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Walter's Blog

Reflections on recent events, plus the occasional fact
free rant unfiltered by rational argument.

"If you want to read a blog to get a sense of what is going on in Hong Kong these days or a blog that would tell you what life was like living in colonial Hong Kong, this blog, WALTER'S BLOG, fits the bill." Hong Kong Blog Review

30/4/2020 2 Comments

Well Done, Hong Kong.

1,038 Covid-19 cases and four deaths - Hong Kong is doing something right!

We are all wrestling with the maths of Covid-19. It's the numbers that will drive a return to some form of ordinary life. Although as I've before commented, gathering, analysing and drawing conclusions is problematic.

Although, fortunately, we now have more data that will allow meta-analysis. In turn, this helps us decide which strategies are working and the relative merits of various measures.

I won't cite much data here but have provided links that support the positions I'm taking.

Two things are immediately apparent. First, Hong Kong has done well with only 1,038 confirmed Covid-19 cases (as of 29 April 2020) from a population of 7.5 million, living in very dense housing.

With an average of 130,000 people packed inside each square kilometre, the Mong Kok district is one of the most densely populated places on Earth. Ideal conditions to spread a virus you'd think.

Of those 1,038 cases, only four deaths are Covid-19 related, while four people remain in critical condition. Significantly, we've not recorded a single infection of a medical worker.

So, while not out of the woods yet, the omens are promising. The risk now lies in a second wave or an outbreak as Singapore experienced amongst its migrant workers. So, let's not get too complacent.

My second observation is that there exists no credible evidence that lockdowns stop the spread of the virus. Further, given the adverse economic impact of a lockdown, plus the consequences for people's mental health and general well-being, we must ask serious questions about this approach.

Add to that the overzealous actions of some law enforcement in policing lockdowns. I'm intrigued to see the British police adopting measures that would cause an outcry in Hong Kong. Another example of Western double-standards — I digress.

Hong Kong did not adopt a lockdown — by which I mean people forced to stay at home, most gatherings banned, and many businesses closed. We did the following:-

People wore masks
Hand washing
School closures
Banned large gatherings
Curtailed travel
Temparature checks at point of entry
Quarantining the sick
Contact tracing and quarantining

People in Hong Kong came primed to act because the SARS episode of 2003 left deep scars in the collective memory. Thus, without prompting from officials, we started taking precautions. The government never mandated mask-wearing.

Initially, I was sceptical. I took the view that masks, then in short supply, should be held back for medical staff. Then over time, as evidence of asymptomatic carriers emerged, my attitude changed.

The science is simple to comprehend; any disease spread by droplets is hampered by a mask. Granted, no mask is 100 per cent effective. Still, a study by Hong Kong City University found even two layers of paper towel was 80 per cent as effective as an N95 mask in reducing droplet dispersal.

That extrapolated over a population of millions produces a substantial reduction in the spread.

Likewise, hand washing reduces the opportunity for the virus to move around. The frequent disinfecting of high-traffic surfaces, something that Hong Kong adopted during SARS, came back in force. Lift buttons, handrails and door handles have never been so clean.

Scientists at the University of Arizona placed a benign virus on a door handle; then monitored its movement. Within four hours, the virus was on most surfaces and had reached half the staff. Thus, frequent cleaning works.

Also, research supports the closure of schools as effective against halting a community outbreak. Likewise, any large gathering has the potential to produce a cluster that soon grows.

As an example, on 18 February, hundreds of Christians gathered in Mulhouse, France, for a traditional celebration. This event was mostly in the open; yet, crowds came together to chant and pray. At least one of those present brought Covid-19.

To date, officials traced 2,500 Covid-19 cases back to this event, with 17 of the congregation dead. The virus soon moved out from Mulhouse into Germany, Latin America and Corsica.

From this case and others, we can see that banning large gatherings is crucial to success.

Hong Kong, Sweden and the Netherlands are amongst the places that didn't adopt a lockdown. Each has had varying degrees of success in containing the virus.

Alone this does not prove lockdowns are ineffective because other factors are also relevant. But, we can assert that a lockdown is not a critical ingredient; otherwise, Hong Kong would be overrun with cases.

Hong Kong-based economist Lyman Stone makes a convincing case against 'lockdowns' in this article. In the same vein, the issue gets debated here.

Meanwhile, the hard truth is that places which adopted a lockdown have more unemployed people, their economies are in tatters, and public borrowing about to skyrocket.

Next, comes inflation and all the related consequences. At least Hong Kong has it's massive reserves to fall back on, but for how long?

The picture that is emerging is that Hong Kong's system containment worked. Medical staff had enough protective gear, government departments coordinated, and we rolled out measures as necessary.

The media is speculating that countries led by women are, in the main, handling Covid-19 better. Our Chief Executive, Carrie Lam, is not on that list. While I've been a critic of hers for years, credit is due for overseeing this situation.

