Eldon-Online

For The Record ...

My intended quiet return to do something very part time, very non-executive for an unlisted 100% owned subsidiary of an HSBC company seems to have been derailed rather. But there we are - it happens - or some such expression!

I thought that rather than making a big fuss - not my preferred style anyway - I would just get on with it but there are now a few stories emerging, as they do, so I thought a brief note should answer most of the questions raised so far - and maybe answer some that are still "back of mind".

Firstly; Am I completely nuts? Undoubtedly!

I mean let's face it, who in their right mind would return to an industry that is still on the top of everyone's "hate list", and to a region where political strife, battlefields and "hit lists" are the current order of the day? So - to paraphrase Teresa Norton's old SCMP column opening line ... "Yes, I must be nuts!".

Much has been made of my "return from retirement". Technically correct of course insofar as the Bank is concerned, but I have hardly been retired for the last six years and have maintained an active working lifestyle, as those around me will testify. In particular my friends in PricewaterhouseCoopers where I will be remaining as Senior Adviser, but also a variety of other institutions.

My term with the Dubai International Financial Centre Authority (DIFCA) - which I have thoroughly enjoyed, was coming to its natural end this coming month. I think five years is a good run, they have a sound base from which to go forward, and we will part on mutually excellent terms.

Will I relocate to the Middle East? Actually, when I became Chairman of the DIFCA many in Hong Kong thought I had moved to the Middle East then. I am still surprised by people asking me if I am in town for long, from the Middle East.

Fact! I never moved to the Middle East, and will not do so now. Hong Kong is my home, and it is where I am staying.

What is my role? It is as non-executive Chairman of HSBC Bank Middle East Limited (HBME). The Bank, as I stated above, is an unlisted 100% subsidiary of the Holding company. Previous Chairmen of HBME have come from Executives within the HSBC Group, and therefore as a non-executive I believe I bring an additional degree of independence (those who know me will say very independent) to their deliberations backed by a 40+ year association with the region. My role is to run an effective Board and ensure, with my fellow directors, that the Bank's policies and strategies in the Middle East are proceeding in line with the Group's stated aims - as well as providing advice where I can.

Why am I doing it - or as one person wrote to me - "don't you like the idea of retirement"? Indeed - a good question. I could say, "because I want to, and I can" but that sounds a bit too flippant, even for me. How about, "Because I enjoy working and being active, while I can"?

After Stuart Gulliver knew I was coming to the end of my time with the DIFCA, which was after he had become CEO of the HSBC Group, he asked if I would have any interest in taking on the role in HBME. It was as simple as that. Stuart knows my background in the Middle East and he is, like me, also aware of the growing synergies between the Middle East and Asia - where I also have a bit of experience. 

Happily, my contacts in the Middle East have remained over the years, I am still able to put one foot in front the other and am not totally gaga; (other than agreeing to take the role on at all, of course!) 

And there you have it!

I hope that I will contribute satisfactorily once again to HSBC (of which I remain a shareholder!) - and that we can get through what is undoubtedly going to be an interesting and difficult time in the region.

History Lessons, China and Books!

In this helter-skelter world we have created for ourselves, we all need to pause for breath sometimes. The stresses and strains of our present world are certainly challenging, and are clearly different from those of our forefathers, but they are not necessarily any harder to deal with than the difficulties they faced in their time. And as one of my friends never tires of reminding me, it is foolishness to believe that we are living in the hardest of times and that everyone else before us had it so much easier.

History, therefore, still has many lessons for us from which we can learn because, no matter how many times you hear “it is different this time”, very often it isn’t!

And so to China.

I received a message today from Korea saying that all my recent blogs seemed to have a China focus, and wondered if China was really top of my mind all the time. Short answer – no – but living and working in Hong Kong, and spending a lot of time on the Mainland makes one very conscious that keeping abreast of what is happening in that country is not just important to me, but also is important globally, and I want to know what’s going on as far as I can. That said I should admit that not for one minute, despite my long engagement with China, would I ever consider myself to be an “expert” on China. I am a foreigner (a westerner, if I am to be more specific) for a start, and therefore I think differently. In this respect, I am drawn by a line in a book I have recently been reading – more of which in a second – which says plainly “If dialogue between Western nations and China is to be successful, we must stop thinking of ourselves as missionaries of a superior civilisation … “. I like that.

Regular readers of my Blog (thank you!) will know that I have delved into books written a long time ago that have provided lessons for today. The best recent example being the descriptive book about the lead up to the Global Financial Crisis we have just witnessed – the causes and the aftermath, that was written in 1875. And now, in part, I have another on the subject of China sent to me by an extremely thoughtful young man with some great ideas and a somewhat extensively varied taste in literature.

