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The Red Dragon’s New Pandemic
From:
Albert Goldson --  Indo-Brazilian Associates LLC Albert Goldson -- Indo-Brazilian Associates LLC
For Immediate Release:
Dateline: New York , NY
Sunday, July 05, 2020

 

 

With its official imposition of the Hong Kong national security law The People’s Republic of China (PRC) has effectively placed its autocratic knee on Hong Kong’s democratic neck extinguishing any remnants of free speech and human rights. The overwhelming passage of this law undoubtedly proved that the pen is indeed mightier than the Hong Kong riot police.

The PRC’s timing was impeccable enacting it so near to our Fourth of July – an anti-Fourth of July anti-freedom of speech legislation. Admittedly its passage had more to do with the fortuitous timing of a world preoccupied with their respective internal pandemic crisis and the “kid gloves” rebuke by the Trump administration relative to the draconian security law.

The argument put forth by the PRC supporting this law is that it will be used judiciously for specific individuals. On the other hand it’s merely a question of selective enforcement and political convenience akin to laws stating fines for littering or jaywalking which are rarely enforced but could be overnight.

Psychological Impacts

The sword of Damocles now hangs over most Hong Kong professionals triggering stratospheric stress impacting physical and mental health. The pressures for this first-world territory is unique because there hasn’t been a change in the type of government anywhere else in the world. In addition to the dangers of Covid-19, Hong Kongers are suffering a psychic shock because they now live under a de facto autocratic state after decades and generations under a democratic one.

The security law raises self-censorship at the level equivalent to walking on eggshells. Everyone now has to reassess casual, business and even family relationships in avoiding becoming guilty by association.

Economic Impact

This elevated stress will adversely impact work productivity and creativity required in an uber-competitive world. The PRC has been slowly reducing Hong Kong’s importance for decades as Shanghai and Shenzen has emerged as the dominant financial & trade center and technological center respectively. In the future Hong Kong may be relegated to merely a comprehensive back office engaged in nothing more than administrative duties.

Since the summer of 2019 when the protests began there have been strong downward economic pressures on the commercial real estate market. Initially foreign firms drastically reduced their personnel by evacuating many professionals because of the protest violence followed by a recession. This commercial real estate trend is underscored by The Wall Street Journal article 30 June 2020 Hong Kong Skyscrapers Lose Some Sheen, 30 June 2020.

In sum, the article states:

·         Remote work and hot desking may reduce companies’ need for office space by up to 20%.

·         For this reason vacancy rates have risen dramatically to between 5-8% depending on the commercial sector.

·         Rents for prime Grade-A Hong Kong office space could continue its decline from 2019 by an additional decline of 15%-20%.

·         In 2019 Grade-A office space in Central Hong Kong was $313/sf or 48% higher than the next expensive city, midtown Manhattan. This figure has been dropping precipitously.

Additionally my previously published article 31 May 2020 entitled Asian Dunkirk | Hong Kong Brain Drain provided a comprehensive overview of the aforementioned factors particularly the real estate market just prior to the enactment of the national security law.

 

Global Pandemic | Strangulation through Triangulation

The political epidemic is entrenched in Hong Kong. The political pandemic will soon begin is worldwide tour. In other words Hong Kong’s national security law is a misnomer because in reality it’s an international security law that applies to non-Chinese companies and non-Chinese citizens worldwide.

The national security law’s global reach is insidious. According to the Wall Street Journal article 2 July 2020 Hong Kong’s Security Law Means No More Business as Usual, “violations can apply even if committed overseas, and even if the person isn’t a Hong Kong resident.” That means anyone of any nationality, anywhere who says something perceived as hostile to the PRC could be liable under this law.

It would not be far-fetched to imagine that this savvy language was specifically designed as a tool for political and economic suppression and de facto blackmail worldwide. It subtly forces corporate behavior modification in their business and communications about the PRC or risk incurring heavy “penalties” such as lost business whether directly with a PRC firm or non-PRC third-party company whom the PRC has informed not to do business with them. It’s business strangulation through political triangulation.

It’s a law that can impact business negotiations with a politically well-connected PRC firm who can merely whisper the possibility of alleged “irregularities” to gain a business edge. The permutations are as endless as the vagueness and vagaries of the national security law.

The absurdity of the open-ended scope and vagueness of this security law can be compared to a classic scene in the movie Reservoir Dogs (1992) in which merely thinking anti-Chinese government policies can get you a one-way ticket to Beijing.

Counter-Measures

Standing up to the world’s # 2 economy whether for a big or small corporation is a daunting but not impossible task should one be so bold as to challenge the PRC’s high table. The security law serves as a hidden yet subtle constraint on growth for non-Chinese firms globally while PRC companies enjoy a competitive advantage.

The Hong Kong security law is an internal matter as long as the security law is applied within the PRC’s jurisdiction. However if this law is used against non-PRC companies and citizens outside the PRC, this would constitute an intolerable and illegal imposition on another’s sovereignty. With respect to countermeasures, sending a message through aggressive and immediate shareholder and consumer activism can be utilized through protests and boycotting.


Copyright 2020 Indo-Brazilian Associates LLC

Indo-Brazilian Associates LLC is a NYC-based think-tank and advisory service that provides prescient beyond-the-horizon contrarian perspectives and risk assessments on energy investments, geopolitical dynamics and global urban security.


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