The inexorable descent to hell of the “Umbrella Movement”

Yesterday, the leaders of the 2014 movement called “Occupy HK” or also the “Umbrella Movement” went down yet another rung into what seems to be an inexorable descent to hell.

Old man protesting at oathgate
The “Oathgate” protests of November 2016.

After wonderfully squandering a unique leverage and negotiation position afforded by 3 months of continuous occupation of the streets of Hong Kong, the “Umbrella movement” faced, in the subsequent years, a determined push by Beijing to terrorize any independence wannabes.

The Legal Case

Originally, you have the “historic leaders” of the Occupy movement spearheaded by such figures as the law professor Benny Tai and then you have the “kids” who took over, such as Joshua Wong and the rag-tag group of students who ensured the occupation. The criminal case decided upon yesterday focused on those historic leaders, whom the judge convicted of “public nuisance”.

On a strictly legal standpoint, the case is probably justified as the initial movement launched by those activists has brought the city to a standstill for three months with little to show for this movement in terms of result. What Hongkongers do not exactly realize is that generally, the right to protest is always strictly kept under control, especially in democracies. Blocking a whole city was something exceptional, to the measure of the stakes at hand.

There is no doubt that the leaders convicted did encourage the public to occupy the streets in an attempt to pressure the HK government. As such, from a strictly legal standpoint, the judge stood little leeway when deciding on their outcome. Nevertheless, looking at the legal case is only looking at half of the issue.

The political undertones

It is widely known that after the huge alarm set out by the “Occupy” movement in 2014, and its ignominous ending in failure, Beijing set out to mete out a special brand of punishment on everyone involved from close or far with the movement. Lawmakers were disqualified (to be honest after making a disgrace of themselves), the “kids” were sent to prison or shut out of any professional career in Hong Kong, and the HK government has set out to enforce more diligently the heavy hand of China on the city.

But all of this could be expected. The unrealistic goals, the childish and immature manner in which the “Occupy” leaders behaved when trying to fix their goals, or even when they got elected to the LegCo, the legislative assembly of Hong Kong, ended up harming their public image.

Oathgate protests
The oathgate protests in November 2017

Over the three months of the protests, and later over the past five years, public support dwindled particularly among youth. Those who were at the forefront of the movement in 2014, learned that they should live the Chinese way, meaning just try to make money, and hold no ideals or hopes.

In a way, the Umbrella Movement was given an extraordinary chance to change the political destiny of a city. But because the “kids” of the Umbrella Movement were naive and because they seriously underestimated Xi Jinping’s China, they just ended taking the movement down all the rungs of Chinese hell. Although it has become mainly a mouthpiece of Beijing, the SCMP published one editorial which truly reflects the feelings of most of the population.

A discredited movement

To add to the discredit of the Occupy leaders, the antics of some people such as Howard Lam who invented some “torture” by Chinese agents (he later admitted self-inflicting injuries), ended up precipitating the movement into irrelevance.

Nowadays, the only persons who believe democrats still hold any relevance in Hong Kong are the Western journalists who played a great role in the international echo of the photogenic movement. The majority of the population moved on and probably even hates the democrats for failing to make good on their promises.

A perfect sign of this was in the public present at the court to support the leaders of the Occupy movement: only middle aged people were present. The youth that was at the heart of the Occupy movement in 2014 did not even bother showing up.

This was already true in 2014, but time has proved this even more: China won the political battle and is about to win the battle of minds. All Hong Kong’s youth has left is either the pursuit of money or the pursuit of leaving Hong Kong.

Mid-Autumn Festival in Shatin Park

As yesterday was a full moon day, it was also the occasion of heading to the New Territories to see the mid-autumn festival activities.

In this case, I headed to see the mid-autumn festival in Shatin Park.

Shatin being a relatively new development on the outskirts of Hong Kong has a quite young population. At the same time, there are long-standing traditions in the local population which make it an interesting place to visit out of the city.

The moon

Obviously, it would not be a mid-autumn festival without the moon. As the sky was clear I managed to see a full-moon and even to take a picture of it.

