Monday, October 20, 2014

Communist or Capitalist - What's in a Name?

Support for Free Market System

This year's Pew survey on global attitudes towards future wealth is full of intriguing questions and results (is Life Success out of one's control? Will the next generation have a better future than yours? Is Inequality a major challenge? How important is education and hard work to success?). Not surprisingly, there is a strong correlation between a nation's economic growth and its people's overall levels of optimism.

Among the polling results, the question posed in the graphic above produced a particularly curious paradox: Vietnam and China, two of the world' s last remaining so-called Communist countries, are among the staunchest disciples of the free market economy. This result may be causing Karl Marx to stir yet again in his grave. More likely, however, he is remaining stock-still, having long ago abandoned delusions that his collectivistic prescriptions are still being followed anywhere.

Hope, mixed together with industriousness and dashes of ingenuity, is a powerful tonic for getting people off their butts in the quest to make money and improve their lots. In underdeveloped markets, people generally seem to believe that there is nowhere to go but up, so why not go for it. Meanwhile, the emerging markets of Asia have had a taste of growth and its people seem hell-bent on continuing to chase their fair share of it. Ironically, perhaps, it's the "old world' countries of Europe (and surprisingly Japan) that seem to have gotten lost in their belief in free enterprise and prefer to paw through what goodies there might be for doling around by the welfare state.

Another intriguing driver of hope lies in views towards wealth disparity, as laid out in the table below. Here also, Vietnam and China - two countries that have whoppingly wide wealth gaps and high Gini-coefficients, seem least concerned about the notion that there is a thin, dense layer of cream at the top of their economic cakes. These people might have chosen to take their pitchforks and protest banners out into the streets and seek to topple their lords and masters. Instead, the people of these countries simply want to keep their noses against the millstone and grind out more money and better lives for themselves. Good on 'em.          

Inequality Seen as Major Challenge

One final note: the communistic North Koreans were not included in this survey. Had they been, there is little doubt that, given the importance over the past few years of the free-trade and black market for goods in keeping the citizens alive at even a subsistence level, they too would have also given the wild and wooly practice of capitalism a big thumbs-up. 

Friday, October 10, 2014

Hong Kong - Cronyland

At the risk of adding yet more blah-blah-blah to the global debate about Hong Kong's Umbrella Movement, the table above speaks volumes. Therefore, little else needs to be said. The table from The Economist was initially posted on this website in March of this year (for full report, read Asia One Percent: Crony Nations). Some of the consequences of this level of economic disparity are now on full display in Hong Kong. Repression of economic, political and social opportunities in an advanced, educated society simply leads to baaaaad things.

Thursday, October 9, 2014

Robbing the Baron

Hey, seen a maid sporting a Rolex?
No one should feel amused to hear that someone has been burgled. However, if that victim happens to be Hong Kong's Cecil Chao - the property billionaire who has made a second career of openly serial bachelorhood, and who has famously offered HK$500 million to any bachelor who can set his lovely lesbian daughter Gigi back onto the path of heterogamy - perhaps a little schadenfreude might be excused. As reported in the SCMP, he is the latest of several burglaries in Hong Kong of tycoons.
In Mr. Chao's case, the storyline is that someone approached his 20,000 square foot mansion (modeled after Frank Lloyd Wright's Falling Water house) late at night, climbed in through Mr. Chao's latest girlfriend's bedroom window, made their way into a bathroom which contained a safe, pried it open, and then took off with six antiques, five watches and twenty items of jewelry worth HK$10 million (c. US$1.2 million). This incident happened when the property's CCTV happened to be shut down for repairs.
A few questions of curiosity immediately spring to mind:
  • Is it coincidence that the burglaries were made while much of Hong Kong's police force was preoccupied with the Umbrella Movement?
  • How can this not be an inside job, since the thief was probably aware of the wonky CCTV system as well as able to negotiate the labyrinth of Villa Cecil to find the safe?
  • Why is there a safe in a bathroom anyway? Has Mr. Chao cornered the local market on Viagra and rhino horn powder? 
  • Why does his girlfriend have or need her own bedroom? Is Stud-man Cecil only half the man he once was? Or maybe this is the modern-day version of Raise the Red Lantern, where the rich Chinese tycoon chooses between his many wives each night by hanging a red lantern outside her bed chamber.
While authorities are investigating, Mr. Chao is not commenting. That's unfortunate, because it would be good to know if the HK$500 million reward for the lucky winning he-man is still on offer, or whether it will be revised. To, say, HK$490 million. 


