Greetings from Singapore, where the government’s off-again, on-again Covid-19 containment rules can seem a bit ridiculous at times. At present, cafés and restaurants can seat no more than two people at a table. So when I’m in a Starbucks with my two young sons, the five-year-old understands why Daddy is sitting at a separate table but not the two-year-old, who is perplexed by the arrangement.
It is a trivial inconvenience compared with the horrors and disruption the pandemic has visited on many other countries, and Singapore officials say the current restrictions will be the last before it finally achieves its goal of “living with Covid”. This includes the city-state’s opening of more and more quarantine-free “travel lanes” to countries and territories around the world.
Hong Kong, however, will not be among these quarantine-free partners as the Chinese territory has aligned itself with China’s “zero Covid” approach to the pandemic.
Hong Kong can be thought of as a fort with two gates — a northern one connecting it to China and a southern one linking it to the rest of the world. From 1949 to 1978 Hong Kong’s northern gate was closed and its southern one open. Then during the era of “reform and opening” pronounced by Deng Xiaoping, the north gate also swung open. A 40-year boom ensued.
But now, because of Covid, Hong Kong must choose. If it wants an open gate with China, it must keep its southern gate to the world closed. It is an unprecedented experiment for one of the world’s most successful trading centres, and the subject of today’s briefing.
Charted waters looks at how US coal usage is rising, despite the push to end reliance on fossil fuels.
‘To be a hub, you have to be able to travel in and out’
For the past 18 months, travellers entering Hong Kong from China or overseas have faced the same strict quarantine regime. This includes two or three weeks in a designated quarantine hotel, which can be extended to four weeks or longer in certain circumstances.
It was an impossible situation. A city such as Hong Kong cannot stay isolated forever. Ultimately, it would have to choose between opening to the outside world or opening to China. Carrie Lam, Hong Kong’s chief executive, has chosen the latter option.
Under the current political circumstances, it is hard to imagine Lam doing anything else. Ever since China’s president Xi Jinping quashed Hong Kong’s autonomy with a strict new national security law and began to strangle the territory’s pro-democracy movement, it was inconceivable that his administration would allow Hong Kong to reopen to the outside world rather than China.
Politics aside, there is a reasonable economic case to be made for Hong Kong opening its northern gate while keeping its southern one closed. As Lam recently argued: “If Hong Kong were to loosen border controls for people arriving from overseas or adopt what other countries have done — so-called living with the Covid-19 virus — then the chances of resuming travel with the mainland will be reduced.”
“Hong Kong’s primary advantage lies in being the gateway to mainland China,” she added. “If businesses established in Hong Kong cannot go to the mainland, it would significantly reduce the appeal of Hong Kong as an international business hub and international finance centre.”
According to this argument, Hong Kong factory owners need to be able to travel freely to and from their manufacturing operations in southern China and Hong Kong-based bankers need to be able to fly at a moment’s notice to meet their overwhelmingly China-based corporate clients. Similarly, for most Hong Kong restaurateurs and hoteliers, the huge numbers of Chinese tourists who used to patronise their establishments are more important than the much smaller number of international tourists they also catered to.
Others strongly disagree with this reasoning. David Webb, the Hong Kong investor and corporate governance activist, recently polled his Twitter followers on whether they preferred “joining [China’s] quarantine or opening [Hong Kong’s] international border and living with Covid”. Even allowing for the fact that Webb’s Twitter audience is English-speaking and thus skewed towards people with a more international outlook, the response was an overwhelming 10-to-one in favour of opening the international border.
“Hong Kong is supposed to be Asia’s world city not Asia’s isolated city,” Webb told Trade Secrets, referring to the nickname coined by the city’s investment promotion agency in happier times. “To be a hub for anything, you have to be able to travel in and out.”
For Webb and those who share his preference for Hong Kong to open its south gate even at the cost of keeping its north gate closed, the most important question is not which gate facilitates greater flows of people. It is which gate is more essential to Hong Kong’s role as China’s premier international financial centre.
“People want to open the international border and live with Covid because those two things have to go hand in hand,” Webb argued. “Hong Kong can pitch that as being patriotic in terms of taking one for the country because it would be the only place on Chinese soil with freedom of movement not just of capital but of people as well.”
Not too long ago it seemed that Chinese officials also valued Hong Kong for its international linkages. As the then Chinese premier Zhu Rongji said during a visit to the territory in 2002: “We are proud of Hong Kong. If Hong Kong becomes a mess under our watch, I would be a sinner of the nation.”
Under Xi’s watch, however, Hong Kong’s international character has been viewed by Beijing as more of a liability than an asset. So in the coming months if not weeks, the north gate will open and the south gate will stay closed. The risk for Hong Kong is that it then finally becomes, as many people have long warned, “just another Chinese city”.
Charted waters
It’s ironic that, as COP26 continues, US coal is enjoying something of a resurgence. President Joe Biden may have promised to curb the use of fossil fuels, but, partly because of changes in US natural gas production, the amount of coal fed into US power stations this year will rise by almost 20 per cent to 521m short tons, according to the US Energy Information Administration (EIA). That means it will surpass nuclear as the second-biggest source of American electricity after natural gas.
The EIA added that the rise in US coal use would contribute to an 8 per cent surge in energy-related carbon emissions.
Trade links
A rebound in consumer demand, along with record imports, have led to US warehouses running out of space. Containers are piling high, particularly in port areas, prompting an urgent search for more storage capacity. At the same time, warehouse operators say they face shortages of everything they need to run their facilities efficiently, from racks and balers to forklift trucks, because this equipment is caught in the same shipping delays as other imports.
Meanwhile, Maersk has said there is no end in sight to the global supply chain crisis. The world’s largest container shipping group had a hugely successful third quarter — the most profitable in its 117-year history — due largely to a sharp increase in demand, although labour shortages at some ports meant long delays in unloading cargo. Chief executive Soren Skou told the Financial Times that congestion outside ports such as Los Angeles and Long Beach was getting worse. The same ports were mentioned by Ryan Petersen, chief executive of Flexport. He pointed out the introduction of new fees for not picking up containers on time and that these were increasing by $100 every day.
Following on from yesterday’s first-person piece in Medium by an American truck driver on the realities of being a trucker in the US, Daniel Thomas battles exhaustion (and an aching back) as he takes on a 13-hour shift as a UK driver.
Finally, Nikkei has learned that Apple is sharply cutting iPad production to allocate more components to the iPhone 13, a sign that the global chip shortage is hitting the company harder than it has indicated (Nikkei, $, subscription required).
