 we're live. We're talking about Hong Kong today with Carl Baker, Senior Advisor of Pacific Forum and there's lots to discuss about Hong Kong. It's, you know, it didn't just close up and go away and disappear after the new security law, but it did change and COVID has changed it further. And the question before the house is how does this affect its connections as a place to connect east and west, which we always loved it for that, but query is that still the case? Carl Baker, thank you so much for coming down. Yeah, thanks Jay. It's always a pleasure to talk about the places in the world and Hong Kong has certainly has always been sort of a almost a nostalgic place for some people I think because it always was unique in the sense that it connects east and west and I think it still does and it still will. I think part of the nostalgia of course is the old colonial Hong Kong, which had its own problems and the British didn't exactly leave it in great shape when it handed it over back in 97. So I think certainly Hong Kong is changing and the dynamics are certainly making it much more of a Chinese city but it's still a place to connect. I found an interesting quote from your friend Jerome Cohen and I'll start with that. He said this dramatic transformation will not be the end of Hong Kong as a global financial hub as it has already begun to boost economic integration with mainland China but it is surely the death of democratic hopes of most of its 7.5 million people and I think that that's probably where the nostalgia comes in. Hong Kong was always going to be this beachhead of democracy in China and with the recent events I think Jerome and the rest of us see that that's probably not going to happen, that it is going to become much more of a city controlled by Beijing and I think that's what we really see in the nostalgia is that it's becoming a Chinese city and what's happening is it's still a financial hub but the nature of the financial hub is changing, that it's becoming a financial hub that focuses on China and so the big banks are shifting their people, the people are leaving, some people are leaving the regional office, it's not so much a regional headquarters anymore as it's becoming an office that does wealth management for Chinese. That's the other direction. I've been to Hong Kong a couple of times and the last time I was there I went to a banquet, of course you've got to have banquets in Hong Kong and Chinese banquets right around this time of year, right? I was sitting next to a guy who worked for some kind of venture capital firm, capitalistic firm and he said his job was to put the money together with the opportunities in Mainland China so he was funding these projects and he was making a lot of money because they needed the investment in China and he had it and Hong Kong was a portal at least at that time. This was maybe 10-15 years ago, that's all it was. It was a portal to all this investment money and it was a model that was enviable, it was that connection with East and West. The money was from the West and the projects were in the East in Mainland China so now they still have the skill. A lot of these guys it was still there, I'm not sure they're all still there, from what you say it sounds like some of them are not there anymore. They went to the UK already but the ones who were still there are actually very skilled and can manage the money of the what do you want to call it upper middle class or upper upper class from China, such an interesting turnaround. Yeah and it went fairly fast I think and certainly post 1997 I think that shift was occurring but it's certainly sped up in the last couple years where like I said what's happening is not only are the managers focusing on Chinese wealth management but they're becoming Chinese. So the Europeans are still there. There's roughly 300,000 foreigners that still live in Hong Kong so it's not a shrinking expat population. Well it is shrinking but it's not a shriveling one I guess I should say. It's they're still there. The difference. It's shrinking but not shriveling you know because but they're focusing on different things. The needs are different and you know and we have to be honest with ourselves that you know old Hong Kong wasn't this this idyllic place. There were problems there you know in the early in the early post-war era you know post-Japan the 50s and 60s it was full of immigrants living in little hovels manufacturing cheap trinkets. You know it was sort of Japan before Japan became Japan and you know and that and that sort of shifted over time as it became expensive and they started building high rises for all these immigrants you know and but it was still it was still a place that was significant but it was shifting to the to the financial hub you know and so it really wasn't until the 70s and the 80s that it became known as the financial hub of pushing money into China and and like you say now it's kind of shifted and it's taking money out of China finding ways to invest Chinese money in different parts of the world. So it's still east meets west it's just east meets west with a with an eastern focus rather than a western focus looking in so it's really it's kind of a change in direction I guess. For sure you're right you know years ago not too many years but some years ago if you looked at Hong Kong you know the people were not wealthy I mean there were financial institutions and successful executives and all that money managers involved you know with following the money but the ordinary citizen didn't have a lot of money and he certainly didn't have a lot of room you know even in the papers today they talk about people who are quarantined in their buildings which have thousands of units in a given building and the units and I've heard this before are like less than 300 square feet and the whole family lives in 300 square feet now that is hard to take and and you know it explains somebody told me this and I accept it it explains in large part the you know the umbrella movement and the frustration that people who are cramped in these little apartments have and why it's important that