claimed four demands: official apology, compensation, punishing accountable officials for the handling in a bungled rescue attempt, as well as improving security measures for tourists in the Philippines.

The outcome of the hostage situation was deplorable, and certainly the local authorities were out of their depth.  While appropriate gestures are indicated, dictating terms seems out of character.  How sincere is a response that is mandated?

And second only to the victims in this slaughter, the Philippine authorities are motivated apologize, punish negligent officials, and improve security.  Compensation is tricky, since a criminal act is rather difficult to assess, and further the visitors contract was with the tour group, not the state.

The Philippines must have experienced an immediate and hard hit after this event, and is no doubt correcting problems as best they can.  I am not sure how demanding specific actions can improve upon that.

I don't think a Hong Kong, desirable as it is, can be had through planning and negotiations.  I am convinced all such happier polities are accidental, an unseen consequence of forces large in life.  Hong Kong and USA were formed at the same time by the same Scotsmen with the same goals, freedom explicitly sought in USA and immediately lost, freedom necessarily obtained in Hong Kong and maintained by Chinese self-interest.  You cannot control for human action.

Hong Kong is changing, as all places do.  See it soon.

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Anarchy and Hong Kong

The anarchy website asks “does Hong Kong show the potentials of free market capitalism” and answers “no.”  The myth of Hong Kong's laissez-faire regime "has been disproved in academic debates more than a decade ago."  Well there you have it.  Academics say the myth is disproved.  End of discussion.  

“Given the general lack of laissez-faire capitalism in the world, examples to show its benefits are few and far between.”

Wow.  Where to start?  The world is overwhelmed with examples of what people would call laissez faire capitalism.  And they are all bad by any definition, since they include “capitalist” by definition. There are no net benefits to laissez faire capitalism, so few and far between is too generous.  If by laissez faire one means free markets, then Hong Kong is exemplary to be sure.  But exemplary of what?

Hong Kong shows -

1.  Capitalism is evil.

2. Free markets work, and they are antiseptic.

3. How free markets check capitalism.

4. Communism permits freedom to a degree never matched by capitalism.

5. That which governs least governs best.

The site notes Milton Freidman praised Hong Kong.  How come Milton Freidman is a judge of anything...?  So what if Freidman praised Hong Kong? That  doesn't mean anything.  Friedman praised freedom, did he advance freedom?

Rockefeller set up the University of Chicago. At the University of Chicago, Coase and Friedman labored together, in its school of law and economics. If Milton Freidman knew anything, Chile, would be exemplary.  The CIA gave the Chicago school a vicious puppet as leader and a carte blanche to set up a utopian society according to the “Chicago boys” aka the monetarist school.  it worked out pretty good.  For some.  For those murdered, including the legally elected socialist, not so good.  The Chicago crew got a whole country to test out its theories on, and we cannot know if socialism is better than capitalism in this case, cause the murdered the socialists.  

The Chile experiment is what Satan calls “policy laundering.”  A bad idea is taken to another country, tried out, “proven” it works, and then brought back home, ready for prime time.  Since Chile has been on USA life support since 1973, we can have no objective means of judging the experiment.  But “success” it was, as far as policy laundering.  The Chicago boys rose to new heights.

So while Friedman may admire Hong Kong, he has no theory to replicate it, nor even understand it.  The Chicago school of economics version of capitalism requires murder, overthrowing governments and subsidies.  Then it works to some degree.  The republicans are big believers in the Chicago school, and Obama has signed on, or at least is doing as he is told.

Now the anarchists argue the “aha” of Hong Kong is there are no property ownership (something they mostly deplore, with the exception of Spooner, who I quoted yesterday, and a few others.) referring to the fact that there was never private ownership of the real estate, per se.

And to say there is none is a tad misleading.  Since 1997 handover, the Chinese Communist State owns all of Hong Kong, except for St. John's Cathedral and its lands.  Well, Stalin left an Orthodox Church operating in Moscow.  Communists like to hedge their bets.

Prior to 1997, the history was Hong Kong Island was ceded in perpetuity to the UK in recompense for losses endured in the Opium War, a token grant of a watering hole.  It wasn’t until about 50 years later that the UK got  a 99 year lease on Kowloon and the new territories, which is what we call Hong Kong today.  So we are talking about an Island that the UK owned, and the mass of land that the UK leased from China.  Yes, there was no ability really to “own” private real estate, although some did, because the UK auctioned off property and subleases, which in any event never amounted ot more than 5% of modern Hong Kong.  Or in other words, 95% of Hong Kong is still undeveloped.  And the highest concentration of people in the world.  Which makes you wander about “overpopulation” talk, but that is another discussion.  (Singapore is free and independent, and there too only about 5% of the land is developed and the govt owns the land.  Maybe it's a Chinese thing.)

