Insights from Hong Kong

Political Crises: Thailand, Ukraine…and Hong Kong?

In China, Hong Kong, Public Affairs on 8 July 2014 at 10:15 AM

HSBC Hong Kong – Famous main hall atrium

Today the world’s shaky political systems received another addition. Along with the upheaval in Thailand and the overthrow of government in Ukraine, Hong Kong was added to the list. Yesterday HSBC Bank announced a downgrade of Hong Kong due to strains with Beijing and the threat of the Occupy Central movement. This is fresh on the heels of the largest, peaceful demonstration in the city’s history. Police estimated 98,000 took part. Organisers claim 510,000 marched. Independent experts assert 140,000 to 172,000 participated. Regardless of total numbers, what matters is the amount of attention the tension is receiving.

Hong Kong is a Special Administrative Region within China. That means “One Country, Two Systems” is supposed to provide some level of independence. This has led to plaudits from world leaders:

Overall, our view remains that the concept of ‘One Country, Two Systems’ is an everyday reality in Hong Kong. The rule of law and the independence of the judiciary, which are so vital to Hong Kong’s success, are being upheld. Essential rights and freedoms are being protected, and challenges to them fully and freely debated.— UK Secretary of State for Foreign and Commonwealth Affairs Mr Jack Straw, Six-monthly Report on Hong Kong, July-December 2001, presented to the British Parliament, March 2002

Time, however, seems to be working against Hong Kong. This special set-up was put in place in 1997 and was guaranteed to remain in place for 50 years. That means Hong Kong would be quasi-independent until 2047. Now with 33 years left to go, Beijing is shifting the lines.

Last month Beijing issued a White Paper on the future of Hong Kong. The central claim is that China retains “complete control” over Hong Kong. The Communist Party has called on judges to remember their roles as state employees (versus Hong Kong’s prized independent judiciary). The White Paper has led to a flurry of negative articles, protests and calls for change. This has played directly into the hands of the Occupy Central movement.

In the coming weeks we expect to see more and more protests. The main business district may be inaccessible for days at a time. No doubt protesters and police will clash. This orderly, polite nation will take pepper spray to the face.

Clash is inevitable as Beijing seeks greater control and Occupy Central calls for greater transparency. I just hope we don’t descend into a Thai-Ukraine style crisis.

Waiting in Victoria Park for the 1 July 2014 march to commence


World No Tobacco Day in China

In China, Economics, Public Affairs on 6 June 2014 at 2:20 PM
Raising tobacco taxes will save lives in China.

Raising tobacco taxes will save lives in China.

For China’s smokers, death and taxes are inversely proportional 

The following article appeared in The Singapore Straits Times, and was developed by Kreab Gavin Anderson for the World Health Organization

Every economist knows that people respond to incentives. Change the incentive for buying a product – by making it more expensive, for example – and people will change their behavior by buying less of it.

China would benefit greatly if its consumers bought less tobacco. Yet the country’s rapid growth has made cigarettes ever more affordable. In 2000, buying 100 packs of the cheapest tobacco required the average Chinese smoker to spend about 14% of his or her annual income. Today, it’s only 3%. This trend of rising affordability requires a strong policy response: higher taxes on tobacco products.

China taxes tobacco at one of the lowest rates in the world. The World Health Organization (WHO) recommends that taxes account for about 70% of the retail price of cigarettes; in China, they represent around 40%. This means that, with the exception of a few luxury brands, most cigarettes in China are cheap. Consumers typically pay about five yuan ($0.80) per pack, much less than in other countries. According to the Tobacco Atlas, Singaporean smokers pay US $9.29 a pack; Australians US $12.14 a pack. New Zealand, whose government aims to make that country smoke-free by 2025 and where taxes already make up more than 70% of the price of the most popular brand, is implementing a 40% tax increase that will raise the cost of cigarettes to around $US15 a pack by 2016.

There is no reason why China cannot learn from the experience of these and other countries which have raised tobacco taxes and reduced tobacco consumption, without any negative impact on their economies.

Tobacco tax increases can save lives, but only if the tax increase results in higher retail prices for consumers and not a minor reduction in profit for the tobacco industry, as occurred in China in 2009 (when tobacco taxes were increased, but tobacco companies simply absorbed the cost in order to avoid driving customers away).

Taxing tobacco is a win-win for governments. By reducing tobacco use, a tax lowers public health care costs, while at the same time generating additional revenue that can be invested into public health or other social priorities. In China, the benefits are undeniable: raising cigarette prices by just 0.94 RMB a pack ($0.15 USD) could increase government revenue by more than one-third, while cutting annual tobacco consumption by nearly 20%.

Such a tax need not be regressive. Because lower-income smokers are more price sensitive, they are more likely to quit or smoke less as a result of higher tobacco prices. By spending less on tobacco, they will enjoy both higher disposable household income and better health.

The world’s top risk factor for preventable death, tobacco use kills 6 million people each year including 1 million Chinese. If China’s current rate of tobacco use remains unchanged, the death toll will eventually triple, reaching 3 million deaths a year by 2050. Given China’s aging population and its need for a healthy workforce to support the growing proportion of retirees, it is not hard to imagine the potentially catastrophic effects that smoking could have on public health and the overall economy in the future.

China must raise taxes on tobacco in order meet the ambitious goals for reducing tobacco use it has set for itself. By next year, the China National Tobacco Control Plan aims to reduce the adult smoking rate by 10% and the smoking rate among young people by 35% from their respective levels in 2010.

China is to be commended for setting such ambitious targets. To meet them, it must enact strong policies that reduce the demand for tobacco. Raising tobacco taxes – and prices – would have the single biggest impact on reducing tobacco consumption in the short term, thereby helping the government achieve its own goals and creating significant health and economic benefits for China.

Dr. Bernhard Schwartländer is the WHO’s Representative in China.


Island In The Stream: Electronic Waste in Hong Kong

In China, Hong Kong on 25 March 2014 at 11:33 AM
21 March 2014

Island in the Stream

Hong Kong’s role in the greater China and global WEEE trade

With a population of 7.12 million and a land area less than half the size of Luxembourg, Hong Kong may not be the first place that comes to mind when examining the global e-waste problem. However, the territory plays an important niche role in the trade of waste electrical and electronic equipment (WEEE).Hong Kong still lacks an effective local WEEE recycling infrastructure and serves as a key stopover point for trans-boundary waste, in defiance of the territory’s international treaty obligations. In Island in the Stream (link to download), Kreab Gavin Anderson Research-Asia examines:The scale of the problem;

Perspectives of industry, retail, NGO and waste collection stakeholders; and

Reasons for delays in resolving the issue.


If you have questions on how local government waste management or environmental policies might impact your organization, or if you seek better communication with local stakeholders, contact Kreab Gavin Anderson today.


If you have questions on how the included regulatory changes impact your business, or if you wish to unsubscribe from these newsletters, contact Kreab Gavin Anderson Research-Asia today.

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