Tuesday, September 30, 2014

A Night for Umbrellas

Menace from Afar?
A stirring image of the third night of protests in Hong Kong related to the Umbrella Revolution. Lightning, thunder, heat and a couple of hundred thousand people willing to endure it out in the open.

Monday, September 29, 2014

A Season for Brollies

The dragon snorts. Time to cover up.

Tis the season for umbrellas in Hong Kong. Late September is marked by residual days of summer, with either tropical sunshine or typhoons that blow in from the east across the South China Sea. On sun-splashed days, Chinese women shelter their hard-won alabaster skin from damaging UV rays under parasols, many brightly patterned, frilly or predictably kawaii-ed by Hello Kitty. Stormier days bring out a wider range of brollies, from the upscale Burberry variety to more pedestrian US$8.00 7-Eleven types to cheekier models emblazoned with messages such as "Shit, it's raining."

This week, the good people of the Hong Kong SAR have found another reason to keep their favorite umbrellas close at hand. The menace has not been preceded by a UV rating, typhoon signal number or amber thunderstorm warning, but instead by red and black banners held aloft by the local police demanding that crowds (peaceful though they may be) disburse. Uncooperative crowds have then been pelted by clouds of tear-gas or pepper spray. The public's defense has been limited to donning plastic goggles and surgical masks, and ducking under a phalanx of nylon shields.

This is the first time in almost fifty years (since 1967) that Hong Kong's police have used such aggressive crowd-control measures against its own people. Ironically, the complaints in 1967 were by left-leaning communist Chinese sympathizers against British rule, rather than democracy-craving citizens (mostly young students) protesting against Beijing's increasingly heavy handed governance. History, like storm systems, sometimes has a petulant way of coming full circle.

A long brewing irritation caused by a myriad of political, social and economic issues between Hong Kong and China over the past few years seems to be hitting full boil. How long the now erupted brouhaha will continue is anyone's guess. However, no analysts on either side of the current issue believe that amicability will be restored anytime soon. Meanwhile, Hong Kong's stock market, property prices and already-flagging retail sales will likely come under serious pressure, particularly given that the social unrest is occurring during a critical week for tourism and shopping - China's National Day holiday. The merchants and those who live off of their welfare may likely face tough times for some time yet. 

When people live at the feet of an active dragon, they need to expect to be hit with expectorants that inevitably get snorted out its nose from time to time. Sadly, umbrellas do not appear to be much of a shield against such peppery and tear-inducing snot. Looking ahead to the next few days, we should all hope and pray that they won't be tested against even more lethal projectiles.    

Guess which one is the Burberry

Tuesday, September 23, 2014

Blundering Indian Newscaster Told "Xi ya!"

As reported in this BBC article and other news sources, at least one Indian citizen will not recall fondly Xi Jinping's recent visit to India - the newscaster who inadvertently referred on-air to the Chinese President as "Eleven Jinping". The unnamed newscaster was summarily fired for the blunder.

In the view of this blogger, the canning seems like unduly harsh punishment. First of all, the newscaster should be commended for knowing his/her Roman numerals. Too few people these days bother to study the classics.

Secondly, perhaps the reporter was offering a subtle indictment of the Chinese government's recent heavy-handed clampdowns on human rights. Perhaps the steadily-consolidating power of the current Chinese leader seems rather imperious to more than a few observers. "Jinping the XI" does have a certain ring to it, particularly when considering that he is the eleventh person to act as China's head of state since the PRC was formed in 1949. Coincidence or not?   
In any event, the Indian newscaster is far from the first person to take liberties with Mr. Xi's name. As put together by the Foreign Policy magazine's editorial staff, here's a list of ten Xi headlines NOT to use:
1. Territorial disputes in the South China Sea: "Xi's Gotta Have It."
2. A profile of his teenage years: "Xi was only 16."
3. His second visit to Iowa: "There Xi Goes Again."
4. His portrayal in Chinese state media: "Isn't Xi Lovely?" (Or "Xi Will Be Loved.")
5. A Chinese Gorbachev: "Xi Change."
6. Bizarre policy choices: "Xi Moves in Mysterious Ways."
7. A definitive chronicle of his speeches: "That's What Xi Said."
8. His meeting with Henry Kissinger: "The Old Man and the Xi."
9. On a conflict with the current head of the disciplinary committee: "He Said Xi Said."
10. His stylish sartorial choices: "Ain't Nothing But a Xi Thing."

