Laobaixing Capital Outflows

Chinese nationals can only take out US$50,000 per year

I caught up with several friends in Beijing, both locals and expats, and the big issue for them was getting money out of China.

In the news Beijing is trying to stop capital outflows in the hundreds of billions of dollars. While one might think this mostly applies to large companies, it affects ordinary people, or laobaixing too.

My expat friend was having a hard time because his wife who is Chinese, has a fledgling business in the Chinese capital and they have to pay suppliers up front who are outside of China. They try to wire the money out, but their bank stops them, saying they aren't allowed to do this transaction. He says it's random -- sometimes it works, sometimes it doesn't.

And then for my local friends, getting money out has become a big obsession. Over lunch two of them were excitedly going over ways, from buying up US dollars and even the pound Sterling -- they think it'll go up after Brexit (?!), and even going to Hong Kong to buy life insurance.

Locals are anxious to get their money out of China

"Buying life insurance products there aren't just for life insurance -- it's an investment vehicle," one said.

Then during dinner with another friend, she announced to me that she had bought a condo in Toronto -- and her husband didn't even know about it!

She doesn't even know where in Toronto it is, but it was her second best choice after Vancouver made it harder for foreign investors to buy property. "Maybe when my daughter grows up she can go to school in Toronto and live in the apartment," she said.

This friend used to work in state media and now works for one of the big Chinese internet companies, and so her salary must be exponentially larger than what she used to earn 10 years ago when I met her.

That on top probably extra money from her parents has enabled her to invest abroad.

And she's only 30.

I asked all these friends why they were so concerned about getting money out of China, and they said they didn't have confidence in the government.

They also said the yuan was depreciating and so they wanted some guarantee for their hard-earned money.

But it is a vicious cycle -- the more people invest in foreign currencies, the further the yuan depreciates, and that makes them even more worried, and they continue to exchange more money.

Beijing is very anxious about the situation. Currently each person can take out a maximum of US$50,000 per year. That will be halved next year.

These further restrictions are making people even more anxious, and there's no end in sight...

China is Open for Business

Chinese President Xi Jinping addresses the World Economic Forum in Davos

Xi Jinping is the first Chinese President to address the World Economic Forum, and today he used the platform to take the high road, making the case for globalization in a time when the UK will implement Brexit and President-Elect Donald Trump advocates isolationism.

In his speech, Xi promised to improve market access for foreign companies, and said China has no intention of devaluing the yuan or launching a currency war.

He said protectionism had to be opposed and the finger-pointing stopped.

"Those who push for protectionism are shutting themselves inside a dark house. They have escaped the rain and clouds outside, but also missed the light and air," he said. "A trade war will only lead to suffering on both sides."

Xi says China is open to foreign companies... really?

Since his predecessor Hu Jintao's leadership, China has been protectionist too, making it harder and harder for foreign companies to do business in the Middle Kingdom. And with the further media suppression on foreign journalists and outlets, people on the outside find it harder to get the information they need to objectively assess the situation.

So if Xi really does keep his word, it will be interesting to see China open its doors for more business -- but are companies willing to pay higher wages for labour? And will this still be cheap manufacturing, or something higher up the manufacturing chain?

In addition, Xi said there was no point in blaming globalization to the Syrian refugee crisis or the 2008 financial crisis. He said there was "no justification for wiping out economic globalization all together".

How does the Syrian refugee crisis have anything to do with globalization, when it's a civil war in the country?

What kind of president will Donald Trump be?

Nevertheless, it seems Xi is keen to stimulate his country's economy -- apparently it grew just over 6 percent in 2016 -- and perhaps get rid of its overproduction.

As the inauguration of Trump drawer closer, many are trying to come to terms with the new normal in Washington. Will he continue to see it as one big reality show in the White House, or will he really take the job seriously and help those who voted him into office?

Xi is probably looking on horrified at having to deal with a man who makes knee-jerk pronouncements that may or may not have substance. However, he is probably impressed by how Trump handles press conferences by shutting reporters down...

Brexit Fallout Continues

Strange times in Britain these days with Brexit a hard reality to get used to

Friends and colleagues are still processing their shock and disappointment over Brexit that left us all floored on Friday morning Hong Kong time.

One colleague who is British, and has lived in Hong Kong for over 20 years, and her son was born here, is devastated that her son's job opportunities have virtually evaporated.

"Before he had 28 countries [in the European Union] to be able to work in, and now it's only one!" she exclaimed. She is angry that her older relatives voted Brexit, who wanted to keep Britain the way they remembered it from before than realize the world has since globalized at such a fast rate that no country can survive by isolating itself.

However not all of the Brexit voters were old -- even her younger friend who is an expat in Hong Kong preferred to leave the EU so that Britain could retain its "Britishness", whatever that means.

Jeremy Corbyn put himself in an awkward position politically

Another colleague is very curious about the geo-political fall out, with Prime Minister David Cameron betting his job on the line to remain, and has no choice but to resign.