Meanwhile, a review by the Deep Knowledge Group puts Hong Kong in the top 10 for health security capabilities. The USA and the UK don't make the top 40; yet, both top the lists for Covid-19 risk rating.

As things stand today, I can only conclude that Hong Kong has handled the Covid-19 outbreak well. Credit is due for that, as we start the process of getting life back on track.

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27/4/2020 0 Comments

Tied Together

Cutting through the political rhetoric, China holds only 5 per cent of US debt.

The Frog and Scorpion fable teaches us that vicious people cannot resist hurting others, even if it is not in their interests. This lesson seems to be playing out again today as Covid-19 enters into Cold War II between the US and China.

Meanwhile, Trump is busy distracting to cover-up his inadequate response that killed thousands of US citizens. Along the way, he is stoking fear of Beijing’s economic clout. It could come back to bite him.

With the US economy in a shambles, Trump’s best chance of winning reelection in November is to run against China. Thus, I suspect, he will exploit distrust of China, xenophobia and nationalism at every opportunity. He's got little else on which to hang his election chances. But it's a strategy that is risky.

I doubt he will be talking much about how state-owned Chinese banks funded his projects. One loan for $200M from the Bank of China matures in 2022. Neither will he highlight the Chinese construction companies building his latest projects in the UAE and Indonesia.

Whether Trump received other loans from Chinese banks and investors is unknown, because he refuses to disclose his financial records.

Walter Shaub, former Director of the Office of Government Ethics, which sets standards for conduct in the Executive Branch, wrote "So, who knows who else he owes money? I'll tell you: The lenders who have him in their grip."

Depending on how you do the calculations, either the US or China is the world's largest economy. Using the IMF's 'purchasing power parity' method, China took the lead in 2018, with the EU second and the US third.

These three combined generate 50 per cent of the world GDP. In unadjusted numbers - nominal GDP - the US remains the largest economy. Besides granting bragging rights, the top position is mostly academic.

And, of course, Covid-19 is taking its toll. For example, the US took ten years to create 20 million new jobs. In the last month, 26 million Americans applied for unemployment benefit.

The 2020 US budget deficit will increase after four response bills pile more than $2 trillion onto the national debt. These numbers tell a story that shapes the interaction between the US and Chinese economies. And this brings in the issue of debt and politics.

As of 17th March 2020, the total amount of debt owed by the US federal, state and local governments stood at $23.4 trillion. Of that amount, China holds claim on $1.1 trillion. But, China is second to Japan with $1.2 trillion owed. Strange that US politicians rarely fret about Japanese influence on the economy.

Further, since 2011, China has sought to reduce its level of US debt from a height of $1.3 trillion.

Don't forget that the trade war dampened China's ability to invest in US debt, a situation that will exist for some years to come.

Yet, no matter how you cut it, the two economies come tied together. Should the US Scorpion plunge its stinger into the Chinese frog, both may drown. The Chinese yuan is linked to the US dollar, an arrangement that pivots the economic relationship between the two.

If confidence in the US dollar falls, China also suffers. So be careful those US pensioners who are demanding punishment of China, because that could see your retirement funds drop off.

Cutting through the political rhetoric, China holds only 5 per cent of US debt. That’s not insignificant, but it does not offer the leverage that some think. Why?
Well, because China relies on American markets to sell its goods. With the profits made, China bought up US Treasury stocks.

In turn, this helps inflate the US dollar, making Chinese good cheap to buy with the American consumer benefiting. At the end of this cycle, the average American is better off. In short, China is providing affordable services and only taking pieces of paper in return.

Selling off those pieces of paper would push the dollar down; hurting China's competitiveness by raising the value of the yuan relative to the US dollar. It’s assessed that if China opted to sell, willing buyers would snap up the stocks; thus blunting any punitive impact on the US.

Further, the US-China economic relationship delivers more benefits to the US than is commonly recognised. Recent data shows that US exports to China support around 1.8 million jobs in sectors such as services, agriculture, and capital goods. Although, that relationship does mean jobs transferred from the US to China. It's swings and roundabouts.

As human we find simple ideas very attractive. Politicians like Trump recognises this trait, then exploits its power. Thus, its China's fault that the US economy is doing poorly or that US jobs are going overseas. Unfortunately, matters are far from that simple.

A multitude of linkages including economic, political, treaties and even geography are at play. Understanding this reality can be a time consuming and complex process. Trump's over-simplistic finger-pointing distracts from that more complicated truth.

In reality, the US-China economies rely on each other. A decrease in China's growth can hurt the world economy and slow down global economic growth. The effects would hit the US.

Thus, people who call for a reckoning with China must understand the consequential blowback. No amount of political posturing or rallying cries will change that.

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