Wednesday, September 17, 2014

The Louis XIII of Rolls Royce

Rolls Royce Phantom Extended Wheelbase Macau
The motor car
Louis XIII Macau Hotel Stephen Hung
The casino
The man (on the left)
Luckily for the Rolls Royce Motor Car company, there's a new king in town, or at least as far as they are concerned. His name is Stephen Hung, he is a flamboyant 56 year old Hong Kong billionaire real estate developer, and he has just put in the largest order in history for the Rolls Royce Phantom. The deal is for a fleet of thirty of the uber-the-top cars, worth a total of $20 million, or roughly $667,000 a piece. As reported in this Business Insider article, the bespoke cars will be utilized by Mr. Hung's forthcoming Louis XIII Hotel and Casino in Macau, an ultra-luxury property catering to China's super-rich which might just make the palace at Versailles look like a university dormitory. The fleet of extended wheelbase Phantoms will ensure that the casino's top end clients will never have to confront Macau's chronic taxi shortage when they want to go casino hopping. Instead, they will be nestled in a gold-plated interior with diamond-studded timepieces by Graff. The opulent styling will match that of the hotel itself, which will offer accommodations costing as much as $130,000 per night. And both car and building seem to have taken creative inspiration from the man himself, who has been sporting red-dyed hair of late. As he has been quoted saying, he is at the point in life when he can do whatever he wants. These days, he seems to be in the mood to throw caution to the wind in the face of Macau's slowdown and Beijing's anti-corruption campaign, and make even extravagant French kings blush.   

Monday, September 15, 2014

College Admission - The Hedge Trade

And get a hall named after you to boot!!
Steven Ma of ThinkTank Learning is not your usual college consultancy CEO catering to Asia's aspiring Ivy League families. Sure, his San Francisco Bay Area-based practice provides tutoring for the SAT and the usual blend of guidance and motivation. However, he is willing to go the extra step and provide a money back guarantee of success. How does he do it and still maintain a viable business?
Like the former hedge fund manager that he is, through an algorithm, of course - a "secret sauce" formula based on the historical data that he has compiled from his clients over the years. In short, he crunches a candidate's GPA and other qualifications together with his/her targeted schools into his black box to arrive at a pricing proposal. For example, for a U.S.-born high school senior with a 3.8 GPA, an SAT score of 2,000, moderate leadership credentials, and 800 hours of extracurricular activities, ThinkTank predicts a 20.4% chance of admission to New York University and a 28.1% shot at the University of Southern California. Based on those odds, Ma might charge a guaranteed consultancy fee of $25,931 for NYU and $18,826 for USC.
For the particularly well-heeled and academically motivated client, Ma is also willing to tailor a more complex probability-weighted fee proposal that would look more familiar in Las Vegas, Macau or Wall Street than in the education sector. Consider the case of the wealthy Hong Kong CEO whose son dreamed of gaining acceptance from a good university. The problem is that Junior was not the brightest star in the far eastern sky. In fact, he was struggling with a C-ish average GPA and attended a small high school in Utah. With this client, Ma struck a deal as follows:
  • Client deposited US$700,000 as an ante, even before Junior began the application process
  • Client and Ma agreed that a 3.0 GPA and 1600 SAT score were Junior's threshold achievement levels
  • If Junior failed to get accepted into a Top-100 school, Ma got zilch.
  • If he got into a school ranked 81-100, Ma got $300,000.
  • For a 51-80 ranked school, Ma got $400,000.
  • For a top 50 school, Ma's payoff started at $600,000, and climbed by $10,000 for each higher ranking gained, up to $1.1 million for the #1 school in the US.
What margin Ma pockets from such hefty success fees when all is said and done is up for some speculation. However, this case can't help but call to mind the old adage about having more money than brains. In the enigmatic and hypercompetitive world of college admissions these days, it sure seems to help to have at least one of the two. 

