HONG KONG BRIEFING February 2005

News this month

Hello, I love you

On January 20th, China Netcom, the mainland’s second-largest fixed-line carrier, bought a 20% stake in Pacific Century Cyber Works (PCCW), a Hong Kong telecoms giant, for US$1 billion. The deal makes China Netcom the second-largest shareholder of PCCW, a company that is deeply in debt. More importantly for both, it gives PCCW a foothold for mainland expansion. This deal will reportedly not diminish the role of its former majority shareholder, chairman Richard Li, whose stake will fall about five percentage points to 25.5%. China Netcom will nominate three non-executive directors on the PCCW board, one of whom will be non-executive deputy chairman.

Mr Li, the son of Asia’s richest man, Li Ka-shing, has trumpeted the mainland's fast-growing telecom market. Zhang Chunjiang, China Netcom’s general manager, described the deal as a “win-win transaction”, explaining that PCCW's experience in Hong Kong's competitive market promises important lessons for expanding China Netcom.

A public plea

Hong Kong's government has noisily defended its choice of developer for Cyberport, a controversial business park that launched in 2003. Critics complain that the project was awarded in May 2000 to Richard Li, son of Li Ka-shing, Asia's most powerful tycoon, without a formal tendering process. But John Tsang, the technology and commerce secretary, published a formal rebuttal in six newspapers on January 26th, and released more than 20 letters with PCCW, Mr Li's telecoms firm, to prove that the deal was carefully vetted. The row comes amid mounting suspicion that the government is keeping all but the most powerful developers out of the running for one of the world’s most lucrative developments, a proposed 40-hectare cultural district on Victoria Harbour in West Kowloon.

Mr Tsang explained that the deal's hasty approval was an effort to capitalise on the booming economy of the late 1990s. Construction started just as the economy lurched in 2000, and the development has been struggling ever since. The deal awarded PCCW the right to defray US$2 billion in land-cost repayments until the project started making money. But only US$214m has been repaid so far, mostly from the sale of luxury apartments (the total occupancy rate is 42%). Critics allege that Mr Li promised to substantially minimise the government's risks in building Cyberport.

Red scare

Chinese New Year celebrations were disrupted when more than 600 anthills of dangerous red fire ants were found across Hong Kong. Customs agents suspected the ants (native to South America) were inadvertently imported in shipping containers along with tangerine trees, which are traditionally displayed during New Year's celebrations (this year on February 9th). The agents began holding thousands of the trees at the border. After the red ant discovery was made official on January 29th, the number of trucks delivering the trees fell from 1,000 a week to 220. Anthills were also found near the site of Hong Kong’s Disneyland, due to open in September.

Huang Huahua, the governor of Guangdong, a neighbouring Chinese province, confirmed in late January that ants had also been found in flower and fruit nurseries in the city of Shenzhen. Officials admitted that mainland provinces were warned about the ants two months earlier. Strict customs inspection controls were put in place there on January 17th, but Beijing officials only notified Hong Kong about the problem a week later. The ant's bite causes a burning sensation and leaves a white pustule on the skin. An attack from a swarm can lead to chest pains, nausea, shock and, in rare cases, a coma or death. The species is estimated to cause more than US$1 billion in damage a year to American agriculture. Taiwan reported a death from the ants in October.

Wishing destruction

Hong Kong began the year of the Rooster with one of the worst possible omens: the branch of a world-famous “wishing tree” snapped off, injuring a 62-year-old man and a four-year-old boy. While the man is nursing his broken leg in the hospital, the tree continues to bow under the weight of paper wishes that are tied to oranges and then thrown at the tree. Chinese superstition has it that if a thrown wish hooks on to a branch, it will come true. The weight of wishes and bugs in the fruit were named as chief culprits after the snapping of the eight-metre branch on February 12th, the 4th day of Chinese New Year celebrations. Officials also suggested the gold and red paper had weakened the tree by blocking the sun.

A ban on throwing wishes at the tree was put in place on February 14th after locals and holidaymakers from the mainland continued to try their luck. The Chinese banyan tree, thought to be about 80 years old, attracted crowds of wishers in 2003 when Hong Kong endured the SARS outbreak. A HK$2.8m toilet was built nearby, in the style of a temple, to accommodate queues of visitors.

Trial begins

Nina Wang, thought to be the richest woman in Asia, appeared in court on January 28th on charges that she forged her husband’s will. Famous for eccentric clothing and red hair worn in pig tails, Ms Wang arrived at the hearing looking subdued, with plain cropped hair and a maroon outfit. She was released after posting a US$7.1m bail and handing her passport to police. Her next court date is on March 23rd.

The charges against Ms Wang come after a two-year police investigation. But the saga began in 1990 when her husband, Teddy Wang, was kidnapped. When he was legally declared dead in 1999, his wife was named sole executor of a property empire now worth about US$2.3 billion. (The fortune, largely built by Nina Wang, is based around Chinachem, Hong Kong's largest private property developer.) But Wang’s father-in-law, Wang Din-shin, won a civil court case last year accusing her of forging the will. Ms Wang's final appeal of the ruling is expected in July.

Catch if you can

March 2005

Hong Kong International Literary Festival

Asia’s leading literary festival started as a small two-day event five years ago. But it is now a gateway to the West for Asian authors, and a lure for some of the world’s finest writers. The year’s event offers talks and readings by Alan Hollinghurst, who won the Booker Prize last year for “The Line of Beauty”, and Thomas Keneally, who won it in 1982 for “Schindler’s Ark” (later adapted into the Steven Spielberg film “Schindler’s List”). Other attendees include William Dalrymple, a leading non-fiction writer, Jeremy Strong, a top-selling children’s author, and Yu Hua, a Chinese writer who is legendary here for the novels “To Live” and “Chronicle of a Blood Merchant”.

The most anticipated guest is Shirley Hazzard, whose last novel, “The Great Fire”, won America's 2003 National Book Award. It is partly based on her years as a teenage spy for British Intelligence in Hong Kong. Her appearance at the festival will be the first time she has set foot in the city since leaving with her parents in 1948. She refused to visit Hong Kong during the 20 years it took to write the book, fearing her memories would be overpowered by the city's changed face.