So there was never really any need or point in private ownership of land in Hong Kong, and in any case with the communist takeover it is out of the question, although China is letting Hong Kong continue its gig until 2047, when Hong Kong will take over China and Taiwan.

Britain gave up its ownership of Hong Kong Island in 1997 to China since it is rather worthless without Kowloon, except for the CofE cathedral, likely because its relations with Rome are a template the Chinese Communist leaders find admirable.

So real state ownership is sui generis, not indicative of anything. on the Kowloon peninsula, and all makes for unusual circumstances.

Any example extent has problems.  To make a case about anarchy, we need to look in spite of “government ownership of the land (Hong Kong is a communist enterprise)”  how does anarchy do in Hong Kong.  Very well, by all measures.

Yes money is issued by private companies. And mass transit is owned by private companies.  Yes, the govt is huge investor, but they have to put their fully funded pension dollar somewhere.  So why not in mass transit companies, a safe bet.  

There is no place on earth where free markets are extant.  What is good in Hong Kong is the vast majority of human interaction is free market.  What is wicked in Hong Kong is small and state provisioned.

And if you’ve never been to Hong Kong, one probably ought not try to dig it.  The anarchists missed the fact that, until the Communists took over, within the relative free markets of Hong Kong, there was ALSO a 100 plus year continuous total anarchy experiment called Kowloon city.  No need to guess how things would work, or surmise we need A New Man or some certain elements dead, Kowloon City was anarchy in action, no state, no defended borders, quite profitable, peaceful, and too short lived.

Like all free places, Kowloon City was accidental.  When China leased Kowloon to Hong Kong, the China maintained a garrison (Kowloon City) for purposes of some security. When the Qing fell in1911, Kowloon City was abandoned, although still Qing property.  It was a stateless zone.  It began populating with people who preferred to live stateless.  When the communists took over in 1949, Taiwan claimed it as theirs.  Sticky business, what.  So the british just took a hands off policy, as in “it’s not ours.”  By some legal fiction is belong to Taiwan, located in Hong Kong, which had a 99 year lease payable to the Red Chinese.  Accidental, in the theological sense.  Unique in history and place.

Kowloon City hd a bad reputation, but that is largely because it had no PR.  A blond English woman could move in free of fear, and did for 20 years.  

It was totally voluntary society.  Anyone could leave, and in fact many worked outside the city.  But no officials from the outside were allowed in.  No cops.

It was not allowed to expand out to accommodate all the people who wanted to live in anarchy, so it built up.  Straight up.  When I first saw Bladerunner, the city Ridley Scott portrayed looked very familiar. And it accommodated the extreme of humanity in one place.  No need for a New Man, no need for enlightened child rearing procedures, just raw freedom.

This is a better thing to note about Hong Kong, and to study, with a view to what really happens when people are free. We have to rely on histories now, because before China would take over Hong Kong, it required Kowloon City be leveled. It is now a lovely park.

The century long experiment in anarchy came to and end, by state decree.

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I Love Hong Kong

Hong Kong's credit rating is in debate with the governance question, and the people are taking to the streets over who would be their governor.  Beijing is saying Hong Kong will select a governor from a beauty pageant stacked by Beijing.  Li Ka Shing, the Hong Kong billionaire is diversifying his way out of Hong Kong.  Is this the beginning of the end?

No way.  Hong Kong is China's most reliable city, safest and most productive.  Li Ka Shing is a billionaire because at the time of the last riots, circa 1967,  this plastic flower maven bet that Hong Kong was not over and doubled down while the rich were getting out.  Today Li Ka Shing is the "rich getting out" and some hard, young Hakka businessman is doubling down on Hong Kong, praying for a S&P downgrade so his investments make all the more.

As to China offering a beauty pageant of politicians from which all Hong Kong can pick, England gave the people of Hong Kong no choice whatsoever for 250 years, and Hong Kong exceeded the UK on all measures.  Occupy Central is a very good thing, because people need to demonstrate their love for freedom or lose it, as in the USA.  Where we lost it.

I love Hong Kong because it was started at the same time as the USA, by the same heirs of freedom, both as a historical accident, and both were to remain small entities (hence 13 original colonies.)  Hamilton and his crew hijacked the confederation and engineered the deeply flawed constitution, and it was downhill for the USA from there.  When I am in Hong Kong, I am in what the USA ought to have been in 2014.  Among other things, private companies issue the currency.  They know what money is in Hong Kong.  In USA, we have agreed to lie to ourselves, since pretty much only the poor are hurt by the lying.