As with hedge fund trades, not all of Ma's bets have worked out as well as hoped. His experiences included having to refund $250,000 to the family of Chinese student who was rejected from seven Ivy League schools. As for Junior above, the story had a happy ending. He got into Syracuse (and is reported doing well there), ranked 62nd. Ma pocketed $400,000.

Wednesday, June 18, 2014

My Tutor, My Rock Star

     Dreaming of a better education system

An exam question:

Korea's college entrance exam process is increasingly considered to be deleterious to public health because:

(a) it contributes to a startlingly high incidence of myopia (75%) and a doubling of curvature of the spine over the past ten years among testing-aged Seoul teenagers;
(b) an alarming number of families are going broke supporting an extracurricular “cram school” education that costs 12% of a household’s overall budget;
(c) it is the leading cause for teenage suicides which is the highest rate amongst OECD countries;
(d)  a few popular online private tutors who have reached superstar status have been able to earn millions of USD per year by attracting tens of thousands of pupils, thereby effectively negating any competitive advantage that the lessons purport to confer;
(e) the English curriculum is ultimately considered to be of little value because, while students might know how to define words like “deleterious” and “myopia” in a multiple choice exam, they can hardly converse well enough to order a pizza, much less save their own skins in day-to-day life;
(f)  all of the above.

The answer, sadly, is (f).

Though the rigors of the Chinese college entrance examination (the Gaokao, the subject of the previous blog article) are only now more widely coming to light internationally, the arduousness of Korea's college entrance system has long been well known. It has alternatively been admired for vaulting Korean students to the top of the global academic heap (as measured by test scores) or scorned for the mounting social costs forced onto a stressed out domestic population. Recent public focus has turned towards the increasingly negative impacts. In response, the government has been imposing regulations against Korea’s infamously demanding network of “hagwon” tutoring schools, including mandatory closing time of 10 pm, caps on hourly charges and a ban on front-running study materials taught in school. Nevertheless, real change is difficult to implement in hyper-competitive Korea society. Test-taking is a central tenet of the country’s Confucian tradition. Parents will risk sending themselves to an early grave or suffocating under a pile of consumer debt to keep Junior Kim up to snuff with his/her peers. And society idolizes the best tutors and pays fortunes to them every year. How many other countries treat bespectacled math or English teachers like Lady Ga Ga and Justin Timberlake?

Of additional concern is that some of the “hagwon” have developed a sufficiently strong reputation to export their systems to neighboring countries such as Taiwan. Asian students prepping for the US SAT are enrolling in increasing numbers in “hagwon” systems to improve their shot at getting into strong American universities. However, the growth of the “hagwon” system only creates a vicious cycle of competitiveness among an expanding applicant pool that needs to outdo each other. There should be real concern that the social ills endemic to such a rigid system may also be exported.

In an increasingly complex world, success requires flexible problem solving skills and creative thinking. Such attributes are too often inadequately exhibited through multiple choice exams. And living well - which should be every individual's goal - is a broad issue that has more than one correct answer.

Check out this
FT article about Hagwons

Wednesday, June 11, 2014

A Testing Test

Heading for a good university? Or a re-education labor camp?