Full moon
The full moon as seen from Shatin Park on 5th October

Somehow, we were lucky, as this moon was not visible in some areas of the new territories.

Attractions

The animations at Shatin Park were of two natures for this mid-autumn festival. Firstly, there was a number of stands with traditional activities, ranging from calligraphy on fans to hakka embroidery. For those who don’t know, the Hakka are a major component of Chinese immigration abroad, a population originally from the areas near the Yellow river.

But the most attractive stands were probably those where you could have a calligraphist writing your name in Chinese on a fan.

Calligraphist
A calligraphist writes a name on a fan while a long queue of people awaits for their turn.

Details of calligraphy
Details of the calligraphy

Other similar activities were the art of painting on snuff bottles.

Snuff bottles
Snuff bottles painter

Traditional Chinese Shows

Another component of the mid-autumn festival in Shatin Park was the showcasing of traditional mandarin shows. This brought up some question by hongkongese as the performers were exclusively from mainland… A way by the government probably of fostering an increased cultural integration of Hong Kong with the mainland?

Singer
Traditional mandarin singer

Acrobatics took another part in the show, pretty much typical of mainland China for the degree of mastery which the performers showed.

Acrobatics
An acrobatic performer performs in Shatin

But however, the most appreciated show was probably the umbrella dancers who were extremely graceful and artistically irreproachable.

Umbrella dancers in Shatin Park
Umbrella dancers in Shatin

 

Finally, I also filmed a periscope of the whole show which you can watch here:

 

Where was this?

In the little city of Shatin. You must take the MTR East Line to get there.

Sunsets over Hong Kong: loss of hope

When there is no clouds, haze or fog, Hong Kong can provide some spectacular sunsets, just like the one featured in this post.

Somehow, a previous post of mine with the same title garnered some attention, but I believe it was more because of an understanding about the title referring to the political and economic situation. So, let us try to do the perilous exercise of combining a photographic post with some political and economic analysis and look at what announces sunsets over Hong Kong.

The 2014 turnaround

The consensus in 2014 was that, while Hong Kong grew more dependent of the mainland capital inflows, its economy fared pretty good for the situation.

Some special tax statuses such as the offshore status did a lot to attract capitals, not to mention the general view of the city as the doorway to mainland China.

But the influx of mainland capitals had as side effect of making everything more expensive for the locals, in particular cost of housing. As mainlanders grabbed everything for sale in HK, hongkongers were left with no option but to pay increasingly higher rent. For some categories, like the cardboard ladies, this precipitated the fall into poverty.

An increasing part of the populatino is impoverished

A constriction of the future

At the same time, wages and perspectives for future did not follow for the locals. The increasingly self-centered education system of HK, became more and more a hindrance, as its products came out of school with maybe a good academic training, but severely lacking in language mastery, both in English and in Mandarin. Only Cantonese survived, but was increasingly relegated to a useless role, as mandarin or putonghua is becoming the business language, and obviously, foreigners expected English in a former English colony.

The accumulation of these factors resulted in a constriction of the foreseeable future for the local HongKongese. While costs increased, wages did not follow suit and neither did the perspectives for future. Once able to move easily from country to country in the English-speaking world, the Hongkongese are increasingly locked down in their city. T

hey are part of China, but China imposes upon Hongkongese the same restrictions that they impose on foreigners. At the same time, Hongkongese are not terribly excited to go and live in what is for them (and many foreigners) a lawless and arbitrary land.

Umbrella movement: an economic as well as political protest

The issue of democracy was not the only one worrying the 2014 protesters. They wanted also to have the guarantee that the city would look out for their economic interests and invest into its population, not only facilitate the Chinese takeover of the economy. This side was pretty much occulted both by Western medias and by China.

People feel increasingly left over on the rails of progress

Similarly to Thailand, as long as the economy would have been handled in a fair manner, and they would have felt being protected and invested into, I believe the population would not care much about democracy. The Legislative Council was always a game among few leaders. The powerful conjunction of political and economic unsatisfaction gave rise to the umbrella movement… Before it fell again into oblivion thanks to its leaders.