Another facet upon which I will bloviate is the problem of real property rights, meaning land ownership.  Such a problem in USA.  So much land, and already occupied.  (There is that word again.)  That would imply property rights.  How to handle it?  At first, when our numbers were small, we negotiated.  Later, with bigger numbers, and a capitalist regime, we murdered.

Now in Hong Kong, all arrivals found the land already occupied.  But by the King of England or the Manchu.  People tend to negotiate with the King of England rather than murder for a piece of land.  So for the 250 years of pre-China retention, no one could own land in Hong Kong.  Yet it grew to a premier city-state.  Nothing is new under the ChiComs, no one can own land (one exception, the Church of England owns a spread that the Chinese acknowledge.  Go figure.) And yet, some 3 of the top ten billionaires in Hong Kong made their money in real estate.  99 year leases, property development.

Imagine what we might have accomplished if we respected the Indians rights, and worked within what is ethical?  I know USA is just a corporation, but it is a corporation run by people, and people can decide to do the ethical thing.

A little existential tension makes for good when the comity is good.  I say the smart money is on Hong Kong.  What Beijing proposes is an improvement over what the Brits offered.  And always remember, USA is a democracy.  Do the people of Hong Kong really want to end up like us?

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Snowden In A Hong Kong Hotel

On Jun 9, 2013, at 5:21 PM, CM wrote:

Thought you'd appreciate this paragraph:

"On May 20, he boarded a flight to Hong Kong, where he has remained ever since. He chose the city because "they have a spirited commitment to free speech and the right of political dissent", and because he believed that it was one of the few places in the world that both could and would resist the dictates of the US government."

http://www.guardian.co.uk/world/2013/jun/09/edward-snowden-nsa-whistleblower-surveillance

I was a little surprised to read that Snowden expects asylum in Hong Kong.  As regular readers know, I often praise Hong Kong for various reasons.  But one thing Hong Kong is not is an asylum for dissidents.  Almost no Chinese nationals can get into Hong Kong, so how this guy came to the conclusion the Hong Kong benevolence would extend to him, I am not sure. 

One thing that was always clear to me in Hong Kong, is clear to me when I am there, is I am a guest tolerated for the duration of the time it takes for me to do business.  HK is for the people of Hong Kong, not for NSA dissidents, or anyone else that might cause the people of Hong Kong inconvenience.  Hong Kong is a wonderful place if you are there to make money and behave yourself.

If the Chinese want him (and they will) he sure isn't safe in Hong Kong.  If the USA wants him, he might be safe there from a snatching, but not from a killing.  If the Chinese don't want him, they sure benefit by whacking him, making USA look vindictive (everyone will assume USA whacked him.)  He might be safe in Cuba or North Korea or Vietnam.   USA has never been able to get soldiers they left behind out of there, so Snowden should be safe in Vietnam.  (Several soldiers have gotten out after being abandoned by the military, but as far as USA military is concerned, there are none left behind.)

I doubt Iceland can protect him.  I think he might be a bit naive about his prospects.  But taking him at his word, his act was suicidal, and he'll take getting whacked over life in Dick Cheney's USA.  Most people in his situation simply resign.

You know, the Soviets (ooops) er Russians would take him, could use him, and might treat him well and be able to pretty much protect him, but then, ahem, the Russians are not exactly rights-respecters.  I dunno...  as one who refused to go to Vietnam for Uncle Sam way back when, I doubt I'd get in his pickle.  

My guess is he gets suicided, somewhere somehow. But a wet operation in Hong Kong, I don't think the hotel at which he is a guest will tolerate blood on the carpet or a "jumper" from the 21st floor.  I once made the mistake of handing cash across a table for a sample of a Wine Tasting Game in the lobby of the Hotel Marco Polo and hotel security was on us like white on rice.  They'll have none of that declasse' activity in Hong Kong, thank you.  In fact my guess is he is out of Hong Kong before this post hits my blog.

(Update: sure enough, he is on the move... willingly or unwillingly.)

Snowden's fate, one way or another, will be up to Beijing.  Never forget, Hong Kong is China, under the "one country, two systems" model, until 2047, when that ends.  I think Snowden seriously misread Hong Kong.  In fact, the hotel is no doubt patiently awaiting Beijing's orders.  In the meantime, every USA spook in Hong Kong has several Chinese shadows.  China will again learn much by how USA intel behaves while we learn nothing.  (We badly need a Hong Kong in USA so we can have that kind of freedom.)

But tell me when if ever anyone is USA intelligence gets anything right?  This is just another example of a $200,000 per year clerk who screwed up intelligence analysis.  We have millions of them working for the USGovt Intel and its civilian contractors.  It is another reason why we are becoming an impoverished country.  Time to bring all these people home and get back to business.

Time for truth commissions, instead of depending on whistleblowers.

