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  • About Walter
    • 1980 Joining Up - Grafton Street >
      • Arrival and First Impressions
      • First Week
      • Training
      • Passing Out
    • Yaumati Cowboy >
      • Getting on the Streets
      • Tempo of the City
      • Jumpers, pill poppers and the indoor BBQ
      • Into a Minefield.
    • Why Tango in Paris, when you can Foxtrot in Kowloon? >
      • Baptism By Fire
      • Kai Tak with Mrs Thatcher.
      • Home; The Boy Returns
  • 1984 - 1986
    • PTU Instructor & Getting Hitched
    • Having a go: SDU
    • Starting a Chernobyl family
    • EOD - Don't touch anything
    • Semen Stains and the rules
  • 1987 to 1992 - Should I Stay or Go?
    • Blue Lights, Sirens & Grenades
    • Drugs, Broken Kids & A Plane Crash
    • 600 Happy Meals Please!
    • Hong Kong's Best Insurance
    • Riding the Iron Horse
  • Crime in Hong Kong
    • Falling Crime Rates - Why?
    • Triads
  • History of Hong Kong Policing
    • History 1841 to 1941
    • History 1945 to 1967
    • Anatomy of the 50 cent Riot - 1966
    • The Fall of a Commissioner.
    • History 1967 to 1980
    • Three Wise Men from the West
    • The Blue Berets.
    • The African Korps and other tribes.
    • Getting About - Transport.
    • A Pub in every station
    • Bullshit Bingo & Meetings
    • Godber - The one who nearly got away.
    • Uncle Ho
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    • 2001 - A Space Odyssey.
    • The Godfather.
    • Blade Runner
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    • Dr Strangelove.
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    • Bridge on the River Kwai.
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    • Contact
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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 wh at life was like living in colonial Hong Kong, this blog, WALTER'S BLOG, fits the bill."  Hong Kong Blog Review

20/7/2021 1 Comment

Gesture Diplomacy

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"When the U.S. Congress banned China from collaborating on the International Space Station, what happened? Within ten years, China had its own Space Station." 
In summer 1970, when the parents next door banned my brothers and me from playing British Bulldog in their garden because we were too rough, we took the game to the street. Soon more kids joined in; we had extra space, a fantastic time and went to bed exhausted. Sometimes, actions have unintended consequences. 

Thus as the U.S. announced another round of sanctions against officials here over the perceived erosion of freedoms, I'm wondering have they thought this through? This move comes one year after the implementation of the National Security Law. And while you can argue the merits of the NSL, what is certain is the law brought a quick end to the rioting.

And that is not to suggest that the NSL vanquished the extremists. On the contrary, some have transitioned to terrorist activity, with bomb plots and lone-wolf attacks on police. As a result, the police remain on alert with high levels of vigilance. 

Along with the sanctions came a warning about doing business in Hong Kong. That fell on stony ground given Hong Kong's stout economy that companies ignore at their peril.

But the question needs asking, do sanctions work or are these moves counterproductive? 

When China launched the NSL, the U.S. responded with immediate measures against Hong Kong officials and individual police officers. Yet, there is no evidence of any impact. Indeed, some people see sanctions as affirmation that the U.S. sought regime change here and felt vindicated to be named. 

Even policymakers view sanctions as blunt instruments, more manifestations of frustration than a serious attempt to resolve differences. Moreover, when dealing with a strong opponent like China, sanctions can give rise to the very thing you intended to avoid.

When the U.S. Congress banned China from collaborating on the International Space Station, what happened? Within ten years, China had its own Space Station. 

In responding to the perceived threat, the U.S. spurred the Chinese on, thereby bypassing the West in the process. The same is happening on a broad front; in computing, agriculture and infrastructure development. 

Former U.S. Consul General to Hong Kong, Kurt Tong, makes a case that sanctions and other economic prohibitions aren't working. Instead, capital flows into Hong Kong remain robust because the sheer size of the China market means banks and companies must engage. 

So while U.S. Neocons cling to sanctions, he concludes the U.S. and Western nations have few options to influence China because the success of Hong Kong remains essential for the global economy.

Oddly, having argued that sanctions don't work, he says that the U.S. should continue to apply them against individuals. He fears stopping sanctions will 'sends the wrong signal'. And with that, he sums up how naive, disjointed and ineffective is the U.S. approach. It's all about gestures because business trumps everything. And the Chinese, who are pragmatic above all else, know this.

Of course, you could argue that America's greatest asset for contesting China is its military. But I'd assert it's the U.S. dollar. Of all global trade transactions, some 41 per cent occurs in U.S. dollars. Whereas the RMB only makes up one per cent. This fact affords America leverage over the World's economy while protecting U.S. citizens by allowing them to access cheap goods. 

In reality, the American people are paying for Chinese goods with 'paper money' printed to keep the U.S. financial system afloat. Plus, with well over 90 per cent of global financial transactions in U.S. dollars, the Americans have an advantage. Hence the U.S. has a trade surplus in services and a deficit in goods with China.

Should the RMB ever gain traction in the World's financial system, the U.S. would be in serious trouble. While China is exploring options that rival the dominant US-dollar mechanism, including blockchain, these look some way off. But if the U.S. did opt to weaponise the dollar then China would likely respond with its own system.

These days China no longer shrugs off sanctions to do nothing. Instead, it is willing to hit back. Confident in the power offered by its vast market, it can deny access that hits hard. Ask the Australian wine industry, which suffered a 96% drop in exports to China, its best  costumer. Ask Nike how sales are going in China; down 59% after the company became embroiled in the cotton saga.

Yet, as the American Chamber of Commerce made clear, the appeal of Hong Kong remains undiminished. Excellent infrastructure, robust rule of law, safe streets and access to the Mainland all work in Hong Kong's favour. As proof, AmCham invested in a new site in Central to foster business. 

Equally, The Economist rated Hong Kong top of the league for 'normalcy' during Covid, while inward foreign investment is the world's third highest. At the same time, property prices continue to rise, as unemployment moves below five percent. 


Say no more.
1 Comment
Chris Emmett
21/7/2021 03:56:32 pm

China is experimanting with an e-Yuan, which is effectively a stable, state backed crypto currency. If the experiment works, watch out US dollar. https://carnegieendowment.org/2021/07/01/what-will-be-impact-of-china-s-state-sponsored-digital-currency-pub-84868

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    Walter De Havilland was one of the last of the colonial coppers. He served 35 years in the Royal Hong Kong Police and Hong Kong Police Force. He's long retired. 

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