Three Cups of Tea

Three Cups of Tea Blog by David Thomas.png

In today’s fast paced world of instant communication, short deadlines, e-mail, text, online chat, social media, speed networking and deal-making, I think we can all agree that the old fashioned art of relationship-building has been somewhat diminished in its importance, if not lost altogether?

It wasn’t always this way. When I started work in the City of London in the late 1970s, the senior partners would regularly disappear for lunch with clients at around 12 noon and, more often than not, wouldn’t be seen again until the next morning.  And when I worked in Hong Kong in the late 1980s, I remember the most respected networkers were those who typically blocked out their lunchtimes every day to meet with people who, if not now, might be useful connections in the future. Despite how this might sound now, this investment in relationship-building usually paid off in terms of acquiring new clients, generating more revenue and increased profitability, and the expenses involved were regarded as the acceptable “cost of doing business”. To prove the point, most Governments around the world regarded these expenses as fully tax deductible, as long as you could find the receipts!

Without doubt, the long business lunch, if not a quick chat over a sandwich at your desk in between meetings, is definitely a casualty of the online age, and is now regarded as an extravagance, if not a disgraceful indulgence reminiscent of a bygone era!

These days we do business with people we hardly know, and possibly don’t even like, assuming we can get them to sign up to a water tight contract drafted by a highly paid lawyer and do as we promise.  In this post industrial age, with an ever-expanding army of lawyers and standard contracts at your disposal, you can simply sit behind your computer and do business with anyone you want, almost anywhere in the world, with an electronic signature and the click of a mouse!

Until now, that is…

Despite the significant changes that have taken place during my working life in the western world, there is still one country that does business the old fashioned way, and that is the People’s Republic of China.

We are now all impacted by the rise of China, a country which lay dormant until only thirty years ago, but is now the second largest economy in the world and, growing at over 6% per annum, will soon overtake the USA as the largest economy with a population over 1.3 billion and a rapidly growing number of cashed up middle class consumers (currently 300 million and expected to triple in size by the end of the next decade).

In the past 10 years, since the Global Financial Crisis of 2007, China has launched an army of new corporate names on to the global scene, including Alibaba, Huawei, Tencent and Haier who are already disrupting e-commerce industries around the world and, among many other names which we haven’t even heard of yet, will be the brands to watch in the next 10 years as they take on some of the bastions of traditional western institutions in financial services, healthcare, education, agriculture, real estate and others. As we approach the end of the beginning of the Asian Century, the next decade will be dominated by Chinese entrepreneurs, investors and private enterprises with deep pockets as they reach out and grasp the opportunities that were denied to their parents, grandparents and ancestors.

Faced with threats of new competition, disruption and unfamiliar business practices, Western leaders need to decide how they’re going to respond to the rise of China as a global force. One option is to ignore it altogether and hope it goes away, a tactic that worked well in the face of similar threats posed by the rise of Japan in the 1980s. Another option, and one which I would recommend as a starting point, is to embrace this opportunity and engage with Chinese investors and entrepreneurs while they are going through their ‘learning phase’ and upgrading their systems, processes, products and governance to compete on a global scale against established western institutions. This presents a once-in-a-lifetime opportunity for western entrepreneurs, SMEs and business leaders to jump on a train which has well and truly left the station.

However, despite some of China’s significant economic advances in recent times, their approach to doing business remains refreshingly similar to the way they’ve done business over the past one thousand years i.e they only do business with people they know, like and trust. There are no short cuts. If you want to business in or with the Chinese, it needs to be more than just a transaction.

There is a story about a traveller who found that, in order to be welcomed into an eastern family, he would be asked to take three cups of tea. The first cup was taken as a stranger, the second cup as a friend and, if he was offered a third cup, he would then become part of their family. A place where trust was given freely and unconditionally, and from which he would forever be looked after.

I often use the “three cups of tea” metaphor to describe the journey that westerners have to take to be truly accepted in China.  As a foreigner doing business with Chinese people you are a stranger, no matter how much they appear to like you, trust you and respect you. The Chinese are gracious, generous and flattering hosts and often give the appearance of welcoming you as friends and business partners but you will never gain their real trust until you have invested deeply in the relationship. This requires some old fashioned relationship-building skills and etiquette which, as mentioned above, we seem to have lost, forgotten or ignored in recent times.

