What did they talk about?

Would’ve been interesting to be a fly on the wall of Zhongnanhai during this particular meeting:

Steve Bannon flew to Beijing last week for a secret meeting with the second most powerful Chinese Communist party official, less than a month after the former chief White House strategist declared that America was at “economic war with China”.

According to one person in China familiar with the situation, Mr Bannon travelled to Beijing to meet Wang Qishan, the head of the Chinese Communist party’s anti-corruption campaign.

The meeting occurred at Zhongnanhai, the Chinese leadership compound, after Mr Bannon had visited Hong Kong to give a closed-door speech at a big investor conference hosted by CLSA, a Chinese state-owned brokerage and investment group.

“The Chinese reached out to Bannon before his Hong Kong speech because they wanted to ask him about economic nationalism and populist movements which was the subject of his speech,” said a second person familiar with the situation.

Mr Wang, who is seen as the second most powerful person in China after President Xi Jinping, arranged through an intermediary for a 90-minute meeting after learning that Mr Bannon was speaking on the topic, according to the second person, who stressed there was no connection to President Donald Trump’s upcoming visit to China.

He knows what’s up

The lamps go out in Cambodia

A friend writes in Foreign Policy Journal:

The End of Nominal Democracy in Cambodia

By Antonio Graceffo | Sep 15, 2017

Until recently, most Cambodia observers would have tentatively applied the term “democracy” to the country’s political system. While general elections are held every five years, the ruling party always wins. Effectively, the country has been a one-party system since 1979, and Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP) has been documented as using manipulation and bully tactics (including murder), to maintain its firm grip on power.[1]

Problem is, the opposition party started making serious gains in the 2013 general elections and then in the 2017 local elections. And that wouldn’t do at all:

However, unwilling to relinquish the CPP’s grip on power, Hun Sen in late August 2017 began an intense campaign of clamping down on Cambodia’s nominal democracy.

To this end, Prime Minister Hun Sen has begun restricting freedom of speech and quelling potential voices of opposition. The opposition leader, Kem Sokha was arrested for treason in late August, with the CPP accusing him of participating in a US backed plot to overthrow the government.[7] […]

The Cambodian Daily, one of two major English language newspapers, that was renowned for its excellent coverage of the country’s political situation, has been shut down under accusations of tax evasion.[9]

(More on the closing of The Cambodia Daily here.)

Additionally, the Information Ministry has closed down 19 radio stations, including Voice of Democracy (VOD), Voice of America (VOA), and Radio Free Asia (RFA). The Council of Ministers spokesman Phay Siphan has accused VOD director Pa Nguon Teang of being a foreign agent.[10] Additionally, The Ministry of Foreign Affairs and International Cooperation ordered the closure of the US backed National Democratic Institute (NDI) and the expulsion of its staff.[11]

In just over a week, Graceffo writes, “Hun Sen’s government has set Cambodian democracy back decades and cemented the CPP as the dominant force of Cambodian politics.”

And the bruised, staggering “end of history” thesis takes another solid punch in the mouth.

Will they say no to that hot cuppa Joe?

Peking University professor Jeffrey Towson has a few things to say about Starbucks in China:

The amazing thing about Starbucks China is not just the consumer trend. It is that plus the absence of a major China competitor.

Starbucks is a very successful Western business that, for some reason, has no clone or serious domestic competitor in China. This is really stunning.

Try to think of another China situation like this. Nike fights against Lining. Samsung fights against Huawei and Xiaomi. KFC fights against virtually everyone. And so on.

There is no “Starbucks of China”.

Can confirm.

CEO Schulz has said they will open 500 stores a year in China, for the next five years. That would take them from about 2,600 today to 5,000 China outlets by 2021. That sounds big. It’s not for China. […]

Starbucks should be thinking in terms of +10,000 China stores.

Jeez. That’s more than the number of outlets currently in the US.

Changing consumer behavior is what Wall Street should worry about.
Chinese consumers are the most fickle group I have ever encountered. The behavioral differences between age brackets is vast. And the rate of change within each bracket is fast. Brands and products rise and fall all the time in the PRC. Take a look at the wildly swinging market shares of Samsung and Xiaomi over the past couple of years.