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Friedman, Hong Kong & Economic Arguments

Here is an obituary on Milton Friedman from the successor to the Far Eastern Economic Review.  It is on the topic of Hong Kong, and it is a good example of bad economic arguments.  Let’s observe and comment:

Written by Our Correspondent   

MONDAY, 27 NOVEMBER 2006

At one time 60 percent of the people lived in subsidized housing, mostly rented cheaply from the government, and some in Home Ownership Scheme flats, provided with cheap land and sold to lower-middle-income households.  Even now that public housing has low priority and the home ownership scheme has ended, some 50 percent of the people still benefit from this massive intervention in the marketplace.

The intervention also partly accounts for the low apparent ratio of spending to gross domestic product. If the cost of the subsidized housing land were accounted for at market prices in the government budget, the ratio would be significantly higher.

” If, then.”  Well the “if“  is not the case, so the “then” is just a wild guess.  A better way of thinking is to take the facts at hand, and then look for an alternative that is also a set of facts.

We cannot know what prices would be for land in a free land market in Hong Kong, because that is not the situation in Hong Kong.  So what do we see in Hong Kong.  And what do we see in places where  there is a free market in land?

The fact is the “government” owns almost all of the land in Hong Kong.  Well true, but misleading. 

First off, they make the mistake of learning looking at a snapshot, and not the video.  if you look at the situation in 2006, without looking at the situation on a much larger time frame, you miss much.

From wikipedia:

The British East India Company made the first sea venture to China in 1699, and Hong Kong's trade with British merchants grew rapidly thereafter. In 1711, the Company established a trading post or "factory" in Canton. Hong Kong was governed under Xin'an County (新安縣) and became one of the foremost military outposts for Imperial China. By 1773 the British reached a landmark 1,000 chests of opium imported to Canton with China's consuming 2,000 chests yearly by 1799.

So note that Hong Kong was being formed and settled as a western entity in the mid 1700s and earlier.  (And note that by in essence, dope dealers.  This should give us hope regarding the Mexican violence.  It seems Mexicans are doing to USA what the British did to China.)  At this point in the story, all of the land belongs to the emperor, so anything the British set up is at his forbearance.

Who were these Brits (actually Scotsmen) setting up for business?   

Here is David Hume. Adam Smith’s tutor, in his 1752 essay on commerce.

Foreign trade, by its imports, furnishes materials for new manufactures; and by its exports, it produces labour in particular commodities, which could not be consumed at home. In short, a kingdom, that has a large import and export, must abound more with industry, and that employed upon delicacies and luxuries, than a kingdom which rests contented with its native commodities. It is, therefore, more powerful, as well as richer and happier. The individuals reap the benefit of these commodities, so far as they gratify the senses and appetites. And the public is also a gainer, while a greater stock of labour is, by this means, stored up against any public exigency; that is, a greater number of laborious men are maintained, who may be diverted to the public service, without robbing any one of the necessaries, or even the chief conveniences of life.

Sound familiar?

Adam Smith went on to write The Wealth of Nations (1776).  These were the ideas in place at the time.  And from these people come the leading businesses to this day in Hong Kong, Jardine Mathison and Hong Kong Shanghai Banking Corporation, to Scottish companies.

If we want to make useful comparisons, let’s look at the progression of two polities formed at that time USA and Hong Kong, same people, same ideas. same time, mid 1700s.  The USA was not the only experiment in freedom at the time.

Now back to the land ownership issue.

From wikipedia again  http://en.wikipedia.org/wiki/First_Opium_War

From the inception of the Canton System by the Qing Dynasty in 1756, trade in goods from China was extremely lucrative for European and Chinese merchants alike. However, foreign traders were only permitted to do business through a body of Chinese merchants known as the Thirteen Hongs and were restricted to Canton (Guangzhou). Foreigners could only live in one of the Thirteen Factories, near Shameen Island, Canton and were not allowed to enter, much less live or trade in, any other part of China.

This Island is a luxury district of Canton to this day.

There was all this time a struggle between the believers in mercantilism and the free marketers who believed the state (or king) has not business in business.  again from wikipedia

In late October the Thomas Coutts arrived in China and sailed to Guangdong. This ship was owned by Quakers who refused to deal in opium, and its captain, Smith, believed Elliot had exceeded his legal authority by banning trade. The captain negotiated with the governor of Canton and hoped that all British ships could unload their goods at Chuenpee, an island near Humen.

In order to prevent other British ships from following the Thomas Coutts, Elliot ordered a blockade of the Pearl River. Fighting began on 3 November 1839, when a second British ship, the Royal Saxon, attempted to sail to Guangdong. Then the British Royal Navy ships HMS Volage and HMS Hyacinth fired a warning shot at the Royal Saxon.