Nevertheless, China’s reaction to the movement was blunt and to some extent dumb. They have an opportunity with Carrie Lam to regain hearts and minds, but only to the extent a real social politics is implemented in HK.

The real sunset: becoming part of China

Hongkongese might have been able to accept becoming part of China if they were guaranteed their freedom and their unique character would be preserved. Unfortunately, the Chinese reaction went right to the opposite of protecting the unique nature of Hong Kong. Beijing is going to tear away its last embers of independence and focus innovation and investments on other cities, like Shanghai.

From that point of view, the increasing opening of the Chinese economy to foreign capitals may finally be the last blow to Hong Kong. With no foreign capitals, a housing market out of control and no hopes for social mobility or evolution, hongkongese might resort to the last possible exit strategy: immigrating before they become fully Chinese.

The last protest in HK

A big protest against the jailing of “Occupy” leaders

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Today, Sunday 20 August, a massive protest took place in Hong Kong from Wanchai to Central, before the Court of Final Appeals.

The demonstration was organized by several organizations calling to protest against the imprisonment of pro-democracy activists in Hong Kong.

A surprising mobilization

Somehow, the size of the crowd must have come as a shock to the pro-Beijing politicians All indications were that most of Hongkongers had basically given up on the activists.

This abandonment also happened because of divergences between the partisans of a more radical opposition to Beijing’s grip on the city and “calmer” partisans of a more reasoned approach. For this protest, both camps set aside their divergences to call for unity, but it seems apparent that even the activists were surprised by the crowd.

Some of the activists said that they were unable to give a figure for the number of protesters, leaving thus the HK police to number the crowd at a paltry 22,000. That number does not make justice to the crowds marching on Sunday, but then, it was not the crowds of the occupy protests either.

A trans-generational mobilization

The other point to notice as can be seen from the pictures posted, is that the crowd was extremely diverse. It ranged from youngsters to middle-aged or older people. In short, once again, the protest was trans-generational. This testifies to the fears that hongkongers harbour of the end of their freedom at the hands of Beijing. It is also important, because the “occupy” movements  failed partly because of the endless continuation of the movement without an exit strategy. At the time, this alienated the more “adult” component of their sympathizers.

And that is where heavy-handed tactics such as imprisoning activists may end up rekindling the flame that blew off over the antics of the “protesting kids”.

It is however doubtful Beijing will realize that you do not treat a Westernized city the same way as you treat cities which have only known the Communist party. This may set China up for another showdown in Hong Kong.

Whichever way, it seems China’s issues with its independent “special administrative region” are far from over, Liaoning and other shows or not.

After this post was originally posted, another article came out on the subject of demobilization of democracy activists, here.

The Chinese carrier Liaoning visits Hong Kong

Despite the bad weather and intermittent showers, many Hongkongese were curious enough this Sunday, to take a walk past the HK Disneyland pier to get a better view of the sole Chinese aircraft carrier, the Liaoning.

A photoshoot occasion

With a good dose of propaganda by the Beijing-held SCMP, many locals, photographers and ordinary inhabitants took the 500 m walk to the best position to observe the training ship and snap shots.

While just a training ship, the Liaoning will have at least raised interest from locals and allowed Beijing to put a positive spin on the 20 yrs of the handover of Hong Kong, amidst continuing tensions.

The influence of China on Hong Kong from an unexpected angle: taxation

Hong Kong has a worldwide reputation for being a semi tax heaven.  This reputation hangs mainly on the concept of territoriality for taxes, which in turn gave birth to the very interesting concept of the “offshore status”.

More can be learned (from a very technical point of view) by reading the Departmental Interpretation and Practice Note 21 (DIPN 21) of the Inland Revenue Department (IRD).



Basically, what this says, in layman terms, is that if a company does not have elements localizing the profit generation in Hong Kong, then it not liable to pay taxes in Hong Kong. When considering “profit generation”, the IRD generally looks at things like negotiating contracts, taking orders, shipping goods etc.