they get out of the street and express themselves is because they really don't like their lives of cramped apartments with not a lot of money but you know Hong Kong offers still today offers a certain amount of vitality and you're shopping and walking and you know getting out there although I mean with the COVID we should talk about that the COVID has dampened all of that and so has the national security law but but you know the the personality of Hong Kong very vital very feisty and so that's the way people express themselves they got out of their little tiny apartments and into the street yeah and it was I mean it was known as the protest capital of Asia right I mean even even more so than than Seoul and Tokyo back in the day and so yeah and you know and that's you know and that's what the national this national security law that was passed in June of 2020 has certainly accelerated the pace of change and like I mean the last time I was there was in 2019 just really before the the big riots started in in the summer of 2019 and you know and you could feel that that there was this this sentiment among the people that they weren't happy you know that that the conditions weren't weren't very satisfactory because of the like you say because of the of the of the the the number of people the number of people in Hong Kong is compared to other Asian cities is is just you felt crushed at times you know that it was so crowded the high rises are really tall high rises they're not you know they're not 40 stories they're 70 stories and they're packed in in top of each other and like you say the apartments are small and so there was this sense of dissatisfaction and then of course you know in 2019 you knew something had to happen the the the Chinese simply couldn't couldn't tolerate the these protests without doing something and so you now you have the the national security law and and you know what the national security law really does is is it it outlaws dissent and so the democracy advocates have been put in jail you know by the thousands the the open open media is more or less gone apple apple newspaper has gone the way of of the the dodo bird i guess because jimmy lie the the founder of apple media he's been in jail for a year for first amendment violate i mean first for a prosecution which violates his free speech yeah well yeah i mean free free speech is basically is basically gone and you know and and there's really no way to to control it you know and you know what made Hong Kong vital of course for the for the finance industry is is the fact that it had british law and and you know and that was supposed to be maintained at least until 2047 you know and that's that's now gone i think you you you really don't have a very free legal system anymore you know they well because everything gets tied to national security and and the judges well the judges are still there to to adjudicate to adjudicate civil civil law the fact is is that everything you get pushed into national security law and the national security law is there's only a select number of judges who are qualified and those and those qualifications are based on bait james criteria and and you know it's not it's not really a free legal system anymore in that sense and and so what's what's happening is everything gets pushed as i say everything gets pushed into under the rubric of the national security law and there's and there's no real openness about the about the trials or anything so so in that sense you know the legal freedoms have essentially disappeared and they're not they're not coming back the the chinese aren't aren't going to to to remove those restrictions anytime soon can you imagine how how you would feel if you were a protester a student for example a protester and all those umbrella movement type protests in only like two years ago and now you're in trouble and if you get arrested for participating in a protest or any kind of dissent there's this offense essentially no bail um you you you go to jail and you go to jail right now pending trial and you you sit in jail until you're a trial which could be a while further more at the this is very this really struck me at the bail hearing which is usually denied now these days um the press is not permitted to cover that there's there's no coverage of it because because it's it's it's invisible they want it they want it to be invisible and so and so yeah the basic freedoms of expression you know of uh they're gone there and and you know they've taken down they've taken down the the monuments to the to the tin on men's square movement and they've taken down any any reference to to lady liberty you know and so they've removed all the all the symbols associated with the democracy and you know and and the the last election they reported there was like a 35 turnout so the the people that are are still there have said oh okay we we realize that we're not we're not going to get to choose our legislatures you know that's and that's a very bad statement that they don't want to vote because they don't they don't think they have any control over the government yeah well you know and again this goes back you know let's let's blame the british because i like to do that uh you know the uh they need to be blamed well i mean the british the british you know did the did the agreement in in 19 what 1984 you know to do the turnover in 97 and only in 1992 did governor patin have the brilliant idea of saying you know we should probably introduce democracy before we turn this thing over you know and of course then the chinese said no oh wait a minute that's not what we agreed to in 1984 you know and and so it never went anywhere so so you know basically there there never was a real freedom of of of voter choice in in hong kong prior to the turnover so you know so so the british have a little bit of responsibility here for not being more more aggressive in trying to promote democracy when when it was an open system that the british control yeah well as you say a lot of things have fallen by the wayside a lot of those guarantees civil liberties would have you it's really a sad