So, next time you get presented with an opportunity to do business with a Chinese company, investor or entrepreneur, think of it as an opportunity to build a relationship not a transaction. Ask open questions, listen carefully to the answers and think about how you can progress the relationship to another level (the second cup of tea). Leave the quote, proposal or contract in the drawer, take your Chinese guests out for lunch, exchange gifts, tell stories and laugh a lot. You’ll be surprised how old fashioned relationship-building can lead to real business opportunities. But only if you’re willing to take the three cups of tea!

http://www.davidthomas.asia/blog/three-cups-of-tea

Hierarchy

When I started work in London in the late 1970s, we all understood the meaning and significance of ‘hierarchy’. You could gauge the seniority of an executive by the cut of their suit, the make of their car, the size of their office and even the severity of the secretary who sat outside the door! You certainly didn’t address senior people by their first name and, if you were very lucky, you might be invited to have lunch with a client in one of the Director’s private dining rooms (which served alcohol, unlike the staff canteen which offered only water and a strange orange drink). We didn’t know it at the time but this was the end of what would later be described by the post-war generation as “the good old days”, before Margaret Thatcher set about unravelling and deregulating some of Britain’s most protected institutions and then Tony Blair embraced egalitarianism with “cool Britannia”.  Throughout the western world, scores of middle management positions have now been dismantled in the pursuit of profit and shareholder returns and most organisations and institutions now adopt a flat structure with open plan offices, hot desks, minimal reporting lines and even casual dress! My grandfather, who wore a tie on almost every day of his life (even doing the gardening after he retired) would be shocked by the informality of it all!

The same isn’t true in Asian culture, particularly in China, which has only recently begun its own industrial revolution and, in any case, with its long-held and deeply ingrained influences and beliefs emanating from Daoism and the teachings of Confucius, it will take more than a generation or two to dismantle the concept of ‘hierarchy’. Remember, China is modernising, not westernising!

I find it fascinating to observe the lengths that the Chinese will go to respect and give face to their elders, leaders and seniors. The fussing and detail that goes into the seating arrangements at meetings and dinners, the line up for photos, the gift-giving, the number and order of speeches, the decision-making process. It’s always important to observe these rituals and embrace them with the enthusiasm and respect they deserve. And, if you’re hoping to do a business deal, it will give you important clues as to how business gets done.

Some do’s and don’ts for foreigners trying to navigate the hierarchy in China:

·         Wait to be told where to sit at a meeting or banquet remembering that the most senior person in the room will usually be the first to sit down at the head position (which could be the middle of the table in a meeting, or facing the door in a private room or restaurant) and the first to speak when everyone else is seated.

·         The same with group photos. Don’t push yourself into the middle or make assumptions about where you should be positioned. Wait to be shown where to stand.

·         Organise yourselves in the same way as the Chinese ie in order of seniority, from top to bottom, and attempt to mirror them at all times, especially when doing business. In other words, your most senior person only appears when their most senior person is in the room. And your middle ranking people deal with their middle ranking people. If necessary, co-opt Board members and junior staff to give you more scope to create a hierarchical structure

·         At a dinner, always toast the most senior person in the room first (usually your host and seated at the head of the table facing the door) and then work your way around the table, starting with the person to the right of the host, and then the one to the left. The same with gift-giving.

·         Always pay attention to names, titles and positions. The business card is the best clue to this so study it carefully. If in doubt, don't be afraid to ask. The Chinese word for boss is “Lao ban”, a word they all understand!

·         Wear the right clothes. If in doubt, dress up and wear a suit. It’s better to be over-dressed!

·         Don’t make the common mistake of making friends with the person in the room who speaks the best English (often the interpreter or junior) as this will be seen as disrespectful by the senior decision-makers

·         Let the boss talk first. Don’t interrupt. Observe how others react when he speaks and follow their lead.

