The Turkeys are a-Clucking

My wife has suggested, make that strongly suggested, that I make these articles shorter….I replied that our name is Little but there is lots of news! ? All kidding aside, this column is starting to have a serious impact on my time. I don’t think any of you realize exactly what it takes to collect apparently important material, winnow it out, then verify everything so that I can maintain my original pledge of “only facts” (in this day of ever-increasing spin and spun ‘alternative facts’, the line between reality and farce is becoming increasingly difficult to discern). There is rarely an issue where the printed back-up of printed sheets is less than ¼” thick and the stack often exceeds 1”. So please bear with me.

On November 12/19, Carrie Lam was reported in Bloomberg (hereafter referred to as, BBG) as, ”refusing to budge on the demand by the protesters” (and, indeed, as we shall see later, by the vast majority of the people in Hong Kong as well) re: the issue of an inquiry into the actions of the police (whose actions subsequent to this date were even harder to defend) – on November 25th/19, after the results of the HK elections clearly delineated the electorate’s feelings on this and related matters, she remains manifestly obdurate. That character trait, while well known in donkeys, does not do her or those who call her moves any favours.

Almost three quarters (exactly 71.2%) of the entire list of eligible voters cast their ballots and their unequivocal support for the diametrical opposite of the current status quo cannot be gainsayed. The people are showing that they will not be ignored and that it is not going to be ‘abrogation of their rights as usual’. When 86% of the seats go to one’s opponent, one cannot just ignore the reality, much as one would wish to do so – but this arrogantly aloof attitude is exactly what led to the initial situation and the subsequent escalation thereof. It should be noted that most of the people are not interested in democracy as much as they are in a government that acts responsibly and in a police force that acts appropriately and professionally according to the civilized First World standards for which it was previously respected throughout Asia.

Stephen Lo, the then Chief of Police, delivered the commencement address to a group of graduating officers the day before he resigned – in it he referred to polls taken in previous years showing support and satisfaction for the police at a truly enviable level (84% in 2018). No figures were released for 2019 but I referred in a previous GG to an unofficial poll taken a few months ago showing support in the low 30% range, and that was before their latest provocations (eg: deliberately shooting a protester in the chest from a distance of 20 feet). At the same time, the motto of the police force, which was, “Pride and Care” has now been revised to read, “Honour, Duty, and Loyalty”.

It is hard to convey to people who don’t understand the mindset just how disturbing this change is – before, the onus was on “pride” of work and responsibility for “care(ing)” of (and for) the people – now, the “duty” is to be transferred to “loyalty” for the state apparatus and apparatchniks. Following right along, Mr. Andrew Sheng, a former chairman of the Hong Kong Securities and Futures Commission among his many singular achievements (who now lives in Beijing), wrote an opinion piece for the Project Syndicate on November 26th, 2019.

In it, he espouses that it is “the right and responsibility of China’s central government to intervene” and that, “Hong Kong protesters have made intervention unavoidable”. Lest the reader not be fully convinced of the bias, he went on to commend the police by stating, “Hong Kong’s police have shown considerable restraint”, this irrespective of the fact that they have been independently castigated for their actions at the UN by multiple parties. I won’t cite more quotes – read it for yourself and see how the cookie is disintegrating. One final thing on this article, though – you can see a common thread about blaming someone/anyone else for the problems, starting with Beijing’s comments about, “the black hand of the United States” in allegedly fomenting the discord in Hong Kong. Mr. Sheng acknowledges that there were “persistent (HK) governance failures” but ascribes them to their, “remain(ing) committed to (the) outdated colonial-era principle(s)” – surely someone of his acumen could not just forget that the Handover of Hong Kong to Beijing’s control occurred 22 years ago and that the Mainland government has multiple times claimed credit for Hong Kong’s numerous successes during the same interval.

Notwithstanding the headline in The People’s Daily on November 18th/19 with the contention that there is, “No room for compromise with Hong Kong protesters”, it should be noted that:

1. They cannot put (almost) all of Hong Kong in jail
2. The people of Hong Kong did not cast a vote for mayhem – they cast a vote for responsible governmental order, something that has been sorely lacking and, judging from the political leadership’s reaction subsequent to the vote, is still lacking. It is long past time for the government to say, “mea culpa”, and institute some of the needed changes, starting with something that almost everyone in Hong Kong agrees is necessary – an independent inquiry into the actions of the police in the last 7 months.

Not many people in Hong Kong are going to have any positive feelings for any system where, according to SCMP on November 19th/19, “Mainland legal scholars said (that the) Hong Kong Court sent (the) wrong sign regarding the face mask ban” ie. when the Court upheld the appeal against said ban. The Court ruled on the basis of law, not on the basis of something that the government wanted irrespective of the established legal code. If the rule of law is not the rule, then of what use is it and of what use is obeying same? And, if there is no respect for the law, how can there be any respect for the government that makes it and subsequently and arbitrarily ignores said laws at its own convenience?