This is one of the aspects that has been used not so much by multinational companies, but rather by SME’s and (very) wealthy foreigners attempting to evade taxes in their own jurisdiction.

Growing restrictions

In recent years, and under the growing pressure of the OECD’s BEPS initiative (Base Erosion and Profit Shifting) however, the IRD has sensibly tightened the noose around the offshore claim, through various aspects.

One example of this growing restriction is a recent decision of the Board of Review of the IRD.  This decision rejected an appeal by the taxpayer based on the fact that the taxpayer, besides supplying metals from Taiwan to Japan, did as little in Hong Kong as merely presenting letters of credit to the bank. Obviously, in this case, there was factoring and an element of financing in Hong Kong, but it was quite limited. So far, we could merely say that such pressures are linked to the desire of Hong Kong of not being blacklisted as a tax heaven, but concerns with regards to China are also apparent, as a lot of the IRD practice focuses on operations where manufacturing was carried out in China out of offices in HK.

The issue of residence

In 2015, another move took place which is more important and enlightens the growing influence of China.

This involves international treaties aiming to the prevention of double taxation (often just shortened to double tax treaty). In such bilateral agreements between states, a more favorable withholding tax (WHT) rate is granted to individuals or companies residents of one state which receive revenues from the other state, compared to the national withholding rate. This is important, for example, if revenues from dividends are received.

Where a Hong Kong resident company might be paying 30 % withholding tax in the USA if it receives dividends paid from the USA, on the contrary a Swiss resident company could be totally exempt of US withholding tax. This mechanism allows to reduce significantly the burden of cross-taxation across countries and aims at favoring cross-border investment.

Between China and Hong Kong (for the purpose of international tax matters, Hong Kong is almost considered as a State, but it is China that signs the treaties on its behalf), there is a double tax treaty. The Treaty WHT of China is 10%, but it can further be reduced to 5% if the Hong Kong company displays sufficient “substance”.

The concept of substance is mainly an element of fact, but the tax authorities look mainly for sufficient decision-making elements in the country of incorporation. The Dutch criteria for substance provide an an example of what can be required. Normally, the country remitting the dividends examines this issue (in this case, China). The  Hong Kong IRD introduced another unusual twist to this in 2015.

2015: crackdown on HK’s companies

In 2015, out of the blue, the IRD decided to implement a sudden change in its requirements to issue a “Tax Residency Certificate” (TRC). In fact, even when having a double tax treaty with Hong Kong, some countries might ask for such a document which is delivered by the local tax authorities of the country of incorporation of a company.

All of a sudden, the form for issuing a TRC became more stringent and contained detailed questions on the operations of a company. From various reports, it appears that the IRD does now carry out detailed checks on the substance of companies in HK and its “beneficial ownership” of the revenues.

The real reason for the change: Chinese pressure

Where the details become interesting, is that according to local tax advisors, this sudden change was carried out at the demand of China’s authorities. In fact, Hong Kong has often served as a pathway for wealthy Chinese to exfilter wealth from China. With the issues of capital flight worrying the Chinese government, they immediately took aim at Hong Kong, where shell companies have been numerous as previously alluded at the beginning of this article.

Where Hong Kong has had a large autonomy, especially in taxation matters, it is clear that this is changing as on several other points. China is going to make its might be felt where and when it feels it needs to inflex the policies of its “Special Administrative Region”.  From the “gateway to China” as it was perceived, Hong Kong is now increasingly moving to be felt as a threat to China.

While the issue of tax residency may seem secondary and affecting only a minority of wealthy individuals, it is symptomatic of the new shortened leash which the Chinese masters continue to yank around the neck of Hong Kong.

 

Hong Kong’s Umbrella Movement and its failure

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Two years ago, a movement started in Hong Kong, initiated by  a group of young students whose energy and determination brought a megalopolis to a standstill from September 2014 to December 2014. Since then, the movement got bogged down in its own indecision and some obvious frustration and hesitation on the proper strategy to follow before Beijing’s heavy-handed response to the movement.