To those US-bound students (and their concerned families) who just took the Scholastic Aptitude Test (SAT) last weekend: congratulations, but think that was tough? If so, just be glad that you don’t have to sit the Gaokao – China’s equivalent of the college entrance exam. Reports are that the SAT is a cakewalk in comparison. First of all, the pressure to do well is far more intense – the two days of the Gaokao can make or break a young person’s entire future, and Chinese teens don't have the do-over opportunities that are available to SAT-takers should they happened to have been feeling ill that day or simply caved into nerves. Secondly, the Gaokao math section is reputedly much more intense; it makes the US test seem like a color-by-numbers exercise by comparison.
Another Gaokao feature that routinely furrows brows is the essay questions. The SAT essay prompts tend to be relatively straightforward and often deal with personal growth and morality. Examples:
·         There is no success like failure. Comment.
·         Should you tell a friend the truth or avoid hurting their feelings?
·         Is it better to live for the present or prepare for the future?
·         Does character determine success in one’s life?
·         Is reality TV beneficial or harmful?
The Gaokao essay prompts are hardly so straightforward. Some of them read like they were written by a Zen Buddhist monk crossed with an aging hippie on dope. If you think that Asian tests are only about rote learning and rigid guidelines, think again. The Chinese essays require sharp interpretive skills and the ability to think laterally. Courtesy of the website at the link below, a sample of the mind-bending essay prompts that were included in this past weekend’s Gaokao follows (Note: these are real questions posed to students in different regions of China):
Beijing: The “old rules” prescribed by parents demand respect for elders, speaking in a quiet and gentle voice, and sitting or standing straight up. Recently, netizens have gone online to discuss these traditions. What is your understanding of this issue?
Shanghai: “The world belongs to you only after you stand up.” Discuss.
Jiangsu Province: Some say that only youth is immortal, that young people do not believe they will die some day. Is this naive? Are there things such as this in nature that are eternal?
Fujian Province: With the word “valley”, some people think “cliff”. Others think of the old road built along the cliff. What about you?
Anhui Province: “The authors say that the actors are allowed to change the screenplay, but the directors say that they are not.” Discuss.
Hunan Province: There was once a very poor place. Many left it. Others stayed, and over a few years, turned it into a beautiful village. Discuss.
Guangdong Province: Old black and white photos are few and far between. Because they are rare, they are precious. These days, digital technology has seriously diluted the value of photographic images. Thoughts?
Liaoning Province: Grandfather and grandson are standing on a hill. Grandson loves the neon lights of the city, how colorful everything appears. Grandfather hates the neon because it washes out the more beautiful stars in the sky. Discuss.
Every year, China observers try to discern if there are common themes imbedded in the Gaokao’s questions. This year’s bring two alternatives to mind for this blogger. First, the questions seem to grapple with the effects of a rapidly changing society on its individuals – how does one reconcile the old with the new? How should a person relate to a constantly evolving environment? An alternative and more ominous motivation for the Gaokao administrators to pose these questions recalls the Hundred Flowers Campaign in the mid 1950s, when government officials invited multiplicities of views to bloom amongst the intellectuals, just so the leadership could subsequently brutally stamp out the undesirable weeds. Let's hope that we don't need to be so cynical. Life is stressful enough for the millions of teenagers who toil away in hopes of securing a better future for themselves and their families to have to worry that they may be headed for re-education rather than college.  


Friday, June 6, 2014

Hitchhiker's Guide for the Wealthy Chinese

Makes for a decidedly complicated packing list

So, you're a stinking-rich Chinese person. You own three houses for yourself and your family, and possibly one for an illicit lover. You also own seventy floors of mixed use real estate that are fully leased out right smack in downtown Hangzhou. You've furnished your homes with fine Italian leather seating, high thread count bed sheets, marble wall tiles, snazzy German kitchen appliances and an underground cellar full of dusty wine bottles next to a mirrored karaoke lounge. Your pockets are stuffed with an LV wallet, a fat wad of red 100 RMB notes, and an even fatter government bureaucrat or two.

Travel-wise, you've been to the major European cities and New York, done the Harrod's DFS thing, toured a few vineyards (one of which you ended up buying), and lost some money playing baccarat in Macau.

You find yourself standing by the window of your teenage child's Park Avenue penthouse looking out at the foliage of Central Park. Suddenly, you are hit with an existential question that clenches your throat and leaves you gasping: is this all there is? Life suddenly feels devoid of purpose and meaning. You wonder why you bother to continue living.  

Luckily, you are not alone. There are many like you who have faced such a crisis and come out just fine on the other end, thanks in no small part to a few enterprising travel agents. So long as you have a trip budget that can stretch to US$150,000 or so (on average), there are an innumerable variety of "experiential" holidays that will replenish your vigor and life mojo.