Starbucks is somewhat more exposed to these swings than most. [Reasons why]

Fascinating. Here’s another Towson article, from last year, about the singularity of the US coffee giant in China:

So why doesn’t Starbucks have a serious competitor in China? I’ve been asking people this for months and I still can’t get a good answer. It’s weird. […]

Explanation 3: Senior Chinese business have a blindspot for coffee. […]

What is really stopping a major company like China Resources from opening 500 stores? Why can’t Wanda take over all the coffee outlets in their +100 Wanda Plazas? They are doing exactly that in hotels and cinemas at the moment. Why aren’t the big boys of China entering this market?

Is it possible that the senior business people of China all grew up drinking tea and never really started drinking coffee? Maybe people like Wang Jianlin just don’t like coffee?

Maybe he just doesn’t like coffee

Final Explanation: It could still be a fad.

This is the explanation that worries me. There is a possibility that retail coffee in China is, to some degree, a fad. Drinking expensive coffee with friends in a nice setting is still relatively new for most of China. This has only been going on for 5 years or so for most people. It is also sort of a status thing and Chinese consumers are notoriously fickle about what is currently cool. Is this somewhat a fad? Could the retail coffee market shrink by 20%? What if millennials lose interest? Could it ultimately be limited to just a small niche of the population? I think it is definitely possible. Maybe big companies are staying out because they don’t really believe in it long-term.

The prevalence of Starbucks in major cities is one of the most visible and obvious signs of international influence in China, and the Frappuccino-sipping, iPhone-wielding yuppie in Shanghai or Beijing is a staple of dumb commentary by foreign observers like our Instant China Expert.

If coffee-drinking in China does indeed prove to be a short-lived fad, and Starbucks ultimately shrivels without being replaced by a major foreign or homegrown competitor, then that could deal a significant blow to the narrative that China is westernizing. China will seem a little more foreign and confusing to many outsiders commenting on it.

Fun fact: The average Chinese drinks about five to six cups of coffee per year, compared to about 300 in the US. (Towson says that in 2013, it was 4 cups in China vs. 441 cups in the US and, amazingly, over 1,000 cups in Norway.)

Bonus: Here’s an article I wrote about Starbucks buying out its East China joint venture.

The industrial revolution and its consequences

Provocative article (with quite a title) in the Chicago Tribune:

The introduction of the new iPhone X — which features wireless charging, facial recognition and a price tag of $999 — appears to be a minor event in the advance of technology. But it’s an excellent illustration of something that has long gone unrecognized: The Unabomber had a point.

Not about blowing people up in an effort to advance his social goals. Ted Kaczynski’s campaign to kill and maim chosen victims with explosives was horrific in the extreme and beyond forgiveness. But his 35,000-word manifesto, published in 1995, provided a glimpse of the future we inhabit, and his foresight is a bit unsettling.

“The Industrial Revolution and its consequences have been a disaster for the human race,” it begins. Among the ills he attributes to advances in technology are that they promise to improve our lives but end up imposing burdens we would not have chosen.

Does technology serve humanity, or the other way around? It’s getting harder to tell.

The problem is hardly a new one. In his book “Sapiens: A Brief History of Humankind,” Yuval Noah Harari argues that the agricultural revolution that took place 10,000 years ago was “history’s biggest fraud.”

In the preceding 2.5 million years, when our ancestors lived as hunter-gatherers they worked less, “spent their time in more stimulating and varied ways, and were less in danger of starvation and disease” than afterward.

Farming boosted the population but chained humans to the land and demanded ceaseless drudgery to plant, tend, harvest and process food — while making us more vulnerable to famine, disease and war. People who had evolved over eons for one mode of life were pushed into a different mode at odds with many of their natural instincts.

Talk about a Luddite. Kaczynski just wanted to roll back the industrial revolution. This guy thinks the domestication of plants was a mistake.

He kind of has a point, though.

Never go full Ted

The instant China expert

Destined to become a classic:

I’m in the business lounge of Shanghai airport, one of 400 world-class international aviation hubs that China is building every week, sipping a macchiato prepared by David, a 23-year-old IT graduate and barista, who speaks four languages and plays the violin like a concert-hall maestro.

I’ve spent nearly a week in Shanghai, running from business meetings to cocktail parties to speaking engagements. It’s hard to believe what’s going on.