The start of the movement

Originally, the organisers of the “Occupy” movement had planned a rather conventional tactic of civil disobedience, which included peaceful surrender to the Police (in the straight line of Gandhi’s ideals). These more mature organizers (slightly hippy in their ideology) were immediately overtaken by more extreme movements, mainly composed of students who pushed to occupy public space and to confront police forces.

The “heavy-handed” tactics (although many would call them pretty light) of the HK police, drew out a larger crowd in support of the movement across the HK society. This was the origin of the “umbrella movement” name, after students used umbrellas to protect against pepper spray., which ended up occupying central areas of Central, Causeway Bay and Mongkok.

The main success was mediatic, where Western mainstream medias published adoring columns on the movement, without any critical reflection on the failings of the movement, its opacity and its fragmentation.

The failure of the movement

The lack of a central leadership and contradictory expectations within the very fragmented leadership of the students brought them to a tactical and strategic standstill, where the occupation became a goal in and by itself, and where other more irrelevant goals, such as homosexual marriage grafted themselves on what was originally a demand for “real universal suffrage”.

This indecision, the refusal of the leaders of the protests to dissociate from more radical members and an extension without end of the protests brought gradually to a fall in public support and even anger at this movement. For the poorest part of the population, the occupy movement was extremely disruptive and even harmful.

In the end, by December 2014, the HK police cleared without too much opposition the last barricades. The student “leaders”, although still cherished by Western medias, face a return to normality that very few appreciated.

The Childish “Oathgate”

In November 2016, for a short while, the “Occupy” embers flared up again, on the occasion of the destitution of two members of the Legislative Council for making some rather Childish jokes around the Oath to uphold the basic law of the Special Administrative Region of Hong Kong (one of them using some foul language while taking the oath). While on the merits, I could not understand why some people would stand to be members of a parliament if they don’t accept its rules, on the form, this betrayed a lack of strategic intelligence.

Students again took it as an occasion to protest. Violence, this time, was clearly more on the forefront, some students carrying bricks to throw on the police. At the same time, while there was a minority of older hongkongese on the protest, the majority of the population stood quite far away and didn’t come to support the students.

After some short clashes with the police the uproar around the “Oathgate” also dissolved into thin air, and today, on the eve of the 20th anniversary of the handover to China, all that is left are the lonely “leaders” trying to do some mediatic stunts by themselves. The most laughable part probably being the dissenting “lawmakers” being obliged to reimburse the salaries they had paid themselves and their staff on LegCo funds. You don’t express civil disobedience and at the same time take the money from what is ultimately in their view, the organ of Beijing.

Hong Kong has instead become much more the focus of the less benevolent attention of Beijing, with an increasing curtailing of public freedom and an ever-present reminder that Hong Kong is part of China.

A changed Hong Kong

Where the students probably failed greatly, was in failing to acknowlede that there is an ethnic Chinese component to being a citizen of HK. A passport of HK is only granted to people who are “Chinese by descent”. That alone should have reminded the students they were Chinese after all.

Similarly, mastery of English in the younger generations has slipped dramatically, and the dominant language at home, at work and in daily life is Cantonese. With these factors, refusing to acknowledge the fact that Hong Kong is not any more the city it was under the British rule is refusing to acknowledge reality.

With more mainland immigration and deeper presence of China here, you can expect the identity of Hong Kong to become gradually more identified to China, all the more as HK medias are being one by one bought by mainland firms. The most striking such acquisition (and the total change of editorial line to becoming a Beijing mouthpiece) happened with the purchase of the South China Morning Post by Jack Ma (Alibaba’s owner) in late 2015 (see his interview here). In these ways, Hong Kong is already part of China, but refuses to acknowledge it.

What stays unique to Hong Kong is probably the exceptionally caring attitude of its residents. I must say that time and again, I keep being surprised with the kindness and helpfulness of Hongkongese people. In that, they are unique and not quite Chinese.