So here we have the powers that be struggling with their own subjects who wish to be free to trade and free from the odious drug trafficking that was official policy. Note the Quakers are in the world but not of the world. integration without complicity.

The upshot is, as mentioned above, the British got Hong Kong Island, a rather useless rock, but  token surrendering of Chinese sovereignty  It may not seem like much, but then the union busting in Wisconsin does not seem like much.  To start.  Anyway, the British government owns a rock.

By 1860, the UK got Kowloon up to Boundary Street in perpetuity as well.  And in1898 the UK got a 99 year lease on the New Territories, the sum total of which is now referred to as Hong Kong.

So the land we are talking about is owned by the UK government or the Chinese government, either under a lease or no.  The option of private ownership of land was never in play, nor is it to this day.  The situation is not so unique, most states claim to own the land under their territory.  In USA it is common for the State to seize private property and transfer it to other private property owners.

What makes Hong Kong unique is the degree in which the largely self-governing people will not tolerate such USA style actions.

And, as an aide, if 60% at one time, and now 50% live in subsidized housing, then that is the first time in history a government reduced subsidized housing, let alone by 20%.  Go Hong Kong!

What the reporter left out is to this day, some 250 years in, less than 5% of the hong Kong territory is developed.  The state may own the land, and the state may auction off leases, but is the the free market that buys it, and decides to do what it would on the land it does develop.  We see the state providing housing in response to squatters etc,  but we also see fantastic developments when both housing and transportation is in private hands.  We get soaring all view apartments on top of excellent transportation.  We get a polity and economy no central planner could achieve.

And finally in London there is a Free Market in land, and in Hong Kong no such thing.  That state controlled anything is at a higher price is no surprise.

Hong Kong people have also enjoyed almost free medical treatment at government clinics and hospitals. Friedman was against “free” medicine elsewhere but failed to notice it in Hong Kong. Likewise, education, at least up to the secondary level has long been almost entirely funded by the government.

There is no such thing as free medicine and free education.  Someone has to pay.  Since there is no free market in land, since the state has money, since there is a crisis with countless refugees from war flooded into hong Kong, why not drain those state reserves on the immediate needs of housing and medicine for these massive dispossessed.  it is not to say the free market could not have done a better job, it is only to say we as a polity have these fund, let’s earmark them here and now.

And note, far more critical than housing and medicine is food.  There was never a need to feed the people in Hong Kong, the free markets did that well.

In the days when Friedman was writing his praises for Hong Kong, the territory also had a relatively youthful workforce compared with western countries and thus less need for spending on pensions and help for the aged. 

Oh, sheeesh...  Hong Kong has a Chinese culture so there was never a need for spending on pensions, there was never a chance the elderly would go without.  And further, there is no need in western cultures to spend on the aged, because it too is another example of hue solution to a tiny problem.  The writer is trapped in the false dilemma of state providing or nothing.

Nor did Hong Kong have to spend anything significant on external security, the responsibility of London and now Beijing.

Here again, there are so many countries that spend near nothing on external security, and experience no lack for it.  That the USA spends more on the military than the next 7 countries combined is a condemnation of USA, not Hong Kong.

Friedman could actually have helped Hong Kong if he had criticized rather than ignored the excesses of these interventions in the marketplace. They had originally  been spurred by fears of social unrest as the then-colony attempted to absorb waves of migrants from the mainland with nowhere but squatter huts to live.

The author misses the subtle difference between hong kong where the people have a say so in what govt does with its money, and the western capitalist regimes where the people are burdened by state intervention.

Friedman was not a champion of freedom, but of maximizing state efficiency.  A huge difference.  Tiberius told his governors to sheer his sheep, not slaughter them.  Friedman merely argued the paradox of less state means more stable power.  he can talk freedom all he wants, but it is meaningless if his prescriptions are grounded in the coercive power of the state.

It was necessary intervention in the marketplace.

No, it was a casual decision to eliminate some excess reserves.That progressives feel they must descend into paroxysms of panic and “do something” huge in response to every little problem does not mean the Scots/Chinese syndicate in hong Kong is obliged to feel the same way.  That the Scots/Chinese syndicate does do something does not mean it is with the same brio as a progressive. For all of its energy, hong Kong is essentially calm.

Hong Kong’s problem now is that policy change has not kept pace with changing economic and social circumstances. It is hooked on high land prices for the private sector as a revenue-raising measure, which leaves a large proportion of the public trapped in the subsidized housing sector.

Nobody is trapped anywhere.  That once subsidized land exists, and there is no possibility of private ownership of land now that China owns it, then who is in a hurry to change things?

