World Bank memos

Enzo Michelangeli em at
Sat Dec 5 03:13:59 PST 1998

-----Original Message----- From: Henry C.K. Liu <hliu at> Date: Friday, December 04, 1998 4:38 PM

>Enzo Michelangeli wrote:
>> Precisely my point. Why a territory under foreign domination does so much
>> better than the sovereign motherland? Failing to provide a convincing
>> to such a fundamental question may be very dangerous for a government.
>British Hong Kong was way behind Chinese Shanghai until after WWII.

And China was not socialist then. I'm not the defense attorney for Britain: I'm not even British. (Even though I must note that there have been much worse colonial masters than them).

>The Zhou Nan - Patten argument was not about economics. It was a purely
>political argument using economic policy as a vehicle. The very essence of
>dispute centered on Britian, typical for all her final days in her
>wanting to leave HK with a sham free enterpirise tradition that never
>Up until the Joint Declaration in 1982, HK had high tarrifs for all foreign
>goods, including Chinese goods. The only exception was for British goods.
>was in addition the technical monopoly of peculiar British standards in all
>equipments used in HK, British measurments, rail gauges, even screw
threads, so
>non British equipment were not usable. WE could not even buy Italian cars.
>entire financial sector was controlled by 5 British firms and 3 British
>People who argue your point of view are simply unfamiliar with Hong Kong
>history. There were no free press unless the criticism was direct against
>British enemies. There was not civil right protection for Chinese. Dogs
>Chinese not allowed in public parks. Until 15 years ago, there were
>anti-Chinese segregation in HK. Chinese were not allowed to buy houses
>mid-level. So don't tell me about the benefits of colonial capitalism.
>parading himself as protector of freddom in HK is comparable to Hitler
posing as
>liberation of Poland.

Henry, you keep barking up the wrong tree. I'm _not_ defending colonialism, which is the antithesis of free choice. I don't like Chris Patten either. I'm talking about free markets, and the economic advancement they allow: not only to the the tycoons-without-a-degree, but also to those common people with a "decent job", who get their two or three thousand US dollar a month (after tax) as bank employees or accountants, instead of slaving in the fields or over production lines as their cousins in China do.

>The mayor of Beijing incident was a power struggle between the Shanghai
>and the Beijing clique. The corruption bit was just a pretense. You should

Uhm, if you say so. I would have expected more political arguments in the political struggle. But look at what Xinhua says (as reported in today's SCMP): china&template=Default.htx&MaxFieldSize=2096

----------------------------- $9b spending spree turned up by auditors

VIVIEN PIK-KWAN CHAN The National Audit Office has uncovered irregular spending amounting to 9.6 billion yuan (HK$9 billion) in the first 10 months of this year as auditors stepped up inspections of public accounts.

The money was spent on luxury goods without the approval of senior officials.

Auditor-General Li Jinhua said the audit campaign had also enabled the Finance Ministry to reduce its 1.74 billion yuan in subsidies to various claimants by uncovering claims for false losses and liabilities.

The campaign's main focus was on state enterprises, the grain distribution system and securities companies, Xinhua quoted Mr Li as saying.

Auditors have been sent to seven provinces including Hubei, Inner Mongolia and Shandong to review the revenue and expenses of 162 large state-owned enterprises and 23 large- and medium-sized state firms which were reported to have suffered serious losses.

"It was found that false assets reported had reached 11.2 billion yuan, false debt 4.5 billion yuan, and false losses 3.7 billion yuan," Mr Li said.

Auditors have also detected 1,181 cases of financial irregularities by officials working in the grain distribution industry.

"Some 166 officials have been put under party or administrative discipline, while 27 are still under investigation for criminal liability," Mr Li said.

The reputation of the state grain system suffered this year after the publication of a report by the National Audit Office which revealed that state grain distribution offices had lost, or illegally diverted, 214 billion yuan in the six years to the end of March this year.

The department's five-month investigation, ordered by Premier Zhu Rongji in March and involving 50,000 officers, uncovered one of the biggest financial scandals in China's history.

Investigations found that, like state enterprise, many of the reported losses in the grain distribution offices were illegally diverted into non-related activities including the purchase of cars, luxury apartments, mobile telephones and speculating in futures, stocks and property. -----------------------------

So much for the beneficial effects of state ownership.

>> If returns on investment were as large as you say, nobody would
>> produce a single pin in America or Europe anymore.
>They don't. Have you noticed everything we buy in New York is made in

So what are these American workers I keep hearing people talking? Has GM relocated to China? Is Boeing producing in Indonesia?

>> On the opposite, the political shift in China that has attracted
>> their investment precisely by allowing higher returns. And of course,
>> speaking the same language is an additional facilitating factor.
>You can't have both sides of the argument. High returns or low returns in
>China, take our pick, but not both. My point was overseas Chinese capital
>lower returns than Western capital, everyone know that. Hong Kong brokers
>Western capital, its gets high returns. But when pure Chinese capital is
>involved, even fom HK, the returns are much lower.

I think you are kidding. Just last week, Legco has blocked changes to the current rules about electricity generation, not to "discourage the investors". Against the change: Progressive Alliance (your tycoons with double-Rolls) and "Liberal" Party; DAB (the pro-China populists) conveniently abstained; in favour, only the democratic area. (For those unfamiliar with Hong Kong matters: the duopoly Honk Kong Electric and China Light and Power enjoys returns guaranteed by the government on power generation, regardless of what the market can absorb - even though, of course, it would be much cheaper for us to connect to the power grid in China, which would benefit China as well, Ricardo docet).

>Is that an argument for pollution, that poor people will put up with it?

It's a fact of life. Is China less polluted than HK? Was Eastern Germany less polluted than Western Germany? You may argue against inequalities (and I believe that the best way of smoothing them is through free trade and open markets) but when it comes to path of development, you should acknowledge that nobody has yet come out with a solution better than industrialization, with all its initial unpleasantness.


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