As shown in the table above, and in this Jing Daily article, the world is indeed a vast place full of wild and wonderful adventures. First of all, there's South America. Forget Argentina and Brazil. Try Bolivia. Don't ask why - just trust the survey. If that involves too much flora, fauna and hip-shaking Latin dancing, then there's always the South and North Poles. It'd just be you, your guide, a pair of tall unshaven dudes speaking Norwegian, and a few gazillion ice crystals. Alternatively, there's Bhutan, the ultimate anti-China. The people there are dirt poor because they live by something called the Gross Happiness Index and are deeply Buddhist. Who knows, you may even like the country enough that you might want to buy it and turn it into your own spiritual theme park.

Of course, if you are so far gone psychically that none of these destinations get your juices flowing, you can choose to chuck everything tied to this god-forsaken world and take your leave of it, literally, by heading into space. Think of it: no gravity to weigh you down, no airwaves that carry the nags and complaints of your employees and relatives to your tired ears. Just a vast, empty place that will leave you at peace in the company of your own ponderings. Mind you, the re-entry could be a bit of a doozy, and you and your vehicle can risk going down in flames. If that troubles you, there's always the one way journey option. Rather than worrying about what it might feel like to be reduced to a burnt rice wafer, you can spend the rest of your days floating above the human beehive, up where you rightfully belong - closer to the sun.   

Thursday, June 5, 2014

Days of Protest, not Shopping

Jam-packed protests

Empty luxury stores

Where have all the shoppers gone? It’s a question that many luxury retail shops in Hong Kong have been asking of late. Yesterday, on June 4 – the 25th anniversary of the massacre in Tiananmen Square, the shop owners may have found the answer to that question by heading out to Victoria Park, where upwards of 180,000+ people gathered in a candlelight vigil to commemorate the event and raise their concerns to the world.

As reported in this SCMP article, the volume of luxury retail buying in the SAR has fallen off faster than the glass face of a cheap Shenzhen knock-off watch. The figures are startling. Jewelry and watch sales plunged by 40% in April. Sales of consumer durables were down by a fifth, and those of electrical goods and photographic equipment were down by 8.3 per cent. Financial Secretary John Tsang said: “The drop is the biggest since February 2009. If the decline persists, it could affect the economy and the employment situation.”

The abrupt change of fortunes over the past couple of years for the retail sector comes as little surprise to anyone who has taken note of the dismaying transformation of the urban landscape into an antiseptic sprawl of shops selling $3,000 hand bags, $300 jeans, $1,000 shoes and $100,000 watches in order to cater to a single demographic – the cash-flushed tourist from the Mainland. Now that the parade of well heeled Chinese has quieted to a peep as a result of the anti-corruption campaign and the slowdown in the Mainland economy, Hong Kong is left singing the double whammy blues of under-utilized retail space and a public that feels disaffected and jilted by its leaders for shunting aside their welfare. The luxury malls feel like ghost-towns during weekdays, while on weekends, eyeballs get a lot more action than wallets. Meanwhile, tea shops and family dinner tables are filled with locals who are increasingly pissed as hell about it all. It’s a safe bet that no one is going to cry over the demise of a bunch of Louis Vuitton, Valentino, or Vertu stores.

This year’s June 4th protest  has provided an occasion to reflect on interesting ironies about China’s development over the past quarter century. Back then, the Beijing protest was over government suppression of civil liberties in a society where poverty was also a widespread problem. In response to the uprising, the Chinese leadership liberalized the economy in order to increase the welfare of the country’s citizens, while still keeping thumbs firmly pressed down on personal freedoms. In the ensuing twenty five years, stunning rates of economic growth did much to keep a lid on widespread public protests; people were loath to upset the apple cart while they were able to bake larger and sweeter pies from them. However, the grotesque wealth inequality - much of it skewed in favor of the families of the bureaucrats who brutally crushed the student gathering - that has resulted from the government's go-go investment policies has been stoking public disgruntlement again. In essence, suppression of economy liberties caused by an uneven playing field has now become as big an issue as that of personal liberty.
The record crowds in Hong Kong that showed up to light candles and call out to Beijing and the world harbor a wide variety of concerns. They want to be able to directly choose their leader through free elections in 2017. They want those individuals and public institutions that are in a position to promote social equality to do more than look after themselves. They are outraged that rampant Mainland growth has imported pollution, inflation and scarcity for essentials such as quality healthcare, education, and safe foodstuffs. They want to be able to shop in their neighborhoods for things which they need everyday, rather than window-shop at glittery things they can only imagine owning without busting their budgets. But underlying it all, they want what anyone anywhere would want - fairness and freedom in a place where they have a sense of belonging. It would be sad (and potentially dangerous) to think that it would take another twenty five years to give those basics back to the people. It's not too much to ask for.