·         Don’t be too familiar. Address people by their surname (normally the first name on their business card), shake hands formally, stay at a respectful distance, avoid the temptation to put your arm around his shoulder or give her a kiss, certainly at the first meeting!

It's actually not that difficult, and it certainly isn’t rocket science! Respecting your elders, being polite, dressing up and deferring to seniority is something that our parents were taught by their parents and, depending how old you are, might have been taught to you as well. You just need to pay more attention to the importance of Hierarchy when you do business in China!

www.davidthomas.asia

Rise and Fall of Empires

With thanks to my old friend, Tim Parry, for this contribution to our blog

Ancient and Modern History is littered with the rise, and inexorable fall, of Empires.

As the 'known' world grew, so too did the geographical spread of Empire. Egypt, Greece and Rome ruled in the Ancient World, and throughout modern history, Spain, Portugal, Holland and France sailed into the New World and Asia. Under Napoleon, France dominated Europe, The British Empire - driven by industrialisation, efficiency, technical innovation, and the search for raw materials and markets - was probably the most widespread in modern history, at its height covering approximately one-quarter of the worlds population and land area. Its fair to regard the rise of Britain as roughly coinciding with the defeat of Napolean, in 1815, and its decline to begin a century later with the opening shots of WW1.

But as unstoppable as the rise of Empire can be, so too is its decline inevitable. Lethargy, distance, and expense are key negatives in a physical occupation. And it is by occupation that history generally judges the extent of empire.

But these days, even the use of the word 'Empire' is used cautiously. Its intimations of oppression and subjugation are no longer acceptable, and the military annexation of territory frowned upon (though by no means impossible, as we saw with the Russian occupation of the Crimea in recent times). The mere existence of the United Nations serves as a deterrent to such ambitions.

But the reality is that since the end of World War One, there HAS been a dominant global power. An Empire in all but name, with all-powerful influence in military power, political ideology, manufacturing, trade and culture. 

As Britain's power faded after WW1, and fell away in exhaustion after WW2, it was America that stepped in to fill the vacuum. Russia, under the Communist theology, was fenced in, and as China took a different path in its communist strategy, America became the guardian of democracy, liberty and capitalism.

But, after a century in which America, and American interests, 'colonised' the globe ( the Coca-Colanisation, if you like) it too is facing its inevitable decline. As so often, it is economic decline, and to some degree a loss of innovation and manufacturing that has set the tone...

Handling the end of Empire is never easy.

The lessons of history tell us much...

But in modern times, this loss of 'status' is very similar to the 6 steps of grief...

Shock...

Denial...

Anger...

Bargaining...

Depression...

Acceptance...

Britons dealt with them all of these...it probably took them almost 50 years to really get to it all. Starting with India in 1946, and ending with Hong Kong in 1997...a long line of divestments, handled with varying degrees of ability and success.

America? America has only just started...

They are possibly, unwittingly, through Shock, and are somewhere between Denial and Anger.

Which might be why Donald Trump, with his 'Make America Great' call, appealed. 

But as one 'Empire' falls, and goes through its phase of lashing out, as America is now, the vacuum is created.

Next to step up is surely China...

Its influence has increased enormously in the past 2 decades. Its economic influence and asset purchases in Africa, Asia, Europe and Australia, points to it firmly capitalising (perhaps a poor choice of words for a nominally communist country?) upon its centralised Government economic planning and manufacturing capacity. The sheer size of its population and domestic demand makes it a massive market, and its increasing willingness to flex its muscles militarily, and to comment on global events politically, clearly points to a determination to be heard and to establish itself in what is increasingly sees as its rightful place at the top table of global authority.

What happens next is anyone's guess!

China in 2017 - The View at Ground Level

Today is 12th January 2017 and I have just completed a one week visit to Guangzhou in southern China to meet with our local business partners, staff, clients, prospects and many existing and new connections. My focus is on doing business in China, particularly with investors, entrepreneurs, SMEs and high net individuals, and so my views are defined by my conversations with these types of people and my observations of what they think, rather than the more macro economic perspectives that you hear on CNN and BBC. I don’t pretend to be an economic, political or social commentator. I have no axe to grind or political agenda to push. All I can tell you is what I see, hear and observe. I hope you find it to be valuable.

