Hong Kong Rides The Dragon

MAY 2007 — I’m settled in, in Business Class, on a Malaysian Airline flight from Hong Kong to Kuala Lumpur. I just asked my flight attendant where she is from. Borneo. I don’t think I’ve ever met anyone from Borneo. (I would guess she has some Chinese blood; she doesn’t look like a full-blooded Malay.) And I can see the Vietnamese coast down below. The land is under the cover of clouds, but I can see the river delta that runs through Saigon into the ocean. So Saigon, or Ho Chi Minh City, is just below.

But before I launch into the last leg of my journey, into what the British called Malaya, here are my reflections on Hong Kong.

It’s still an incredibly dynamic place on the eve of the 10th anniversary of China’s takeover. Hong Kong has completely repositioned itself since I first arrived in 1979. Then it was a manufacturing hub for the U.S. and Europe mostly; today, it has moved virtually all its manufacturing across the border into China. It is joined at the hip with China in ways that once would have been unimaginable. Chinese tourists speaking Mandarin are all over the place, including at the Island Shangri-La Hotel where I stayed. I’d guess they were paying $400 a night. So they have big money. A lot of the shopping at the swank malls and designer shops is also being done by Chinese tourists.

You can feel the tug of Mandarin Chinese and the ebb of the English language. My government driver and I could sometimes communicate better in Mandarin than in English.

The Chinese government has kept its end of the 1997 takeover agreement. You can see the Chinese Communist flag on government buildings, and the People’s Liberation Army maintains forces in Hong Kong, but the Chinese have largely kept their hands off Hong Kong. The joke at the time was, who’s taking over whom? Will the Chinese take over Hong Kong, or will the Hong Kong Chinese export their style of capitalism to the mainland? Today the evidence is that it’s been a two-way street, and the Hong Kong folks may have had greater impact on the mainland than the mainland has had on them.
The place has gotten wildly expensive, by the way, as expatriates flock in. It is now standard for an expatriate on a full corporate ride to pay $25,000 U.S. for an apartment annually. A lot of my old friends have been priced out of Hong Kong Island and are commuting on ferries from other islands like Lantau.

The infrastructure boom in Hong Kong continues unabated. More land has been reclaimed from the harbor that separates Hong Kong Island from Kowloon, and huge skyscrapers dominate the skyline more than ever. Some of them are Chinese buildings—the Bank of China and the Industrial and Commercial Bank of China are two of them.

The airport at Chek Lap Kok is vast. I got a car ride into town last weekend, but today I took the train from a stop near my hotel. I checked my bags at the central check-in point and then rode the train to the airport. I never touched my bag again. (I hope it made it on this flight.) New York certainly has not built this kind of airport infrastructure.

Hong Kong is really riding on the Chinese dragon. What’s attracting so many people to Hong Kong is the financial sector, which is deeply tied to China now. The Chinese are trading roughly $22 billion a day (!) on the Shanghai and Shenzhen exchanges, compared with about $7 billion in Hong Kong. Clearly, the Chinese have a stock market bubble on their hands. People in Hong Kong expect a correction, but they have big confidence that the long-term direction is only one way—up. For one story I’m working on, I met people from Merrill Lynch, Citibank and Morgan Stanley who are involved in all the Chinese IPOs (Initial Public Offerings). Many Chinese enterprises and also private companies are raising billions of dollars in Hong Kong.

One negative aspect of Hong Kong’s ever deepening embrace of the mainland is the air quality. I couldn’t feel it because I had some very nice weather. But, at other times, apparently the bad air from factories on the mainland hangs over Hong Kong like a pall. Of course, part of it is coming from factories that the Hong Kongers have built north of the border, so they have only themselves to blame for that pollution. The really big question is, what are the Chinese going to do to get a grip on the air pollution before the Olympics next year? The only answer so far is that they are going to have to shut down every factory for two weeks before the Olympics and then during the Olympics, plus maybe place tight restrictions on auto use in Beijing.

The HK government, which sponsored my trip and organized a very good, jam-packed schedule for me, laid on a helicopter tour one day. It was mildly touristy, but I like helicopters and I said, What the heck? The most memorable part of the trip was flying along the Hong Kong border with Shenzhen, the Chinese district just north of Hong Kong. When I first started covering China’s Four Modernizations and their opening to the world, I can distinctly recall visiting Shenzhen and seeing peasant girls wearing conical Hakka hats who were prodding water buffalo down the dirt trails between rice paddies. There were no buildings to be seen. It was a panorama of green.