Thursday, May 15, 2014

Of Money Supply and Mattresses

Padding for a cadre’s good night sleep

This entertaining New York Times Op Ed penned by author Yu Hua raises the lid on the variously creative ways that corrupt Chinese officials attempt to conceal their ill-gotten gains. The Op Ed piece is ostensibly an explanation of why the faster growth of China’s money supply relative to its GDP has not resulted in runaway domestic inflation. The hypothesis? That a large proportion of the money supply is in the form of bribe money that is socked away rather than put into circulation. While the intriguing economic theory is not substantiated with empirical data, the inventive means that bureaucrats have used to stash the cash are worth describing here:
- $4 million in a safe deposit box;
- $1.5 million in the bathroom of a new apartment, which subsequently developed a water leak;
- $450,000 in a garbage heap next to his brother’s house;
- $3 million “wrapped in layers of plastic and hidden in a hollow tree trunk, beneath an ash heap, in a rice field and inside a latrine”;
- $200,000 in a rented luxury apartment. Despite wrapping the cash in plastic, it got moldy. Presumably, he should have reinvested part of the booty in a functioning air conditioner;
- $21.5 million (!) in cash and gold hidden away in a bureaucrat’s two houses. He later admitted that hiding the loot was a colossal headache.
It’s commendable that China’s reluctance to create a currency note worth more than RMB 100 ($16) is partially motivated by the desire to make cash-based corruption and money laundering more cumbersome. However, the bigger underlying problem of course is that such graft is still so rampant. And if the growing pile of dirty cash is not stemmed, at some point, inflation will indeed become a real problem. The iconic red RMB 100 notes may even become a cheaper material than cotton and coils for stuffing mattresses.

Tuesday, May 13, 2014

North Korean Memoir – A Transforming Read

Moving hearts, minds and the soul.

This just-released book is the sort that can save lives – hopefully even 25 million of them. It is a memoir written by Jang Jin-sung, a North Korean defector and ex-poet laureate for Kim Jong-il, and translated into English by Oxford-educated Shirley Lee. It is the most absorbing read that this blogger has had in many years. Why is it better than the many noteworthy books on North Korea that have been published before? Because it was written by a high level insider - one of the country’s chief propagandists - who also happens to be an articulate and sensitive writer, with a vastly different perspective from that of a Westerner or a "common" (if there can be such a characterization) North Korean escapee. 

It's not just a searing indictment of the Kim dynasty or a political dissertation that details the organization and functioning of a Stalinist dictatorship. It's not just an intimate account of unimaginable human suffering that has been inflicted on a nation’s population over the past few decades by an evil regime. It's not just a thrill-a-minute international espionage story that follows two high-value defectors as they flee, starving and penniless, across the winter landscape of Korea and Northern China, hunted by security forces from both countries. In fact, it is all of these story lines, plus more. The range of its setting stretches from privilege to privation. It is a depiction of a place that seems surreal and hallucinogenic, though it is only too real. It is a story of a man’s awakening from a blinkered life to a wide world beyond his imagining – both its horrors and beauty. It is about his coming to terms with terrible truths and the equally terrible lies that he had helped to perpetrate. It is a buddy story about two young men on the run who share every human emotion possible – from valor to shame to frailty to brotherly love. And perhaps most importantly, it is an epic poem, written by a talented story teller. As such, the book touches the reader in ways that no other account of North Korea has done before. By interweaving original poetry and lyrical descriptions of artistic expression into a John le Carre thriller, there is something for everyone. It runs both wide and deep, like a restless ocean.
As such, it has the potential to reach an audience that is broader than any book on the subject. One can only hope that it does, and that by burrowing deeply into millions of readers, it changes the perspective and energy of the global dialogue on North Korea. Such change is desperately needed – evil on this scale needs to be combatted by more than just a handful of poignant, indomitable souls such as Jang Jin-sung, or a few politicians and international NGOs. At stake are millions of lives, and our very humanity.