Contrast, if you will, the following statements:

“The more the economy develops, the more attention we need to pay to strengthen social development and ensuring and improving people’s wellbeing” 

with

“I think the cultural  [and social] questions are the most important, both for China and mankind; if these could be solved, I would accept with more or less equanimity, an economic system which ministered to that end”

Frankly, I don’t see a huge difference in the meaning implied between the two, but they were uttered 89 years apart. Perhaps what gives away the second statement as being the older of the two is the style of the writing. But when were these statements made? The first of the two was Chinese Premier Wen Jiabao at the last National People’s Congress in March 2011, the latter came from the pen of British philosopher Bertrand Russell in his book “The Problem of China” written - or at least published, in June 1922.

As you will have now realised,  Russell was also the author of the earlier quoted piece in which I changed a couple of words to make it sound more modern – for example I changed “intercourse” to “dialogue”.

And in his 1922 book there are almost what I would describe as “throw-away” lines like “In the long run, I believe that Japan must dominate the Far East or go under…” (it certainly looks as if that is the direction in which it is heading at present), or “The Chinese nation is the most patient in the world; it thinks of centuries as other nations think of decades”. Something that we all say today. 

The only point I want to make is this. Our ideas about “new China” are actually not that new. It is when you read a book such as the one mentioned – despite some of the changes and actions that took place in the world since the time the book was written until now, and significantly in China itself, the issues we grapple with today are not necessarily hugely different from the issues that were being identified and discussed nearly 100 years ago.

Perhaps enough on China for a while, as I think about inflation, the global economy, oil prices, gold, the Middle East as we move towards the start of the next phase of this turmoil – and that’s not over yet, unemployment, nanny states … so many things on our minds. 

So, take a good (history?) book, find a shady tree … and explore the past; it is bound to come by you again!

 

 

A Quiet Neighbourhood in China

It has been rather feast or famine-like with my Blog in the recent month, but perhaps the colder weather is beginning to fade away and my fingers have thawed out sufficiently to make them active once more. Or maybe it's just because I have come across a couple of more interesting topics (to me anyway) in the last week - and short ones at that (except for the length of the accompanying video clips).

In fact this particular topic first came to my attention a couple of months ago in an excellent review (relatively short and readable) put out by Ben Simpfendorfer of Global Strategic Associates in his 1 February publication China Insider. The piece, entitled Housing For Everyone can be downloaded free (for the time being) if you go to the website by clicking on the link - and if you like it, you can subscribe. Point of disclosure - I have nothing to do with the company, the website, or anything - I just happen to think it's a good one.

And just as an aside Ben, who is an economist and strategist, is one of few Westerners I have met who speaks Mandarin and Arabic fluently (I think Japanese as well - and yes, his English is okay too!!). It certainly gives him a unique perspective of two important regions.

His article dealt with the "problem" of new towns, built at great speed, to house displaced workers and to encourage others to relocate into these new townships. But whole tower blocks in communities stand empty and silent. As he says in his article, it is not often he would risk standing in the middle of a street in China to take a photograph - but he was in no danger of being run over by anything (bigger than a stray cat - my addition)!

Then, while this was still on my mind, I was sent a link a few days ago to a clip that aired on an Australian television programme called Dateline. The piece was entitled "China's Ghost Cities". (Click the link). My finely tuned antenna and deductive brain sent a message around my operating system - could these subjects be linked? Well of course they were! Sherlock would have been proud of me.

The sobering revelation in the TV clip is that there are estimated to be 64 million empty apartments in China. Now, that number would comfortably accommodate the population of Britain - well maybe not entirely comfortably for everyone - but that is the sort of scale we are talking about.

Of course you can skew numbers to fit them into any scenario you want to promote. For example, the man interviewed who was living in a hutong in Beijing because he couldn't afford an apartment was, according to one of my China experts, from Sichuan. The clip did not say whether he had any property there because, if he did, he then had two properties with the second being in one of the most expensive cities (for property) in the world. Impressive.

But that's an aside.

The point I really want to convey is this. In my last Blog I wrote about the citizens of China beginning to speak up - and be heard both inside and outside China - particularly on issues such as pollution and corruption. Now we hear about similar things - although this time it is perhaps a mixture of corruption and just plain greed. And when citizens become restless they start to agitate - as we have seen in the Middle East.

I am sure that while, sadly, there are some who would like to see China fall flat on it's face, I do not believe that it would be the best outcome for the global economy. A stable China - whether you like it or not - will be better for all, but I am sure the Chinese leadership is well aware of that.