Likewise the free if basic medical system is stretching the government as the population ages, drug and equipment costs rise and public expectations rise. But it is difficult to push people back to the private sector because that thrives on providing very expensive services to the top 15% or so of the population. Indeed, private medicine in Hong Kong is so expensive that instead of being a money earner for Hong Kong, as it is for Singapore, it is often cheaper to fly to Sydney or Singapore, let alone Bangkok, and get better treatment.

Yes, when govt gets in anything, people flee.  Medicine will revive in hong kong, and become as cheap and plentiful as food, when the state withdraws from the field.

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Paul Romer on Hong Kong & Charter Cities

Comes now a welcome call to create more Hong Kongs.  Sadly the fellow has some profound misunderstandings, but not that cannot be overcome.  He begins his talk with the effect of rules, so let me make a point about rules.  Crises are in relation to rules.  New rules are formed at times of crises.  At whatever point we are in the freedom continuum, if rules are relaxed, if there is deregulation at crises points, things get better.  If rules that precipitate crises beget more rules, thing get worse.  Hong Kong, few rules, peace and prosperity.  Pyongyang, the most rules, horror.  When we face crises we have a choice, make things better or worse.

Now comes Paul Romer with a Ted Talk advocating charter cities like charter schools.  We set up Hong Kong style polities around the world, wherever people ask for them.  Exactly who "we" is is vague, but certainly Paul Romer is there to lend a hand.

What is missing is a set of rules that give choices not only to people but to leaders, avers Romer.

He cites Korea, where a common people embraced diametrically opposed sets of rules and yielded opposite results, North and South Korea, and certainly South Korea looks more attractive compared to North Korea.    But that misses the point of where Korea would be if it was not so government intensive - both Koreas have local governments plus hegemons.  Korea, even split in two, tells us nothing.  Hegemons fog the picture.

I was in China before and after Deng Xiao-ping took Lee Kwan Yew's advice and copied Hong Kong in Shenzhen and 3 other cities, eventually going to twenty and more.  I watched the changes as the iron control of the communists withdrew, and freedom flowered in its place, under the aegis of the communist party.  In that event, the powers that be conscientiously decided to deregulate in the face of a crisis.  Good things followed.

I also watched India attempt to compete with China in this regard, and as near as I can tell, in essence the residual rajah-ism and caste system has kept it from flowering.  Here is the difference;  India adopted the rule-intensive British Socialism regnant at the time of its liberation from the UK.  As Romer suggests in the opening of his talk, rules matter, and India is burdened by a legacy of rules alien to India.

Rules are not universally applicable, for they flower in culturally dependent expression.  And to this end, the fewer rules the better, for any majority will oppress a creative minority.  Even worse when an alien hegemon (the rulesmakers) show up, for they cripple everyone.  This is not limited to polities: India's greatest mathematician arrived at correct answers by means his British betters found inscrutable, and no doubt vice versa. But the fact of the matter is, there is such a thing as "Hindu mathematics" and "German mathematics" even in the pure sciences... how much more so in cultural learnings?  What happens when we say "there are a set of universally applicable rules..." ?  Hang on, whose rules?

When discussing rules, and lamenting a given president's dilemma on deregulation, Romer poses conflicting choices facing a president whose power allows him to set electricity rates, between those who want market forces in electricity and those who "... want the choice to continue consuming subsidized electric power."   The mind boggles!  "want?"  "choice?' "continue consuming?" "subsidized?"  How many internal contradictions can one pack into a single sentence?

There is a point in his talk where Romer cautions us against weak governments.   "Rules can be bad because governments are weak... it is not only rules can be bad because governments are strong like North Korea."

This is where Romer's profound misunderstanding causes his argument to come crashing down.  The Chinese Communist Party sponsors two of the weakest governments on earth.  Obviously Hong Kong, under the Communist Party's one country, two systems policy.   And the Red China itself, with an extremely small political party over a massive stretch of real estate.  China is largely self-governing at very low levels.  And what laws China has are few and far between, and apparently whimsically enforced.  This makes for relatively peaceful and prosperous polities.

China is not like Somalia, which descended into chaos compliments of the various super-powers who imposed many regimes from outside, and eventually outright invaded.  Somalia failed for having too much government.  China is performing remarkably for having so little.

The miniscule UK could rule the waves because its practice was to share power and allow locals to thrive.  Tho. Sowell notes from his research that Americans of some Africa ancestry come from either British or French sources. Those from British sources are wealthier, those from French are less so.  France did not share power with locals.  Relative freedom, lack of central rules is important.

Romer shows us pictures of vast stretches of African coastline, empty expanses where new cities could be chartered from scratch.  Why?  Tunis would be an excellent location for a new Hong Kong.  In fact the Tunisian government was in Hong Kong studying the city-state when their hyper-government martinets beat and robbed a fellow trying to feed his family by selling fruit, without a license.  The Arab spring followed.  Too late now.