It seems the referendum was an emotional issue and the remain side didn't do enough to reassure people that there wouldn't be immigrants flooding in, that even though Britain sends 350 million pounds a week to the EU, it got back much more in terms of subsidies and other benefits. It also didn't try to tell the skeptics that the Brexit campaign was wrong in saying that big chunk of money would go to health care.

Then there's Labour Party leader Jeremy Corbyn who was in a bizarre position. Labour is all for remaining in the EU, yet he himself is a Euro-skeptic, and so he was very low-key about campaigning to remain. He sacked one person who questioned his leadership, which led to many of his shadow cabinet members resigning.

And then there's Boris Johnson. He didn't really want Brexit... did he? He jumped on a cause to get on the political stage again, and he did it, but now he's quiet. No one wants to take on the challenge of putting Brexit in to motion now.

Will Boris Johnson continue his path to become PM?

Oh and Scotland is hinting it wants out of the UK...

Meanwhile the EU is outraged this is what the Brits really think of the union, and would rather kick Britain out sooner rather than later. The remain side is naive to think the EU will still continue to do business with them like before, though things might be cheaper now that the pound has fallen.

However the reality is that all those countries need Britain, and Britain needs the access to such a huge market to keep its economy going. Or maybe it doesn't need Britain?

The news hit Hong Kong hard of course, as the city was formerly a British colony, and many have business interests, children studying there, and so on.

Amusingly Chief Executive Leung Chun-ying stated that Hong Kong was prepared to deal with the outcome, but Financial Secretary John Tsang Chun-wah and Hong Kong Monetary Authority Norman Chan Tak-lam both admitted they were caught off guard.

It's a real mess and it's going to take a long time for it to be sorted out. But it's a new reality everyone has to get used to. Everyone.

Black Friday -- Brexit and Blaze

Prime Minister David Cameron announces his resignation after Brexit result

At noon I was in complete shock over the Brexit results, but I was not the only one. Many British colleagues were in disbelief that their fellow countrymen had opted out of the European Union.

Some moaned they were deeply ashamed of being British, while others were outraged their parents -- first generation immigrants -- had voted Brexit.

Someone on Twitter posted that now we'd see Boris Johnson become the next prime minister, and Donald Trump the next president.

Politician Boris Johnson on one of his bad hair days...

Both of them have bad hair.

Last weekend at the gym, I watched part of a BBC documentary about why people were choosing for or against Brexit.

Basically many people living outside of London were for Brexit, as they felt overwhelmed by the amount of immigration into the country and felt staying would lead to even more people coming in, taking jobs and taking advantage of education and health services.

The BBC found education-wise, the children did quite well academically because their parents felt it was a priority for the next generation to integrate into the community.

However, in terms of accessing health care, one doctor told of how she saw many cases of families living together under one roof, each family living in one room of a home, and so illnesses were easily passed around.

Counting votes in the Brexit referendum

They also didn't have much money to spend on housing, so their usually rented low-quality homes that were more prone to mould, which resulted in respiratory diseases.

Some people were concerned more immigrants would push salaries lower, making profit margins even smaller, while others said some sectors like seniors' homes were in dire need of immigrant labour because educated young people were not interested in looking after old people.

Within families, couples are split down the middle whether to stay or go, but mostly it's a younger generation/older generation divide. While 64 percent of young people were for staying in the EU, 58 percent of seniors preferred Brexit, and one wonders if perhaps the population of older people outnumbered the younger ones, which led to today's result.

The deadly fire in Ngau Tau Kok has claimed two lives

The other sad story in Hong Kong, is that a fire continues to rage in Ngau Tau Kok, and firefighters still cannot control the blaze that's been going on since Tuesday at 11am.

It erupted in an old industrial building where a few floors have been converted into a mini storage facility. According to firefighters there are 200 lockers per floor, basically subdivided rooms separated by metal sheeting.

The challenge is that firefighters do not know what is in each of the lockers and have had to try to open each one. Today they showed pictures of what they saw in the building, and reported seeing flames in different colours, which indicated they were burning at different temperatures due to different materials.

There were also concerns that hawker stall equipment was stored here as well, some maybe storing gas tanks, but this has not been confirmed yet.

Initial reports were that firefighters fought with their commanders on how the fire should be contained, and that the order to be sent into the building to try to contain the blaze from inside may have caused the first firefighter, Thomas Cheung to lose his life. The second died last night, Samuel Hui Chi-kit, succumbing to his injuries. Two others were also injured.

Firefighters are exhausted trying to battle the blaze

Many questions need to be answered, including why did industrial buildings built before 1973 not have to be retrofitted with fire sprinklers? And why aren't there regulations for how mini storage facilities do business? Shouldn't there be rules on what can and cannot be stored? And what about insurance?

A lot of people have lost their treasured belongings that they can never get back. But at the same time, two lives were lost trying to fight this fire that still continues to consume the contents inside.

The pollution levels in the area are pretty bad too, affecting residents who may opt to be evacuated from there temporarily.

We can only hope the firefighters can finally contain the fire and put it out. And then we can begin to ask why it happened and what can be learned from this.

As for Brexit, it will take two years for the reality to set in.

How can there be so many things going wrong these days?