Bob Dylan sang in his 1964 release "The Times They Are A Changing" (I wonder if he sang that one two nights ago at his first ever concert in China?). It has some appropriate lyrics, that's for sure!

Speaking Out In Modern China - Something to Watch!

It seems that China never fails to raise extreme opinions when discussions on that country take place, wherever you are in the world. Everyone has a story, covering everything from strident condemnation of unfair practices to those who believe that China is a miracle that has happened through its progress during many of our lifetimes, rather than after.

It is certain that China has made remarkable progress over a relatively short period of time, but would acknowledge itself that it is far from perfect. And it continues to improve generally, slowly perhaps but surely. After all, marshalling 1.3bn people cannot be easy from almost a standing start a little over 30 years ago. 

It has been the case that the people of China suffered the indignities of corruption and badly behaved officials. Actions of people who had suddenly been given power but who were not trained for it. Much, perhaps, in the same way that officials used (?) to behave in the West before the people decided enough was enough.

Well such changes are now beginning to take place in China; documented changes, where people spoke out - even fearing reprisals from local officials and recorded in a film that was nominated for an Oscar in the 2011 Academy Awards. The Director, Ruby Yang has received an Oscar before (in 2007), and clearly has an eye for a story. The documentary, which did not win the Oscar on this occasion, is called "The Warriors of Qiugang", and was filmed over a three year period.

If you have the time and the inclination, get a cup of coffee and close your door for 40 minutes to watch the story - which I have "linked" above.

If this is going to be repeated in many towns, villages and even cities across China, we are going to start seeing changes inside the country that will be powerful, will quite probably cause trouble for a while, but will leave China a more open and accountable society.

Just Another Chinese City ... Not!

I had a conversation the other day with a young woman who has aspirations to return to her studies, and to do so in Britain. She has already received acceptances from two very good colleges in London - and "all" she needs now is to obtain some funding by way of a scholarship, and she's working on it. But something came up during the conversation which caught my attention.

She started to talk about sub-sovereignty, in so far as it applied to Hong Kong and wondered where the "boundaries" were. China through the Basic Law, she said, authorises some autonomy to Hong Kong to conduct "relevant external affairs", but where was the dividing line between "external affairs" and "diplomatic relations"?  Good question and one, by the way, that I am definitely unqualified to answer. However, there are plenty of people out there who could undoubtedly give chapter and verse of the legal answers - probably shrouded by intentional ambiguity.

The question set my thoughts in another, but related, direction. To be honest I had never really thought of Hong Kong as a sub-sovereign state; no one had used the term before in conversation.

Under British jurisdiction foreign policy had been directed out of Westminster, defence was provided by Britain and the Court of Final Appeal was, I think, the House of Lords. It was therefore not a huge shock to discover in 1997 that China was going to take on all of those responsibilities. Hong Kong, after all, was being returned to the "owners" who had it before the 99 year lease. (And before anyone starts, I am well aware of the distinction between the "barren rock" itself - Hong Kong Island as described by Lord Palmerston in 1841- and the land in Kowloon actually leased from China).

But this sub-sovereign status is pretty unique, and I would argue it is of benefit to Hong Kong and is something we should promote rather than risk sinking into the state of being thought about as "just another city in China" - and a pretty small one at that.

So, the Foreign Ambassadors go to Beijing while the Consuls are here. Defence is provided by China and although we have a very good Court of Final Appeal there are still those tricky issues that need a Beijing clarification. But despite these diplomatic, legal and defence issues Hong Kong is a member of APEC in its own right. It is represented at the WTO. It appears in all the top sporting events, subject to qualifying but including the Olympics in its own name and under its own flag - Hong Kong.

Here we are with a population of around 7 million (yes, I know it's a bigger human population than New Zealand) rubbing shoulders with mega countries, ostensibly at least on an equal footing. Given this privilege, you have to wonder what areas like Chongqing Municipality think about all this with a population of 34 million give or take a million or two. Don't you think they would like to appear at the Olympics with their own flag, given half a chance? Or Shanghai appear at APEC meetings? Or actually any one of a dozen bigger Chinese cities with mega populations?

The issue for those cities is that they are just cities in China. Hong Kong has a different place! We have something privileged, unique and special. We do, though, need to walk the walk and talk the talk. We still get bogged down by a narrow minded mentality and we argue about the minutiae. The latest Government budget, for example, was not ideal - but get over it. And to those who say that it has made us a global laughing stock - I think they overestimate the impact this sort of news has on the rest of the world. A pretty big yawn is the usual response.

And another thing about Hong Kong. In December I wrote a blog about some predictions I had made at an Economist event in Hong Kong for 2011 (If the video clip works, I'm the fifth clip down).