Jang Jin-sung's blog:


Thursday, May 8, 2014

From PRC to UAE

Mandarin spoken here.

The UAE, led by its crown jewel principality of Dubai, is a jaw-dropping place. It’s a country that should barely exist, situated as it is where a bone dry desert meets a salty sea, with no fresh water for hundreds of miles around. However, money and cheap petroleum, if poured in with sufficient abandon, and a few rip-roaringly big desalinization plants can change anything. Once a series of trading posts between Arabs and the Indian subcontinent, the Emirates are now home to the ultimate in man-made superlatives and oddities. The world’s tallest building, by a huge 300 meter margin. A “seven-star” spinnaker-shaped hotel with enough gold leaf to fund a country's central bank. The world’s largest mall. The world’s biggest indoor ski facility. The world’s tallest hotel. The list goes on and on. And yet its population demographic is a throwback to a society from the nineteenth century: a small fraction of hyper-wealthy locals, dressed either resplendently in white thobes or ominously in black burkas, which lords over millions of foreigner workers (mostly from Southeast Asia or the Philippines) who live with few rights and close to the poverty line. The principal aim of the place? To attract wealthy foreigners with the lure of trading financial assets and living the good life in a sun-drenched, tax-friendly, first-class accommodated living environment. Over the years, Brits, Saudis and Russians have come in droves. And more recently, particularly since an inflated asset bubble burst in 2008, so have the Chinese. There is now a Dragon Mall especially catering for them. Mandarin language use has expanded. Festivals feature dragons, lion dances and firecrackers.
Not wanting to feel left behind in the paper chase for Chinese wealth, Dubai’s neighbor to the west – Abu Dhabi – has thrown off its more conservative, understated cloak and swung open its doors. As summarized in this
 report in the Jing Daily, the efforts, like a pomegranate tree, have been bearing lush fruit. Over 32,000 Chinese visited Abu Dhabi in the first quarter of 2014, resulting in the best first-quarter tourist figures ever. Furthermore, in April, a massive group of 16,000 employees from the China branch of the Nu Skin direct-sales beauty company visited the UAE on a 10-day boondoggle. Such numbers are big enough to impress even those used to witnessing outrageous excesses.
Potential constraints to the future growth prospects for Chinese in the UAE? Booze and casinos are still severely limited. But who knows going forward. After all, the UAE has already shown that, in a place where big money can transform anything, anything is indeed possible.

Wednesday, May 7, 2014


It should come as no surprise that many of the best young (less than fifty years old) universities in the world are located in Asia. It should also stand to reason that many of the top schools are technology-focused. The table above lays out the Top 10, as compiled by The Times Higher Education website in the UK. A few additional names and their rankings have been added from an alternative source of university rankings, provided by QS. As shown, at least four of the top five institutions hail from Asia. Interestingly, the two from Korea are not located in Seoul, but rather in provincial cities – Daejeon in the case of KAIST and Pohang in the case of POStech. While the names on this list don’t yet match the venerated and storied universities in the US and Western Europe, they are names to watch in the years ahead, particularly if the global academic brain drain begins to tip and then reverse itself, to flow from West to East.

Thursday, April 24, 2014

Income Disparity: Don’t Monkey With It!

Numerous studies have shown that social disgruntlement is more associated with relative wealth inequality rather than its absolute level. Citizens of poor countries are generally happy so long as all people are relatively poor. It’s when thine neighbor becomes better off than thou that serious and chronic grumblings set in.
No video demonstrates this phenomenon better than the one above, starring two capuchin monkeys. To us humans, the difference between cucumbers and grapes may be trivial, but to this pair, the delta feels like that between a Mercedes and a Hyundai. Magnify that amplitude to that of corporate pay disparity in the modern world, and substitute pitchforks and Molotov cocktails for cucumber bits, and one can imagine consequences being more troubling than cute. Hey 1%, beware of flying vegetables.