Heading to meet the founder of Joystream, an exciting new startup, I ride in a “Didi,” a ride-sharing app quite similar to Uber. It’s ordered by my new Chinese friend Hamburger, a 24-year-old stockbroker and father of one, who moonlights on Didi so he can meet “interesting men.”

I ask Hamburger how he finds time to bond with his child, and he explains that Chinese people consider education sacred. While our kids are lounging around summer camp, toasting marshmallows, Hamburger’s toddler is doing long division and performing minor surgery on woodland animals. Hamburger gives me his number and urges me to call him later; the friendliness here is remarkable.

If you’re at all familiar with this genre of breathless reporting by visiting Westerners, you’ll nod at every single sentence. It’s painfully on target. I especially like the uncritical spouting of ludicrously inflated statistics – a specialty of the “China experts.”

This is also pretty funny – a riff on the “Why I’m leaving China” genre. If you’re not entertained by this, well… maybe you had to be there.

This cuts deep

North Korean satellites

I’m sure there’s an excellent reason why North Korean satellites are allowed to orbit directly over US territory:

In February and March of 2015, former senior national security officials of the Reagan and Clinton administrations warned that North Korea should be regarded as capable of delivering by satellite a small nuclear warhead, specially designed to make a high-altitude electromagnetic pulse (EMP) attack against the United States. According to the Congressional EMP Commission, a single warhead delivered by North Korean satellite could blackout the national electric grid and other life-sustaining critical infrastructures for over a year—killing 9 of 10 Americans by starvation and societal collapse.

Two North Korean satellites, the KMS-3 and KMS-4, presently orbit over the U.S. on trajectories consistent with surprise EMP attack.

Of course, the idea of North Korea attempting an EMP attack on the US is wildly implausible and borderline insane. Unfortunately, North Korea is now, in effect, threatening to do just that:

The North said in its statement Sunday that its H-bomb “is a multi-functional thermonuclear nuke with great destructive power which can be detonated even at high altitudes for super-powerful EMP (electromagnetic pulse) attack according to strategic goals.”

More background on North Korea’s satellites from a rocket scientist who was there in 2012:

In my view, the US needs to consider whether we can ever risk letting an absolutely unknown payload from North Korea ever fly across the United States again, and how we can be confident that the next satellite launch is carrying a non-hazardous cargo. For our once-in-a-lifetime visit in 2012, the North Koreans promised to prove their peaceful intent, and failed. We still need that promise to be fulfilled.

Somebody we can trust needs to be watching whatever the North Koreans mount on their next satellite rocket. Or we have to be ready to act based on valid suspicions and on the potentially all-too-terrible cost of relying entirely on hoping for the best from a madman.

Now may be a good time to give this a read:

And prepare.

Another rock-climbing milestone (heh)

Another crazy and impossible victory in the eternal battle of man vs. rock has been achieved:

Now, after over 40 days of efforts spread across two years and seven visits to Norway, Ondra has completed what is being claimed as the world’s hardest single rope-length climb, both in terms of physical effort and technical difficulty.

The climb – 45 metres long and forging its improbable way through the cave’s huge grey overlapping roofs – marks the latest achievement by Ondra, who has dominated rock climbing in recent years in the same way Usain Bolt dominated sprinting, consistently setting new levels of difficulty that others have struggled to follow.

I have to admit, I didn’t realize that elite rock climbing involved so much hanging upside down from near-horizontal surfaces.

Not really my thing, but I can admire the purity and determination of people who devote their lives to pushing the limits of human ability.

On that topic, do skyscrapers have their own climbing difficulty scale?

February 17, 2009, 1:10 p.m. As the thousands of bankers, consultants, and accountants who work in the Cheung Kong Center, a sixty-two-story office tower in Hong Kong’s central business district, returned from their lunch breaks, a slight Frenchman named Alain Robert was being questioned in a windowless room on the tower’s first floor. […]

Robert, who is forty-six, had just ascended the eastern face of the Cheung Kong, which is nine hundred and twenty-eight feet high, using nothing but his feet and his hands.

Just don’t ask why he does it, because you won’t get a real answer:

At the press conference, a reporter for the Hong Kong Standard asked why he was making the climb. Robert spoke at length about climate change, and then said, “It shows that I am willing to give a big part of myself for something that I have a strong belief.” (If Robert is retailing environmental responsibility, he’s something of a loss leader, flying all over the world to encourage other people not to.) When I asked Julie Cohen about his motivations, she laughed and said, “He always gives really corny answers: ‘I climb ze mountain because it is zere.’ . . . But it’s actually that. He can’t not.” The necessity of the ordeal, for Robert, is self-evident.