The last days of the Year of the Monkey

The Monkey year was predicted  to be volatile, unpredictable and full of surprises, and so it proved. Most of the world is grappling with the rise of populism, terrorism, political upheaval throughout the world, particularly in UK, Europe and the US, and a big change in global economic conditions with the US raising interest rates for the first time in over 5 years.

In contrast, China appears to be following a steady and somewhat predictable course. China’s GDP growth in 2016 is estimated to have been 6.7%, which sits comfortably within the expected range of 6.5% to 7%, and it appears to be “business as usual” on the ground as local business people speak with optimism and excitement about the future.

I was in China on the day of both the result of Brexit and the US election, but you wouldn’t have known it. There was almost a deadly silence, as though nobody had noticed, and the people I deal with kept their heads down, focused on their own business, and hardly acknowledged these global seismic events.

As I read through today’s edition of the China Daily, the following headlines grab my attention:

  • Sales of passenger vehicles in China increased by 15.9% in 2016, more than double the estimates and the highest annual percentage increase since 2013.
  • Over the next 5 years, the consumption demand of China’s domestic market will reach $10 trillion
  • China will overtake the US and become the world’s largest aviation market within the next 20 years, with annual passenger traffic volume projected to reaching 1.2 billion by 2034
  • Guangzhou will develop 8,000 new high tech companies and 200,000 innovative enterprises for science and technology by 2020
  • President Xi Jinping will become the first Chinese President to attend the World Economic Forum in Davos next week.

I admire the Chinese Government and people for their commitment to long term planning, predictable and orderly outcomes, “top down” management and strong execution. Whilst western media and commentators sneer at China’s problems (this week the focus has been on air pollution which has been particularly bad in the North, the high price of industrial progress), they seem to ignore or undervalue China’s successes. You have to read the China Daily (which I appreciate could also be regarded as somewhat “one eyed”) to view the other side of this two-sided coin.

What to expect in the Year of the Rooster?

SOURCE: Chinadaily.com.cn                                                                           

SOURCE: Chinadaily.com.cn                                                                           

In addition to the headlines mentioned above, today’s China Daily carries a photo on the front page of President-elect Donald Trump and China’s popular man-of-the-moment, Jack Ma, after their meeting in New York on 9th January 2017 at which Alibaba laid out their plan to create 1 million new jobs in the US by connecting American SME’s with Chinese consumers via their ecommerce platforms.

Everyone noticed this and commented on it. It was a brilliant response to the understandable fears created during the US election campaign which suggested that China would become a target for new US protectionism under Donald Trump. Many said “Trump is a businessman. He’ll know what to do when he becomes President. A good relationship with China will help him”. It seems that this particular fear was (almost) swept aside by this single masterstroke. In a country where symbols and imagery is so important, this was a perfect response!

The general view in China is that the first 100 days of the new administration will be volatile, unsettling and even dangerous while the new President announces his intentions and ideas for the next 4 years. China is ready for this. It is expected that, as the new team move from ideas and rhetoric to the implementation of actual policy measures (involving the two houses and the tedious and bureaucratic legislative process) the new Government will start to resemble a more typical Republican administration (more like Ronald Reagan’s Presidency) and will be less threatening. Only time will tell whether these hopes will be realised.

There was also lots of talk about the new measures recently introduced by the Chinese Government to make it harder for individuals and companies to move their money out of China. This includes reduced quotas for the purchase of foreign currency, greater scrutiny of overseas currency transfers by the banks and new reporting requirements for all foreign currency transactions. I spoke to the senior managers of one of the large SOE Banks and their view was that these regulations were relatively temporary measures designed to support the RMB in the short term. In the meantime, they are expanding their overseas department to assist clients with overseas transactions and overseas investment.

Everyone knew that, when the US Federal Reserve started to unwind the loose monetary policy (also known as “Quantitative Easing”) introduced to counter the GFC in 2008, there would be a period of volatility while the markets adjusted to the new paradigm. That’s why the Fed took so long, and issued so many warnings in advance, before they started acting! With two small interest rate rises, and the prospects of more to come, money is starting to flood back into US dollars and, as a consequence, this has put pressure on many other currencies including the RMB which has come under considerable pressure from currency traders and speculators. To avoid a major and disruptive devaluation in the RMB the Chinese Government has used its foreign exchange reserves to sell USD and buy RMB, and introduced new currency controls (as mentioned above) to keep funds in China.  This tactic has worked so far, despite the strong headwinds blowing in the opposite direction, and the offshore yuan has strengthened in recent days (up 2.6% this week).

In the meantime, financial commentators have raised concerns about China’s dwindling foreign reserves (which have fell by RMB41 billion but still remain above RMB3 trillion, a number which is still regarded as being well in excess of the nation’s requirements to cope with external shocks) and the Government’s ability to continue to support the RMB and, with the much repeated statement that “China growth is slowing” there is widespread speculation in the western media about the prospects for China’s future!

All I can say that these fears don’t appear to be felt, or discussed, on the ground in China. Quite the opposite in fact. Most people regard these events as highly predictable and of little consequence. Most believe that the volatility will be relatively short term and, once the currency speculators lose money from betting against the Chinese Government’s ability to support the RMB, the currency will return to its more long term trading pattern. 

We live in interesting and uncertain times. The first half of 2017 will undoubtedly be challenging and volatile as we all grapple with a new and untested US President and the possibility of new populist Governments emerging from general elections in Germany, France and Italy.

The imagery in China, as illustrated by this caricature of President Xi Jingping rolling his sleeves up ready to work hard in 2017, is of a country taking its place in the world as a responsible, pragmatic and determined nation which is looking to fill the gap that exists in international leadership, global trade and long term planning. The entrepreneurs I meet in China take a similar approach to their businesses. They control the things they can control, work hard and focus on planning and execution. They avoid frivolous distractions and the western media. Perhaps we should all do the same?

 

Hong Kong – China’s International Financial Services Centre?

Many years ago, prior to the handover from Britain to China in 1997, I lived in Hong Kong and worked in the financial services sector. A common topic of conversation involved speculation about Hong Kong’s role in the future. Would Hong Kong continue in its traditional long term role as the gateway of business and investment into mainland China? Would China respect and preserve Hong Kong’s freedoms, laws and practices? Would Hong Kong continue to prosper and grow?

Or would Hong Kong become irrelevant once China was able to build its own mechanisms and markets to attract international capital and, more importantly, to provide confidence to foreign investors and businesses?

Twenty years later, this question continues to be asked, and with the added concern about Hong Kong’s political, economic and social stability which is severely tested every time the locals accuse China of meddling in their local affairs. The “One Country Two Systems” concept, enshrined in the Basic Law of Hong Kong (which continues to follow the English Rule of Law) was guaranteed by China to apply for at least 50 years after 1997, and so any sign of influence by Chinese politicians and bureaucrats in the Hong Kong political process is greeted with outrage and large scale protests.

So, what does this all mean for the future of Hong Kong and can it continue to be “China’s International Financial Services Centre”?

On the plus side….

Hong Kong continues to be regarded by foreign companies and investors as the gateway for investment in the mainland, and as a world class financial centre in its own right. A low-tax haven, modern metropolis and fusion of east and west, Hong Kong has flourished as a financial services centre and banking hub for international corporations and wealthy individuals. Hong Kong now has one of the highest concentrations of banking institutions in the world, with 71 of the world’s largest banks managing their Greater China operations from Hong Kong, and is a gateway to over 3 million high net worth individuals in the Asia Pacific, with wealth totalling approximately US$10 trillion dollars, significantly more than their equivalent European counterparts.

Hong Kong has been officially anointed by the Chinese Government as “China’s international financial services centre” and plays an important role in managing the internationalisation of the RMB, one of the world’s most significant “mega-trends”. To prove the point, Hong Kong hosts the largest pool of RMB liquidity outside the mainland, with offshore RMB deposits of over RMB 1 trillion, and has become the global hub for RMB trade settlement, financing and asset management, offering a wide range of RMB products and services to meet the needs of businesses, financial institutions, and investors.

Hong Kong’s economic and trade relationship with China has become even closer as it has pinned its faith in China’s ‘One Belt One Road’ Initiative. Using its strategic position between China and the rest of South East Asia, Hong Kong plans to become the facilitator of capital, services and people traveling along the Belt and Road. Utilising its strengths in financial and professional services, Hong Kong has promoted itself as the foreign service provider to countries looking to tap into the opportunities and direct investment in and out of China.

Hong Kong’s competitive advantage continues to stand out in five key areas: its people, business environment, market access, infrastructure and cost competitiveness. The foundations of such a business environment are established in its freedom, English common law system, robust regulatory regime, a simple and transparent taxation system and a time zone that links American and European markets with the Asia Pacific region.

I still have many friends working in and out of Hong Kong, in the financial services sector and also in other industries as well, both expatriates and locals. Most are upbeat about Hong Kong’s future and some even some expatriates plan to retire there (an idea that would have been laughed at when I lived there!). Property prices, always a barometer of local confidence, are stable and at historically high levels, and the business community prospers from strong economic growth in mainland China which keeps them all busy and fully occupied. The feeling on the ground within the business community is buoyant and prosperous, as it always has been!

On the minus side….

From a social and political point of view, Hong Kong is at a crossroads, a position that surely can’t be tolerated or sustained for another 30 years when, in theory, the time for “one country two systems” runs out and China can fully take over.

When the Joint Declaration for Hong Kong was negotiated and signed in 1983, a ground-breaking diplomatic achievement by all involved, including Deng Xiaoping and Margaret Thatcher (and my father and step-mother who worked on many of the details and facilitated some of the relationships) China was a poor, rural and divided country which was only just emerging from the cultural revolution following the death of Chairman Mao in 1976. Hong Kong was a ‘beacon of gold’ in a ‘land of grey’, a place where many had fled from communist rule in the 1940s and 1950s with no intention of returning, and there was a genuine fear of “the red army across the border” and the prospects of communist rule in Hong Kong. The masterstroke by Deng Xiaoping and his advisers to propose the “one country two systems” concept, and placate all fears by guaranteeing the preservation of Hong Kong’s rights and freedoms for at least 50 years after 1997, settled the markets and allowed everyone to get on doing what they do best ie to make money and keep their heads down! At the time (before the internet, CNN and the 24 hour news cycle) 50 years seemed like an eternity!

Everything went well until June 1989, and the “Tiananmen Square incident” in Beijing, which hit Hong Kong like a thunderbolt and jolted everyone from their slumber, sparked the democratic movement (1 million people took to the streets of Hong Kong the next day in an unprecedented show of emotion, anger and fear) and brought into sharp focus, played out on their TV screens with the graphic scenes from Beijing, the potential reality of Chinese rule in Hong Kong. I lived through the ‘week of mourning’ in Hong Kong that followed these events, a time when the stockmarket was closed and everyone walked around in a trance, not wanting to believe what had actually happened, and it was obvious to all that any ‘rose-tinted’ hopes and optimism about Hong Kong were well and truly dashed on that sad day, 4th June 1989.

The 8 year period that followed (1989 – 1997) was a frenetic and uncomfortable time for Hong Kong. The new UK Prime Minister, John Major, who succeeded Margaret Thatcher in 1990 appointed his friend and Conservative Party Chairman, Chris Patten (who lost his seat in Bath at the otherwise successful election of 1992) to become the last Governor of Hong Kong with a mandate to introduce a “Westminster style of Democracy” for Hong Kong in the last 5 years of British Rule.

Chris Patten, a highly intelligent man, skilful politician and Oxford scholar of modern history was faced with an unprecedented dilemma as the last Governor of Hong Kong. Rather than preparing a British colony for ‘independence’, as had been done many times before, he was effectively responsible for handing it over to a communist country and authoritarian state from which most of its population had actively fled. With the help of close advisers in Hong Kong, and balancing the demands of politicians in London and British diplomats in the Foreign Office in Beijing, he attempted to engineer a solution which would allow the British to leave a legacy of democracy and self-determination for the people of Hong Kong. Bearing in mind that Hong Kong had been in British hands for nearly 99 years, it’s a shame in hindsight that this hadn’t been attempted earlier!

Most of the new democratic measures, introduced in haste during those last 5 years of British rule in Hong Kong, were immediately overturned after the British flag went down on 30th June 1997. What remains is a diluted form of democracy which falls between the two stools of a ‘benevolent dictatorship’ (as Hong Kong was under British rule) and what we know in the west as ‘full democracy’, and nobody seems totally happy with it!

Only the most optimistic “Sinophile” could have predicted how China would transform itself over the next 20 years. Much of this is documented in past blogs and need not be repeated here. Suffice to say that despite its continuing progress, strength and prosperity, Hong Kong is no longer the “beacon of gold” it was in 1983, and other Chinese cities (notably Shanghai, Beijing and Guangzhou but also many others) are now just as alluring and attractive to foreign investors, business leaders and entrepreneurs.  At the same time, local Governments in China are encouraging, if not furiously competing with each other to attract, foreign companies and investors to go direct, rather than pass through the traditional gateway of Hong Kong, by offering financial rewards, free trade zones, and other incentives to pave the way. Despite assurances from Beijing that Hong Kong remains as “China’s International Financial Centre” many wonder whether this is an empty promise bearing in mind the many efforts being made to bypass it.

As if this wasn’t enough of a problem, Hong Kong’s democratic movement gets louder in its criticism of China for meddling in its internal affairs and attempts to influence the political process, and there are more protests (including the well publicised “umbrella movement” in October 2014 which brought Hong Kong to a standstill for over a week) and media calls for Hong Kong to retain “a high degree of autonomy” as was promised under the Joint Declaration of 1983.

As I write this blog in December 2016, it is hard to imagine that the democratic rumblings in Hong Kong can continue unabated for another 30 years! The stakes are far too high. On the one hand, Hong Kong depends on mainland Chinese business, investment, tourism and collaboration to continue to prosper economically and this will no doubt motivate the business community (which has some influence in the local political process) to maintain a pro China stance and muffle, as best they can, some of the activists, mainly students, politicians and some academics, whose activities cause embarrassment and disruption. On the other hand, China must be careful to ensure that any meddling in Hong Kong (eg their insistence that Beijing should review and approve candidates for the position of Chief Executive of the territory) does not contravene the spirit, if not the wording, of the Joint Declaration which was registered by the PRC and UK governments at the United Nations on 12 June 1985 and would raise major concerns and outrage, in the media and amongst foreign Governments, if China was seen to be reneging on its international commitments.

In conclusion….

It is very hard to predict how all this will play out. At the time of writing, and having recently visited Hong Kong during a spate of democratic protests following the recent local elections, I find myself hoping for the best and fearing the worst!

In my personal opinion, Hong Kong needs to find a way to operate peacefully alongside China so as to preserve its economy and way of life. This requires a strong and respected local Government to lead the way, a level of tolerance and diplomacy amongst all Hong Kong people, particularly the politicians, to accept and acknowledge that China is the sovereign power, and a willingness to make concessions that are not strictly necessary under the terms of the Joint Declaration. Most of these requirements appear to be totally absent at the moment.

At the same time, as China becomes more confident in its emerging role as a global power, and its own political model evolves, as it may one day, towards a more liberal, open and possibly even democratic system, it may be possible for Hong Kong to become a testing ground for Beijing to “cross the river by feeling the stones” and explore one or more democratic models which could one day be adopted on the mainland. I appreciate that this might seem a somewhat distant thought at the moment!

Meanwhile Hong Kong can’t afford to become an unruly, subversive and insurgent enclave operating under its own rules on the southern tip of China. Nobody will win if this happens. Hong Kong has always, and will continue to, prosper if it works with China to promote its traditional role as a gateway to China, an international financial services centre, a place where ‘east meets west’, and a great place to live.  I sincerely hope it will find a way of doing this.