One of my predictions was that Hong Kong would overtake both New York and London to become the number one Financial Centre in the Global Financial Centres Index (GFCI) in either March or September 2011. Well it hasn't happened in March, but the recently issued GFCI report says "... there remains no significant difference between London, New York and Hong Kong". Despite the best efforts of the naysayers about Hong Kong's talents and skills, and while the push to number one in the rankings will need firm action over the next six months, for Hong Kong to be recognised in this manner is not a bad achievement. It is a pity that the critics seem to come from within Hong Kong itself.

So can we please look forward and outwards? We are unique. We are in some good company. We are sub-sovereign - not sub prime, and we should act like we deserve the attention.

No Quarter ... A Bad Three Months

The incoming email said it all. "Do you think there could have been the start of any year more eventful than this one?" it read. 

In our modern era it would be hard to find, I think. Australian floods, New Zealand earthquakes, Japanese earthquakes and tsunamis. The latter complicated by the damage to the nuclear plants and the revelation that Reactor 3 appears to contain a little more than "household fuel"! If that is true, in non-nuclear proliferation treaty signatory Japan, I think they are going to face some serious questions not only from the global community but also from their own people. No wonder they were so coy with their initial information. But just as an aside, does this particular disaster reinforce, and maybe for many years the arguments used by opponents of nuclear fuels that they carry risks that are not yet fully containable? Personal view - it may slow the process and will force users to re-examine the safety of their installations, which will not be a bad thing, but eventually the world will adapt to nuclear programmes. In the meantime we remain in the hands of fossil fuels - for which there has to be a finite end, and no current alternatives.

But natural disasters have only been a part of the incidents that have disturbed our first quarter. We had/still have the Middle Eastern turmoil on which I have already commented and may do again reasonably soon. There have been some recent developments - Libya in particular about which more in a minute. Saudi Arabian and UAE troops moving into Bahrain to restore order; an interesting development in that it indicates solidarity within the GCC, but indicates a more confrontational stance vis a vis Iran, with which country the UAE in particular does a great deal of business. (And why has Iran been so quiet -not all well at home Mr Ahmadinadinnerjacket?) A greater focus on Saudi Arabia where the main troubles seem to have been confined to the ultra religious and Shiite Eastern Province but also where it seems clear that while the reform-minded King Abdullah is generally popular, many of the extended Royal family are not. Syria now, as you will have read, beginning to rise - rather as expected, and demonstrating in the process that you don't actually need the Internet, Facebook or Twitter to organise a rebellious uprising. But it is not just the Middle East that is having problems – look at the Ivory Coast.

And back to Libya briefly, where Western politics and NATO in particular seemed at one point in time to have "failed" the revolutionaries by their dithering. While most people in the democratic West would, rightly, have trouble agreeing to intervene in the affairs of a country that was being led by a democratically elected leader, this cannot apply in the case of Libya.

While the rebels originally said they would like to achieve reforms themselves without any outside assistance, it rapidly became clear that this was not going to be an easy task against a trained army and an apparently trained air force. A "no fly" zone was proposed, which was a measure even supported by the Arab League as a means of preventing air attacks by Libyans on Libyans, but it just took too long to agree on its implementation showing up the defenders of world peace as being incompetent, indecisive or just incontinent.

At least we have the sight of senior Libyan Government officials beginning to defect and that is a welcome sign, while negatively at the other end of the spectrum we have coalition forces now mistakenly blowing up some of the rebel forces. I hope they work out who is who sooner, rather than later!

By the way, I have seen suggestions somewhere that all these political problems in the Middle East started as a result of the revelations in Wikileaks. I would think not, and wouldn't wish to give them credit anyway – but I am sure someone soon will start trying to pin the blame on “Leaks” for the natural disasters! I have also read, and indeed been on the receiving end of emails that blame the media for exaggerating the magnitude of the natural disasters. I mean, the media doesn’t always cover itself in glory, but it’s hard to exaggerate human suffering when you have the pictures. Just be thankful you are not in the middle of any of it. 

Meanwhile back in Hong Kong we are still fussing about underground trains being 5 minutes late very occasionally, and castigating our beleaguered Financial Secretary for handing out small sums of money to the population. You know, we really need to think a little bigger than we do and realise that we have some advantages that are quite unique. But I will write about that in another blog. 

Report on the First Quarter of 2011? – Natural disasters have dominated, heralding perhaps a further shift in our climates within its 500 year cycles, political tensions principally in the Middle East and the economy limping along in rehab in the West, faring better in the East, but keep an eye on China.