Romer recommends Canada and Cuba get together and transform Guantanamo Bay into a new Hong Kong.  Umm.. Paul...  you mean that which USA maintains as a prison?  Weren't you just talking of rules? If the USA had the ability to make a polity better than it was, Gurantanamo Bay would already be a new Hong Kong, and not a prison housing largely innocent Moslems.  Irony, much?

Romer has the idea that these cities can delegate control of certain sectors to other nations... my guess is perhaps the British can be the police, the Germans the philosophers, the French the cooks, and the Italians the designers, and the Swedes the politicians?  Is that not too much government?  Will we not end up with British cooks, German cops, Italian politicians, French designers, Swedish philosophers? Romer says we can share our ideas with the benighted races.  So, it is their fault, their circumstances?  The fact USA has military presence in over 180 countries has no bearing on current events?  Might a starting place for making the world a better place just bring USA troops home?  Then see what happens?

That we can show these people how to make for good international rules...  uggh... here again: Hong Kong thrives for its policies are unilateral.  Chile is free to trade in any way it likes with Hong Kong, and Hong Kong requires no reciprocity.  The test of a good policy, even no policy, is that it is effective even though it requires no reciprocity.  The only reason a policy needs reciprocity is to assure the group targeted for annihilation by the policy cannot escape annihilation.  You name the policy, and I will show you the group so targeted.  All policies have winners and losers. Otherwise, why would the state need to back them up with violence?

Romer tells us we can finance the whole infrastructure of a charter city by the rising land values, such as Hong Kong and Singapore saw in their development.  Oooops... Paul, no one is allowed to own land in Hong Kong.  Rethink that key point.

The problem with Romer's argument is he proceeds from the "white man's burden" school of thought.  Excellence comes from the white race.  And to make his point, he cites a Chinese city.  Irony, again.

The historical fact is every excellent polity is sheer accident.  If we admire, Hong Kong, Sweden, Monaco, Andorra, Iceland, Singapore, Costa Rica, wherever, each is its own unique accident in history.  Hong Kong was formed by Scotsmen who were tasked with creating a British base of operations in South China.  These Scotsmen where of the same ilk as the Scotsmen who were forming the USA at the same time, and they were all informed by the laissez faire philosophy they imported from France, which had its genesis from studying the Spanish Scholastics who found it in the writings of the Moslems who were driven out of Spain, who had inherited it from the libraries of the heretical Christians the Moslems conquered, libraries of Greek and Roman classical authors, who had received it from the oriental sources and then fades away in antiquity.  

Hong Kong and USA were based on the same premises at the same time.  Hong Kong stayed the course, while USA changed.  That both USA and Hong Kong host a diverse group of people, with many languages spoken, and are equal in economic power per capita is no coincidence.  But that Hong Kong is a center of peace and prosperity while USA is the #1 source of terror in the world is the result of a change in rules in the USA, or more to the point, the addition of rules where before there were none.

Now, there is no doubt Hong Kong is completely in Chinese hands, and doing well, currently sans White Man's direction.  This suggests there is something culturally-neutral in play, and I would suggest that is freedom.  It is not rules, Romer's starting point, that matter, but freedom.  Freedom is that ether in which people thrive, and polities emerge, the less rules the better, the more rules the worse.

Freedom is a fundamental human condition.  Hong Kong has rules, but they are largely unknown outside of the voluntary associations that keep Hong Kong peaceful and prosperous.  Freedom to agree to rules is the basis for effective rules.  There is no State that can provide freedom, for a state must necessarily deny some freedom for the state to exist.

Hong Kong has exactly the same distribution of rogues and villains any other location on planet earth might hold, it is just in Hong Kong they have no means of gaining the leverage to do much evil before running into one of the voluntary associations that keep the others in check.  That is how anarchy works, and why Hong Kong is the best example extent of anarchy in action.

On the other hand, in say rules-rich USA, if you have an abiding hatred of, say, people of some African heritage, your best bet is to seek employment with the government, where under the color of law you can do as much damage as you like, with impunity.  Rules provide opportunities to very evil people.

Freedom existed before mankind.  Mankind emerged from freedom, and we carry traces of pre-creation in our unique capacity for free will.  Freedom is not unique to any race or culture.  Look at Hong Kong.  Look at history.  Sure, freedom had some time with the white man, but it has moved on.

If anyone wants to see a new Hong Kong develop, Tunis might still be a good candidate.  But is it for Tunisians to unilaterally advance to freedom.  No one from the outside can bring "rules" that will effect progress.

Detroit is another excellent candidate, and time and again is showing it may happen, independent of the ruleskeepers, in spite of the ruleskeepers.  If Detroit goes free, it will be in spite of the rulesbuilders.  Until Detroit goes free, no one in USA should be making recommendations to the rest of the world.