But looking out my window now, I could see a city of 11 million people crammed into skyscrapers and other very tall structures. Hong Kong’s population is 7 million, but now an even larger city has sprung up in the rice paddies north of the border. By all accounts, it is not a pleasant place. Peasants and migrant workers come to Shenzhen from all over China looking for work. But there just aren’t enough jobs, so many newcomers resort to crime. And pollution is much worse there than in Hong Kong because so many factories are in Shenzhen.

I had a funny incident one day that in some ways is revealing about how things get done in Hong Kong. It was late in the afternoon on Monday and I had a 5 p.m. appointment with a principal economist for the Hong Kong government, a woman. Getting into my car I had to stretch my leg out in a slightly funny way and RIP! There went the seam in the crotch of my pants. About five inches. I could look down and see my underwear hanging out of my pants. I thought, Holy Shit! How am I going to get through this interview? And how will I manage to find the time to buy a new suit? I am traveling with only two lightweight suits, plus a spare blue jacket.

Well, I kept my jacket on, rather than removing it, because that covered one or two inches of the gaping hole. And I simply kept my little legs squeezed together during the conversation. I don’t think the lady economist noticed anything. The next morning I called housekeeping at the hotel and they sent someone up to look. The key questions were, can you fix this today and how much will it cost? Does it make more sense to get a new suit? I left my driver’s cell phone number and went on my way.

Within an hour, the hotel had called to say they could repair the seam for free as long as I would pay to dry clean the suit. Bam! Problem solved. My suit was fixed and back in my room within hours. (Of course, I paid more than $100 U.S. for that plus laundering three days’ worth of shirts and underwear. Getting laundry done while on the road is always a rip-off.)

I didn’t do much shopping in Hong Kong because I’m traveling so heavily and there’s just a limit on just how much I can carry. I bought only two Giordano knit shirts for $180 H.K., which is about $25 U.S. I would guess that each of these would cost $30 to $40 U.S. at retail. Hong Kong remains a great place to shop.

I saw tons of friends. Rob and Sheri Dorfman were good friends when Cathy and I lived in Yonkers, and they’re still there. Generations ago, his family fled Russia to Harbin and then Tokyo and then Hong Kong. She’s a nice Jewish girl from the States. Their children are both grown now. We talked a lot about Cathy and old times. Rob runs a company of $200 million in sales and has nine factories in China. He supplies Target stores.

Then there is Jim Laurie, formerly of ABC News, whom I knew in Beijing. He’s now teaching journalism at Hong Kong University and is married to a younger Vietnamese wife who keeps running back to Vietnam to invest in real estate. I saw Kerry McGlynn, who handled PR for longtime Governor Chris Patton, the last Brit. Kerry, who is 65, also lost his wife to cancer after a five-year battle, so we compared notes on all that. He’s now a special advisor to Cathay Pacific. (I asked for an upgrade to first class on my return flight from Hong Kong directly to New York. We’ll see what wonders he can work.) I saw Peter Randall, a Brit, who worked for the Hong Kong government in New York. Now 64, he’s currently doing contract writing for the Tourist Authority. He lives with a slightly younger Hong Kong Chinese woman. Sarah Monk, who was once a journalist but later went into PR for the Hong Kong Trade Development Council, came to the Foreign Correspondents’ Club for drinks and dinner. (I spent a lot of time at the FCC—the prices are just so reasonable, and I don’t have anyone to pay my Hong Kong expenses. I’ll take them against my taxes, but obviously I wanted to keep them as minimal as possible.) On and on I could go. Suffice it to say that I am deeply connected in Hong Kong, more connected than I had expected and certainly even more connected now that I’ve spent a week making the rounds.

It’s a great place. I am scheming on ways to spend more time there. I don’t want to live there full-time, but in my new life I need to figure out a way to arbitrage between all that’s happening in Chinese-speaking Asia (and indeed Asia as a whole) and what Americans need to know and must know. The sense you get from being in Hong Kong is that people are building futures and are very confident about their prospects. It’s a very different feeling than the one I get from so many Americans, who are just trying to hang on to what they’ve got. Certainly my two weeks in Tokyo and Hong Kong reinforce my conviction that Rome was and is positively Third World. The jury is still out for New York and for America as a whole—we can either go the way of Europe and become one great big museum dedicated to the past, or we can try to innovate and build and create wealth. Here endeth the lecture.

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