situation you can imagine how people feel you know for a long time i was considering taking a subscription out to the south china morning post yeah which was a statement of pre-speech in hong kong would you do that today carl uh i read i read south china morning post uh you know they they actually don't even charge for their for their subscriptions like new york times and washington post it you can you can read i've never run i've never run across a limit for south china morning post and so i think uh i think i do read it okay all right i should take a page out of your book but literally but what what about its credibility in a place where there is no freedom of the press you know it does it does a fairly good job of reporting the news uh and it uh it doesn't do anything controversial obviously because it wants to stay open but you know but it does it does report regional news and it does report on on what's happening in hong kong uh so you know i mean it's better than nothing that it's it's still it's still a newspaper it's still it still has some some opinion pieces that get written but of course it's very careful to to avoid getting crossways with with b jane yeah so i guess um you know i to me i think the the central question where halfway through our discussion here is how all of this affects the the vitality that we have seen in hong kong it has been a very vital city or crossroads uh as you said a connection between east and west so if i give you a population and we need to talk about how coven has exacerbated this and the and the prc's reaction to coven which is really draconian um so you know the people are being squashed the people who had all the vitality of being squashed the population was to say 7.5 million um i'm sure most of them are unhappy except for a few fellows making money um but the average person is stuck in his place his house he doesn't have money uh he can't go to work um he's really really unhappy and and so you get a pale of unhappiness and this is especially relevant now in early february because it's chinese new year time for celebration and all these people in all the newspapers say the same thing that's so unhappy about everything so query but how does that affect commerce yeah you know it's hard to say i mean obviously not being able to visit hong kong you can't you can't really get a sense of what common people feel like or how they are how they're how they're reacting because you you can't read about it because it's not an open media so you don't you don't really have a good sense of how how the common people feel uh you know i mean if you look at numbers you know there's they estimate the british estimate that you know the british national overseas passports they open that up in late 2020 as a way to to give people the opportunity to move out they they estimate that by the by the end of 2021 they thought they would probably be roughly 123 000 people who have taken the the british national overseas passport route to to move to to to the uk the european union you know has opened up political refugees from hong kong canada has done the same so so there's some outlet you know and and the numbers are in the like i say the hundreds of thousands the british the uk has said you know at worst case or worst case at at the extreme case they could get a million people that move out in the next five years under the british national overseas passport system you know so so there's uh you know there there is an outward movement of of actual hong kong people you know and the other the other measure that you can look at is uh i saw an article that talks about the the drop in enrollment in the prestigious private schools you know where obviously the wealthy are are leaving in in big numbers like they did you know prior to 1997 uh and and the indication that they're staying you know is there's they have this this mandatory provident provident provident fund that's basically their retirement system and and you can only draw your money out if you say you're never coming back and the numbers of people who have done that has gone up so the wealthy some of the wealthy are leaving so it's not you know it's not everything is not wonderful for them either they see that there's there's an opportunity to leave and they're taking it you know when you look at the expats you know like i said there's still a big expat community but what what everybody's talking about is as you say with covid uh people don't want to work in hong kong because you can't leave i mean there's no there's no way for if you're a regional bank if you're if you're if you're a regional center for a big bank you can't go out of the country because you have to come back you quarantine in basically a prison for 14 for 14 days they just reduced it from 30 days you know so that's not practical so you you really can't you really can't run a business like that or our regional headquarters like that so you know so i think you know and and so now they're having trouble filling these these uh high high positions uh in these in these financial institutions because people don't want to go obviously if you have a family outside of hong kong you don't want to go and you don't want to subject your family to this kind of this kind of a system that doesn't allow you to move about yeah it's hard and so you know we don't we don't know that the total effect yet is a lot of things in the world are building under the hood you know and we'll have to take a look back in a year or two and see how they were affected by covid and other things but you know it seems to me that what's probably brewing under the hood is a general dissatisfaction among the expat community uh gotta get out of here gotta go somewhere else now one thing is very interesting i think is that although china you know suppresses civil liberties and suppresses freedom in all ways on the mainland you know in a funny way that tougher on hong kong and they are in mainland china and i just wonder you know whether any any person who was frustrated with hong kong would say hmm i think i'll go to shang ha they do plenty of international business why don't