Romer is rent seeking.  "We've fouled our nest, with a little chutzpah, we can find new nests to lord over."  How about we straighten out the USA first.  Haven't we done enough harm?



Are those Hong Kong phosphorus bombs, or USA phosphorus bombs?

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USA Hong Kong Wine Agreement

Below I reproduce a news release from a Hong Kong trade promotion office, outlining a memorandum of understanding between US and Hong Kong.  You can read what it entails.

USA Ag policy has been "get big or get out" for at least 150 years.  One exception to this is the wine business, particularly in California, where the state and fed govt subsidized the rich and politically connected to set up wineries and live the charmed life in Northern California.

This subsidy has led to massive overproduction.  If you have market locally for 5000 bottles of $49 merlot, but you produce 25000 bottles do you cut your price to move the extra 20,000 bottles?  What if the price to move it all is $3 a bottle locally, but that will slaughter your image and no more customers at $49?

The average price paid by Hong Kong importers for red wine from USA is $3 a bottle.   (I show you how to research that here...)

5000 bottles at $50 is $250,000.  20,000 at $3 is $60,000, or $310,000 total.

If you price cut here USA, and you market price drifts down to say $5 a bottle, then you'll end up earning 25000 times $5 is $125,000.  If you are only getting by at $310,000, you are out of biz at $125,000.  Exporting allows you to keep your domestic prices higher than otherwise.

A quick biz to get into is re-importing wines.  Know your USA wines.  Set up an office in Hong Kong.  Buy excellent USA wines cheap.. . negotiate cheap regular shipping, buy the wine from usa, bring it into hong kong, and ship it back.  As USA wine it will come in duty free.  (If you test this, make sure you do it first with a small shipment, only as much as you would like to drink, if this there is some rule I am not aware of... work with a customsbroker on this.)

This is in essence what was going on the pharmaceutical re-importations and plenty of other products whose exports are subsidized.

It does not surprise me in these times of economic distress the US govt is subsidizing this waste fraud and abuse (and it does not surprise me Hong Kong merchants are smart enough to take the money.)  many of those villas in Northern California are owned by politicians, or politically connected, so they voted themselves another pay raise.

Such subsidies distort the markets, and lead to USA consumers overpaying for many items, such as wine.

As for the best way to export USA wine to China without govt subsidies and assistance, I have a video coming up on that.  As to the memorandum of understanding, there is not a single element in it that would be useful to a start-up company.

Notes from the Article:

Gist of the HK-US 

Memorandum of Understanding (MOU) on 

Co-operation in Wine-related Businesses

The MOU is an extensive one, covering some common areas of co-operation that also feature in our MOUs with other wine producing countries/regions, including promotion of wine trading, investment, wine-related tourism, education / manpower training, and combat against counterfeits.

It also embraces a number of special elements relating to :

(i) promoting wine alongside regional and local cuisine – both sides will encourage enhanced partnership to promote food products and culinary arts relating to wine as well as regional and local cuisine;

facilitating as appropriate the organisation of wine auctions in Hong Kong for US wines – for example, Invest Hong Kong stands ready to assist US auction houses to set up a base in Hong Kong and/or identify business partners; and 

encouraging the provision of quality wine storage facilities in Hong Kong - for example, the US side may help us publicize the wine storage certification scheme recently launched by the Hong Kong Quality Assurance Agency, which seeks to enhance confidence of wine traders and investors in using Hong Kong’s storage facilities.

The common elements are :

facilitation of business visits, exhibitions and wine-related trade fairs – to strengthen wine-related trading activities, both sides will facilitate business visits and encourage each other’s participation in wine fairs organised in Hong Kong or the US; 

investment promotion activities – the investment promotion agencies of the two sides will facilitate exchange of information on wine-related investment activities and services;

education and manpower training – the two governments will encourage the training institutes in Hong Kong and the US to enhance partnership so as to improve education and training on wine-related subjects, such as courses on wine appreciation, wine culture and wine storage, and programs for meeting the manpower needs of enterprises engaged in wine-related businesses;

wine-related tourism and wine culture – we will encourage enhanced partnership on promoting wine-related tourism and wine culture through trade shows, festivals, individual and group travel programs, and exchange activities between Hong Kong and the US; and

co-operation in combating trade in counterfeit wine and smuggling of wine – the two governments will endeavour to provide assistance to each other to prevent, investigate and prosecute illegal activities and illicit trade involving counterfeit wine and smuggling.  Hong Kong has a clean record on wine counterfeiting.  We will upkeep our vigilance through such enhanced co-operation. 

Government of the Hong Kong Special Administrative Region
May 2010

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