Sunday, 25 June 2017

Superficial Economic Progress

This picture in Times Square was taken last year but still applies today
A local newspaper asked Hong Kong documentary filmmaker Ruby Yang her thoughts on the last 20 years since the handover in 1997.

She said it was superficial progress, that it was all focused on the economy and asked, what about people's livelihoods?

Yang really hit the nail on the head -- superficial progress. The government doesn't like to admit there are serious problems, in particular with the economy. However, the wealth gap between the rich and poor has gotten even worse, with the Gini Co-efficient at a record 0.539, up from 0.537 in 2011.

This means the city's wealthiest make 44 times more than the poorest. Interestingly Hong Kong is behind New York as the second-most unequal city in terms of income.

So while we have people who are uber rich and at the other end of the scale people barely scraping a living, the economy is faltering, but the government doesn't seem to notice.

Around dinnertime today I went to Sogo department store in Causeway Bay to buy a few things and was shocked to see how empty it was. The place is usually packed with shoppers and you'd have to elbow your way through the crowds.

But tonight there were none.

A friend had made this observation to me a few days earlier and I was very surprised, but this time I saw it for myself.

Granted the mad summer sales ended a few weeks earlier, but individual brands still had discounts though they weren't enough to entice people to buy.

People cannot afford to shop in Hong Kong -- heck they can't afford to spend much money except for basic expenses. People may be looking, but not many are actually getting their wallets out.

The only place that was busy was the basement grocery store, but while there were customers there buying food, the cashier line was empty.

There were mainlanders in the department store, some were buying -- saw one woman with her suitcase open on the floor and she was literally filling it up with her purchases like a jigsaw puzzle, while others were conducting a Sunday afternoon window shopping exercise with the emphasis on exercise.

Meanwhile most locals were empty handed.

As my friend said to me, this economy is unsustainable with housing prices through the roof and people priced out of the market.

So yes, Ruby Yang is right -- we are experiencing superficial progress -- to the benefit of whom?

Saturday, 24 June 2017

Fact of the Day: Number of China's Rich X9

The wealth gap in China is getting even bigger with even more wealthy people
A private survey has found the number of rich people in China has risen nearly nine times in a decade.

Those with at least 10 million yuan of investable assets hit 1.6 million in 2016, up from 180,000 in 2006, according to the 2017 China Private Wealth Report by Bain Consulting and China Merchants Bank.

The overall value of the private wealth market rose to 165 trillion yuan last year, growing 21 percent annually from 2014-2016. It's expected to reach 188 trillion yuan this year.

The rich spend a lot of money on luxury and invest abroad
There are about 120,000 "high net worth individuals" who had at least 100 million yuan worth of investable assets, up from fewer than 10,000 people in 2006.

The percentage of rich people with overseas investment rose to 56 percent this year, up from 19 percent in 2011.

The top four destinations for investment were Hong Kong, the United States, Australia and Canada, though Hong Kong's popularity fell 18 percent and the US fell 3 percent from 2015-2017.

Respondents said their top reasons for investing overseas was to diversify risks, capture market opportunities and migrate.

The wealthy are concentrated in major cities and coastal areas, but the survey found 22 provinces have at least 20,000 high net worth individuals.

One thing wealthy Chinese can't buy is class...
One can't help but wonder if this wealth amassed in a short period of time is due to loose credit from banks and they've taken advantage of this to invest in real estate and other appreciative assets.

The other possibility is investing early in property and it has significantly appreciated within a decade.

Either way it's a staggering number of nouveau riche in China who are looking for places to spend their money. They are definitely looking overseas for greater security and better living environment.

Anyone who has the access to some kind of wealth are trying to get it out of the country though investing in insurance products or real estate.

But the one thing they can't buy is sophistication and manners.

Friday, 23 June 2017

The Straddling Bus is Dead

This hybrid bus was supposed to alleviate traffic and air pollution -- not!
Guess it was too bizarre to be true.

The Chinese-designed "straddling bus" that was supposed to allow cars to run underneath it has reached the end of the road.

It was originally hailed as "the future of public transport" because it was supposed to be a bus-train hybrid that would create less air pollution and transport commuters faster by avoiding traffic jams.

Less than a year after its unveiling, the bus has gathered dust
However, the widely hyped vehicle in the city of Qinhuangdao was dogged by difficulties and controversies. Local residents complained that the straddling bus was a traffic obstacle, making it hard for cars underneath to see, while the straddling bus would have difficulties making turns and there were questions if it could sustain its own weight and that of its passengers.

"It can only run on wide and straight roads," said Sun Zhang, a transport professor at Tongji University in Shanghai. "In big cities where roads are winding and jammed [with traffic], such roads are in short supply."

State media outlet The Global Times criticized the project for being "stuck in a concept with no real breakthrough", and for not realistically taking traffic problems into account.

The paper was also critical of the Transit Elevated Bus (TEB)'s funding source using peer-to-peer investment platforms. Huaying Kailai, the parent company of TEB Tech, which was to produce the bus, had reportedly raised billions of yuan online by convincing investors they were getting in on the ground floor of the next big thing.

Workers are dismantling the test site in Qinghuangdao
But it seems the company spent less than 200 million yuan (US$29.2 million) on research and development. And it doesn't seem like the project was ever approved by local authorities, as many government departments denied any connection with the project or gave it their blessing.

So now workers have begun dismantling the test site and will demolish it by the end of the month. Meanwhile the giant vehicle that is covered in dust -- less than a year after its debut -- will be moved to a nearby parking lot to wait for further action.

The "straddling bus" is now officially a dud.

Wonder what the next big thing will be...

Thursday, 22 June 2017

China's Cheap Labour No More

There are still armies of factory workers -- but they want better pay to stay
On my first day at work in Beijing at a state media company in 2007, my new boss took me out to lunch and I remember him saying the supply of migrant workers was "limitless".

He believed (or wanted me to believe) there was an endless supply of cheap labour for factories.

I was very skeptical -- eventually the country would run out of migrant workers because everyone had one-child families save for ethnic minorities.

Ten years later I wish I could go back to him and say, "Remember you told me the supply of factory workers was 'limitless'? You were completely wrong!"

Workers come from the countryside and are hardly "limitless"
Factory owners are having a tough time not only finding but retaining workers these days.

Rising labour costs have led to a high turnover rate among factory workers. Wuhan University did a survey of factories in Guangdong and Hubei and found 26 percent of workers in the Pearl River Delta had changed jobs.

"With high turnover, they have to pay workers more to retain them," said Albert Park, one of the designers of the survey and is a professor at the Hong Kong University of Science and Technology.

The average monthly wages in China rose to 4,126 yuan (US$603.78) per month in 2015, almost comparable to Brazil and much higher than developing economies like India and Vietnam.

In addition, in order to gain subsidies and tax benefits from the government, more than one-third of mainland factory owners try to gain favoritism from the state or the Communist Party. More than half surveyed received government subsidies, which account for 2.6 percent of their sales revenues.

Some factory owners resort to using robots to cut costs
About 23 percent of factory owners do this by serving in local parliaments and political consultative committees, while 39 percent are party members.

Because of rising labour costs, 40 percent of manufacturers in Guangdong and Hubei use robots in production. To Park, this means factory owners aren't sure demand will improve and so they are cautious about making large investments.

How much has changed in a decade! While we're pleased to know migrant workers are earning more money, the cost of living for them has increased too.

What they really need is access to education to further improve their employment opportunities. However, this is the next hurdle that really needs to be tackled so that children of migrant workers will at least see more hope for the next generation in terms of social and economic mobility.