i go there i can make some money and have a good lifestyle become a millionaire whatnot is this happening i i there's no evidence that i've seen that suggests that's happening uh you know i think that the the chinese companies are moving into hong kong i mean you know so they're able to recruit people to move into hong kong so you know if that's if that's any indication you know what what i've what i've seen is that what what's happening is as the as the multinationals leave the chinese companies are moving in filling in behind them taking taking the opportunity to move to hong kong because i guess you know there is still some more flexibility in in the the economy of hong kong to to move money in and out of hong kong as opposed to if you're in shang ha you know you're very limited in how you can how you can move money around and so i think the the the chinese have sort of kept some some legal structures open enough to to allow more flexibility and in currency movement in and out of the in and out of the country the ones who are leaving of course they can go to uh u k i although i think the numbers have been constrained recently there's not as many billets open as used to be i'm not sure what the number is okay yeah no the uk has said they'll take three million people oh okay well i guess that that's a substantial yeah i mean they don't they don't anticipate getting close to the chinese allow the the the chinese government allow the hong kongers to go well you know yeah it's i certainly not not common hong kongers i think i think there's a there's a wealth there's a wealth the barrier put up that would not allow it i think it would it's fairly expensive to get the permission from the british and and then to to get the permission from the from the chinese are from the hong kong government so if i was a multinational or if i was a business a businessman um you know looking to you know thrive in my business despite the problems in hong kong i would consider other ports in asia i would consider singapore um and i would imagine a lot of them are going to singapore because singapore is i don't know if you'd call it a democracy in the fullest extent but it's a it's a place with a quality of lives it certainly has the quality of life and yeah that's where the that's a lot of where the the financial regional centers are moving to this home is uh is from hong kong into into singapore another interesting fact of course is you know competition for the regional transportation hub between hong kong and singapore so some some numbers just to to give you a sense of what's happened is singapore is pushing hard you know to reopen to make chang yi airport the the regional hub and the numbers are that in 2019 chang yi processed 19 million passengers last year it was 3.5 million but they were happy because they were ahead of hong kong so so think about think about the shift that's happened there and and so what's what's happening is is yes the the regional banks are are moving their regional headquarters out and and primarily to to singapore some to some to tokyo some to to soul some to taipei but for the most part singapore seems to have the the winning the winning hand there and partly because southeast asia is is sort of the dynamic area these days uh and you know and others others have done the same thing i think that singapore looks more attractive uh you know if we look back then we see the vitality the and the international connection of hong kong and a fabulous restaurants i might add that too and you know all the things to do um and all the shopping shopping in every direction for miles nathan road comes comes to mind that's right you know that that is really subdued now and it isn't going to come back and you have you have multinationals who you know the family doesn't want to be there and they hate to see what's happening and they're you know they're they're down about it just the way that hong congress is down and so they're leaving and as i said before i i believe that under the rock when you turn the rock over there are things processes happening socially you know in in civil society that are changing we agree that changing hong kong forever and it's not going to come back there's going to be something different it's going to be a chinese city okay um so my question is just wondering about this is this has got to have an effect on global money moving it's got to have an effect as you say on southeast asia because it was a it was a it was a pivot point for the whole community and for the connection of europe and asia and now it isn't really not as much and so the question is how this is a hard question carl i'm sorry for this question how does this change the the calculus for the development of asia well i think it i think it does shift it away from from hong kong uh you know and and it shifts it into the capitals in southeast asia and and you know i think you you basically you almost have a more multipolar financial system i guess where where you know tokyo is much more willing to go directly into into southeast asia china is going to have to figure out how to do that you know and you you begin to bypass hong kong for that for that purpose you know and i think that's that's what really happens is hong kong it still becomes a financial hub but it becomes a financial hub for chinese money moving out rather than money moving into china and and so but hong kong becomes mostly a chinese focused city rather than rather than the rest of us that start using singapore and and tokyo and and to some extent taipei uh as as your as your approach into into the developing area of southeast asia and so hong kong gets gets left by the wayside it becomes it becomes an entrepot for for chinese goods still but it becomes much less much less of a a center of the financial world i think you know you know the the chinese have been you know to to the observer pretty i mean the chinese government prc shijing ping they're pretty nasty about hong kong and maybe they they had good policy reasons and they didn't want to have any more umbrella movements because they thought that would be something that would catch on fire in other chinese cities yeah but you know that it didn't help their brand very much and it didn't help their their image of the world among countries and multinationals that make decisions on the basis of that brand so it strikes me that you know they didn't help themselves financially on that well again you know their view their view and they very much push this as their narrative that that we don't care because because we see hong kong as becoming the hub for chinese financing you know so so they see and like i said it's almost it's almost a one-for-one replacement as as the multinationals move out the chinese companies move in as the focus on on money moving into china reduces the amount of money moving through hong kong into the rest of the world becomes more important and so that's that's i think that's the chinese view is that that's that's why they don't they don't care but one other point i want to make is is the impact it's had on tai in taiwan you know this this whole idea of one system one country two systems was always the thing that that the chinese pushed to taiwan well once once the you know the whole national security law happened in 2020 you don't ever have to try to talk one country two systems in taiwan again you know even even the the supporters of the mainland in taiwan have heard that message loud and clear it's it's it's one system yep clear enough so a couple years ago before covid there was a panel program downtown here in honolulu um and it was organized by some people from china you know chinese people here in hawaii um and the subject was belt belt road and there were chinese investors and and non chinese investors that they came actually from around the country uh into this program and they were all there because they felt that they could funnel money into belt road and make money and it was you know a great opportunity that china was not limiting itself to you know the funding from the government or from government controlled um you know agencies uh uh in in china but um it was trying to draw capital from everywhere and this program that i saw um you know reflected that they came from all over the us and asia to talk about how you invest in belt road and how you make money doing that with the help with the you know the the permission source of the of the chinese government which was running built which is running built work so i guess my question is uh gee you know if if you're a money guy and you're making investments from wherever you are and you see that um those these changes are happening in hong kong uh that may change your way of looking at making investments in hong kong or rather in belt and road because i think you got it correct if i'm wrong that hong kong was also a portal for investing european american money in belt and road so if that's closed off or changed in some way does that change belt and road uh i i i'm not sure i follow but i i think i don't think so remember you know you have the china has also set up the asia asia infrastructure asia infrastructure investment bank a i a i i b yes you know to go along with belt and road and so so i think in in some ways you know beijing has anticipated moving away from hong kong as a finance center that it sees it sees more advantage to to actually controlling it better out of beijing and so the a i i b and and and belt and road initiative have taken taken some of that financing away from hong kong in in that sense so i think that that it changes the calculus about hong kong but it's not so much that china is concerned about that again i you know i think i think it sees hong kong as as its avenue to the world rather than hong kong as the world's avenue to beijing last area i want to ask you about is you know hong kong was a very attractive tourist destination and had some hotels and features and things that drew people from around the world it was an exotic it was magnetic i don't think it's like that anymore honestly they have violence in the street people got you know wounded and killed in the umbrella movement so forth and now you have that you know sort of the eastern european pale of oppression on everything you know tourism must be way down just as flights are way down well yeah and you know i know people who lived in hong kong who say i can't go back there on the other hand i know people who lived in china and say i can't go back there i'm really i'm afraid and the fear is a valid fear so my question is would you go back there i'm telling you now i would not go back there but i'm wondering if you would i probably would like to go back to hong kong just to see what how it has changed because you like i said you can't really see anymore what's happening because you don't you don't get the real story you're getting a very filtered story at this point so it would be interesting to go back just to understand how the hong kongers have actually reacted to all of this but i don't think i would go for a very long time i think it would be a very short stay well let me assure you that we we will we will not ask you to do a think tech talk show while you were in hong kong you were in hong kong this would not be advisable good the world changes carl it's changing around us and and we have to you know follow the sea changes and the changes happen on the surface they happen underneath they happen all around and it's it's it's fantastic it's fabulous it's it's so interesting to to spot these changes today because they're seem to me to be happening faster than before yeah yeah and what we remember of of hong kong is some nostalgia and and that is going to be we're going to be disabused of that nostalgia i think if we do go back and and look around i think you'll you'll see less and less of western influence in that city yeah well thank you carl it's great to talk with you about this and to get a handle on it and i i suppose after this discussion if we did go back we would we would have our eyes would be wide open yeah yeah thank you carl baker senior advisor of the pacific forum joins us every now and then on global connections thank you so much thank you hello