Hong Kongers do not want their system to be depreciated into one where there is “loyalty” to the state irrespective of whether it merits that support and where criticism of same can result in arbitrary imprisonment. When a system promotes legal scholars who espouse ignoring the laws, that is not a system that values its citizens. And stating, as the Government of China did on November 21st/19, that the passage of legislation by the USA that supports the free will of the Hong Kong people is, “slandering China”, is not going to be received positively by anyone other than the people whose myopic behaviour precipitated this situation in the first place.

So that’s Hong Kong for the moment. Regarding China, the economic news is increasingly bleak, very sorry to say – when times are good, people are happy and reasonable; not so when the news is bad and the clouds on the horizon are black. According to the Wall Street Journal on Nov. 12/19, shipments of containers into Long Beach/Los Angeles are down 14.1%. They tried to spin this somewhat by saying that some of this decrease was due to companies buying in advance of the implementation dates of various tariffs….but, with all due respect to that illustrious publication, I strongly doubt that companies brought in Christmas inventory 6 months to a year early, don’t you?(especially considering that same would have to be ordered at least 2+ months in advance of being shipped – just saying).

More spin – according to Reuters, also on November 19/19, the top 200 companies in China have all reported earnings to be way ahead of market expectations. That sounds like really good news – and then one finds out that expectations were drastically lowered previously. Moreover, as most of this group are State-Owned Enterprises (SOE’s), the reader may have noted that they have a past tendency to report what they want/told to report. To wit, I reported in GG#31 that the SCMP on October 27/19 reported that earnings were down.

And yet more spin – Xinhua on November 19/19 reported that the head administrator for foreign investment at the Ministry of Commerce (I’d give you his full title but I am trying to keep this article short ?) stated unequivocally that there has been “no large scale retreat of foreign firms (from China)”. So all these firms going to Viet Nam are coming from where exactly? Or maybe, when they leave, the Chinese are considering them to be Chinese firms – you say shite and I say shit.

Nouriel Roubini, an economist who I think has an absolutely sterling record, stated on November 20th/19 that, “The financial markets’ new exuberance is irrational;”. That is something that I have been saying for over a year and no one took me at my word and I doubt that anyone is going to take him at his…..but things are getting choppier and choppier and paper is getting iffier and iffier.

Home Depot (BBG Nov. 19/19) reported that their sales missed guidance and would continue to do so for the final quarter….Alibaba reported that sales on Singles’ Day were up 26% to north of US$30 billion – impressive until one takes in the fact that purchasers were from a much larger demographic than encompassed by previous measurements (and still no information as to how much the average sale was).

According to the New York Federal Reserve, in a report dated November 26th/19, “US tariffs have had little effect on import prices” – in other words, Chinese suppliers have not been swallowing all or even part of the tariffs as Trump, Ross et all averred that they would (and Wal-Mart tried to enforce). Chinese suppliers, as I have stated previously, were already running close to break-even and had and have no more room – the entire 25% is being passed on to the American consumer, and the results will soon be enough in evidence that this insane exercise will hopefully be stopped in its tracks.

A few weeks ago, a China SOE steel company (Xiwang) defaulted …now a massive state-owned conglomerate (TeWoo) has done so. And another relatively small Chinese bank (Yingkou Coastal Bank)is in danger of collapse to the point that tellers were shown with huge stacks of RMB at their posts, in order to ‘reassure’ depositors against making a run. In the meantime, the Chinese Government is proceeding with a bond for 6-7 billion in US dollars, all the while trying to inject more and more into the economy to keep it liquid (100’s of billions of RMB in the last 2 weeks alone, and that’s just the official injections from the Central Bank).

It is necessary to point this out that this is all happening even as the Bank has been warning about the increasing level of household debt, which is now equal to a total year’s household income (Financial Times, Nov. 26/19). Moreover, economist Nie Wen, of Hwabao Trust in Shanghai, pointed out that consumer inflation is high even while the producer price index is and remains negative, while Xinhua reported (Nov. 12/19) that retail sales are up 8.1%.

If all this data seems difficult to fathom and to be missing key parts, welcome to Evaluation of the China State Economy 101. The Wall Street Journal on November 21st/19 addressed this very issue, by finally calling attention to “disappearing data” from the Central Bank vis-à-vis the breakdown of loans. I should point out that the words, “disappearing data”, are misleading – there is nothing wrong with the word data but something cannot be disappearing when it never existed. Perhaps the opacity of data might be a better descriptor…since 2016 the Bank of China has not been forthcoming as to the breakdown of loans in its economy and, moreover, has been playing 3 card monte with the data, shuffling it here, showing it there, renaming it somewhere else, combining it, slicing it and dicing it – but the smell lingers on, and it smells like Soochow Creek on a hot summer day.

Where does it go? Uber lost their licence to operate in London – according to The Telegraph on September 26th/17, there were 40,000 Uber drivers working in the City. Add that to the number of people leaving because of Brexit, the number of multiplier jobs lost because of the same reason, and then add this to the mix. It seems that there is no cause for exuberance anywhere – must be that Canadian cannabis! The ‘olden days’ seemed simpler, when turkeys were on the plate, not on the ballot.

Thanks for reading. Happy (American) Thanksgiving.

Comments/suggestions?

Bennett Little
benlittle@facetedproducts.com

Global Gab #32