One of the themes of the essay is how society chooses to deal with a mild lawbreaker and entertaining nuisance like Robert. I liked this anecdote about the famous Hong Kong tycoon Li Ka-shing, who owns Cheung Kong Center:

At Cheung Kong, Li Ka-shing, the billionaire landlord, had happened to be on the premises during Robert’s climb. From his private apartment on a low floor, he had called the head guard. Robert was absolutely dying for an audience with the tycoon.

“Please, it would be a privilege,” he said.

The guard announced that Mr. Li had agreed to release Robert, but that he would not be able to see him. Despite having clambered from sea level past the treetops half an hour earlier, and got away with it, Robert seemed crestfallen.

Cambodia Daily closing

Statement by The Cambodia Daily, one of Cambodia’s three main English-language newspapers:

The power to tax is the power to destroy. And after 24 years and 15 days, the Cambodian government has destroyed The Cambodia Daily, a special and singular part of Cambodia’s free press.

As a result of extra-legal threats by the government to close the Daily, freeze its accounts and prosecute the new owner for the actions of the previous owner, The Bernard Krisher Jimusho Co. is unable to operate The Cambodia Daily newspaper and it will cease publication as of September 4, 2017.

From a New York Times account:

For the reporters and editors of The Cambodia Daily, an independent newspaper, Sunday was the end of an era as they prepared its final edition after 24 years in operation. […]

The Daily was ordered by the government to close its doors by Monday over allegations that it had not paid millions of dollars in taxes. The newspaper will publish its last print edition on Monday morning.

Seems ominous in context:

In recent weeks, the government of Prime Minister Hun Sen has ordered at least 15 radio stations to close or stop broadcasting programming from the Voice of America and Radio Free Asia. The government also ordered the expulsion of the National Democratic Institute, a pro-democracy, nonprofit organization tied to the Democratic Party of the United States.

I can’t claim to have read The Daily, but this echoes what I’ve heard from others with direct knowledge:

Since its founding in 1993, the widely respected newspaper has been an incubator for a generation of young Cambodian and foreign journalists, and it has served as an independent voice in a country with little tradition of free expression.

Of course, the closure of the newspaper is very unfortunate for the editorial staff of 17 Cambodians and 17 foreigners, many of whom I’m sure are very dedicated to their jobs – especially the locals, who can’t simply pack their bags and skip town if they run afoul of the government. I wish them well.

However, I must say that the following fact (interestingly omitted by The Daily in its statement) gave me pause for thought:

Operating under the king’s sponsorship, Mr. Krisher [the founder] never registered the newspaper as a business or nonprofit organization.

But the newspaper’s association with royalty has long since faded. King Sihanouk abdicated in 2004 and died in 2012. And Mr. Krisher, 86, who lives in Tokyo, is too ill to come to Cambodia to try to rescue the paper, said Douglas Steele, his son-in-law and The Daily’s general manager.

Mr. Krisher’s daughter, Deborah Krisher-Steele, tried to normalize the business this year. Ms. Krisher-Steele purchased The Daily’s assets from her father in April and will return them, the paper said.

Wait, so the newspaper operated for over 23 years as a non-registered entity? Did I get that right? The Daily was not even a legal business, at a time when it employed 34 editorial staff?

Imagine trying that in the US. The IRS would be far from amused.

Now, I am not up on the Cambodian legal system, and I can’t pretend to understand all the nuances of this case. Also, it is disturbing that Deborah Krisher-Steele’s husband, who is the legal representative of the newspaper’s owner in Phnom Penh, has reportedly been barred from leaving the country (Deborah is in Japan).

The lesson I take from this is that a business dependent for its survival on the whims of a king is inherently fragile, especially after that king’s death.

Freedom of the press is important, but so is covering your bases. Unless I am missing something, The Daily left itself wide open to this type of takedown.

Communism, summarized

This may be the most profound statement on Communism ever:

Is there really anything else to say?

Apartment buildings

Just a random photo of some Hong Kong apartment buildings, taken from a hotel window: