Common Cents

The Corona Restoration

Ralph Murphy

(7/1) A late May announcement by the American State Department that China’s " one country, two systems" policy of dual rule relative specifically to Hong Kong was violated by recent Beijing security legislation and it would further affect trade status between the regions. The new law was targeted at an article 23 anti sedition provision of the regions Basic Law Constitution drawn to mutual accords following independence from a hundred year lease agreement of the peninsular region from the British starting in 1997. The new law was the first successful introduction of long sought wresting of pillar control by the communist party following demonstrations the locals couldn’t suppress. The real winner isn’t clear yet but it does affect world trade ties and has allowed for a formal security Peoples Liberation Army and civilian security presence that had previously not been staged.

The original accords promised a fifty year period of relative ruling autonomy for what was to become the Special Administrative Region of Hong Kong. China was pejoratively dubbed "the iron rice bowl" for its work and food guarantees up to Maos death in the 1970 s. There had been reformist movements at the time of its implementation and the subtle understanding China would move toward an independent.market economy, not a communist totalitarian one but it remained officially hard left though embraced by world leaders as an equal. It was mostly sgrarian to product base. There was limited steel or other labor intensive industry as coal mining that could generated export earnings. Hong Kong’s independence levels are now unclear following the Peoples Congress ruling seizing a security role. It effects trade ties as many federal functions were performed by the regional governing authority as a de facto nominally independent nation.

Similar to Singapore the port area of Hong Kong is strategically valuable and if a nation was described as one of the top five to rotational earnings in the Far East. Port fees alone would likely sustain its regional population of over seven million to normal circumstances. Despite its many trade advantages and international projection the politics were awkwardly fragmented. The lower house has twenty parties in a seventy seat legislature and initiatives were gridlocked or muddled despite broad control potential. The 1997 Basic Law guaranteed it relative autonomy in the fields of "trade, finance, monetary, shipping, tourism, communication, cultural, sports and security". Only. Macau, a cross Pearl Delta Portuguese concession would share that status as a similar SAR.

There was an attempt by Beijing last year just before the Covid 19 control angle to enforce a legal regimen involving extradition where Hong Kong " nationals" could be tried in mainland jurisdictions. Massive street demonstrations followed as the locals feared it meant mandatory resettlement or reflected arbitrary controls they were otherwise protected against. Hong Kong officials couldn’t or wouldn’t suppress the demonstrators. Beijing sent in troops and also drafted the new protocol which was targeted at security but reflects a pillar breach in local rule. Hong Kong fears the other areas especially trade controls will follow but for now the " one country, two system" designation hasn’t been dropped by their policy commitment.

Beijing has tried this exact same security reasoning for an increased physical presence to the peninsula in 2003 but were beaten back by demonstrators and international condemnation of the areas breach to legal .autonomy. Citing a health concern SARS or Severe Acute Respiratory Syndrome the acronym near paralleled SAR or the political control understanding. It was an apparently scripted ploy similar to the coronavirus one. They became world issues when adopted as a pandemic by common World Health Organization accords. it led to the face mask requirement and other restrictions as "stay at home" orders to regions as an internal problem despite realistic distancing. Their efforts now -here and there - are apparent rallying means more for political mobilization than justified by event circumstances.

There are several themes which have to be explored at this point as the interlocking of really dissimilar lead objectives can and have gone badly wrong. Confusing non productive social interests as group control with its foundational product base has proven costly. If an activity doesn’t register on a national income earnings statement it’s an esoteric that might serve as groundwork for that type value but is otherwise likely just that groups interest. In a free market there’s ideally no barrier to consumer demand or production other than resource or incidental cost. The integration if any is in product selection as brokered by price, not an input requirement that reflects a control authority’s vision. Central planning personifies the latter and while an objective may be realized the give and take costs are often extreme. Just keep opposites apart as circumstances warrant.

Resource allocation "guess work" never approximates selection by the demand signals of actual desire to purchasing. Specific to China the pacifist constitution and overnight vast wealth appearance. appealed to a group of wishful thinkers who transferred huge sums of western bank and tax overdraft to support that "economic miracle". The miracle was that we survived the transfers as federal authority here did catch on to the scams of that era and neutralized it along with the legal affordance to leaked our money. That left a defunded set of political control groups clamoring for a rebound. The Covid 19 scare might have worked to redirect real cash if the equity or earnings source was still vague. From tax reviews to bank regulators it isn’t, the varied law enforcement bodies are closely counting outflows or tax intake that had drawn little scrutiny when alternate, mostly bankers, were trusted.

Plurality presumed to varied political control has control parameters within natural system bands. If one group seizes unitary type control despite their professions or intentions there is inevitable violence. That is a defining feature of political extremism and depending on their leverage they can establish a social order around it if they make the survival minimum. Politicians or social leaders often abuse control levers to reconcile the masses to their vision but a dissident interest is likely " born every minute" and has to be dealt with given regulatory variance requirements. Equal opportunity versus forced introduction of a central vision that doesn’t even recognize others utility or sales potential, even existence has proven expensive.

Managing diversity to intrinsic optimal activity placement versus domination of completely dissimilar ones is optimal and the clearest path to stability and growth. If systemic the product can be used as errant, but the production phase is inherently non violent as is that social order.

Hing Kong was run as a key tropical port with earnings guarantees reflecting that basic need. In the 1980s there was the political resolve to increase plurality and diversify in the closed economy. It was tacitly understood the Maoist republic would follow other western ones in shedding single party rule. In Spring of 1989 Tiananmen Square in Beijing became the "high water mark" for that movement. Unlike European overthrows or buyouts, however, there was a violent suppression of the demonstrators that institutionalized the hard left in power. Reform efforts were later resumed but unsuccessful. There must have been some type of western planning understanding that couldn’t be adjusted as that nation should have been isolated as simply too focal different. Instead the west engaged as if the plurality groups of the 1980 s had won. There wasn’t enough social loft so they added to or carved Special Economic Zones externally controlled in 18 major provinces. Mostly coastal initiatives Beijing allowed for them in a control environment that did guarantee their personal placement in seat party or governing control presence alone.

Operating under "four principles", the control outsourced dealing in "foreign capital, joint ventures, were to be export oriented and free market guided" Shanghai region on the east coast had a separate status as a Free Trade Zone which made it nearly as colonial an appendage as old Hong Kong. Almost all the major western multinational corporations of varied fields from large enterprises to small in automobiles, planes, shipbuilders to primary goods producers as steel or aluminum for whatever reason were encouraged to relocate to those areas. There were limited tax or regulatory advantages. It seemed a type move where the mystery of the orient matched their pacifist social. It wasn’t their earnings, however, and when sourced to theft overdraft, non performing subsidies, tax scams, or ghost systems the set up teams had no explanation for the movements costs.

Hing Kong itself was still doing well to self rule through last years extradition bill and then corona linked crackdowns. Unemployment was less than 4%, rotational foreign direct investment remained in surplus and external allies did continue support, even when Shanghai replaced it to mainland projects. It had its own currency the Hong Kong dollar which predated the communist revolution and is listed as a separate top ten world trade currency, It was provided by a unique banking arrangement involving multi national HSBC and Standard Chartered Ltd. along with the Bank of China that could issue their own bank notes under the Hong Kong Monetary authority now threatened by the PLA.

All those coastal SEZs are near collapse since the West largely pulled financial assets from the region since 2016 when the extent of the transfers became a national security threat. One of the biggest ever given levels of trade flows. There were other projects such as the "belt and road initiative" that lost arbitrary fund access and curtailed or terminated. It left officials in Beijing scrambling for cash and Hong Kong was still solvent up to this years control effort. Repatriated cash use is unclear to other sourcing, though it’s now in consumer not planners control, so can reflect actual demand not hypothetical or artificial ones of the planning group. It could even return if sales warrant it.

The status of the SAR is again unclear to official policy. The Americans and several allied investors to the area have determined it now effectively "one China" which may be what Beijing actually wanted. The party policy remains Hong Kong regional authority is one of two formal SARS until further notice so trade dealings can reflect it. Again the ruling authority is strongly divided, the monetary one relies on the banks that are weak multinationals with cash need elsewhere so can’t be counted on for regional stability or investment. Despite the formal sovereign control by China as one nation, Hong Kong did have its own external trade policy. The tariff issue of recent concern between Washington and Beijing was officially divorced from theirs. Most trade did funnel through the mainland so it seems a convenient access venue to avoid that law.

The State Department cited specifically defense trade would be impacted with the new status of one China void of any other designation to the SAR status drop. England has promised citizenship to many of the nationals if the PLA does enforce security restrictions. Taiwan said it would take in political refugees. Japan was also a recent top investor there and on the mainland. Tokyo has offered now to pay repatriation or movement of production facilities to more stable regional nations in a reverse process of cash flows.

There might be value in some form of constructive interaction with China but at present they have to be isolated. A non inclusive command group is scrambling for money to maintain very unlikely lifestyles given their equity or sales interests and that included the Hong Kong control effort. Miracles are generally hidden transfers, in China’s case it proved too costly leaving the west with its campaign themes. I don’t believe in the pseudo warmth of their social leverage given event costs so can’t follow them, but that system does lack real equity or strength and the Coronavirus is mostly a redressable bluff symptom of it and seen from that perspective as Ill defined thrust.