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December 2003
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January 2004

Up, Down, Good, Bad. Understanding the peg.

Earlier this week I noticed this story about how the currency peg is making it more attractive to invest in equities or property. Then another piece yesterday, worrying that the Hong Kong Dollar is falling in value and that this may cause interest rates to rise and slow down the economy.

We need to get this into perspective - these are tiny changes in the value of the Hong Kong Dollar, which hasn't moved more than 1% from US$1 = HK$7.73 for many years.

What has been happening is that HSBC and others have reduced the interest rates they pay to savers almost to zero, but the official base rate hasn't changed. The effect of this is fairly marginal, given that they were previously paying (I think) 0.1% per annum. This is more a confidence thing - people have had long had money in the bank but were nervous about investing in property and equities, and now they feel more confident. The amount of interest paid by banks on money in savings accounts has low in Hong Kong for a long time, and no-one can have kept money there for the return they were getting!

Still, I suppose they have to write something!


Space for a C5

A rather strange story from The Guardian about garages that are too small to park a car. I don't normally have much time for consumer stories, since they typically serve to highlight that people have been naive or stupid, but this one is a bit mysterious:

It would appear that architects do not consider how much room is actually required for a car when designing a garage, but as both local authorities and house buyers assume that they would not design a garage that you can't fit a car into, the dimensions are not checked. As a result, many homeowners end up having a garage they can't park their car in.

I would be very unhappy if I bought a house with a garage and couldn't fit my Renault Vel Satis* into it, but I suppose you could always use it as a granny flat or for your irritating teenage children.

* Only joking - the Renault Megane is not only cheaper but marginally less hideous, so I'd have one of those instead.


Stupid viruses

I'm getting rather bored with the latest virus (MyDoom). I have received a few of these email messages containing attachments, and also the follow-ups claiming I have sent out messages containing viruses.

I am intrigued by the logic behind this one, which seems to be aimed at people who will open an unexplained attachment from an unfamiliar sender even when it does not promise anything exciting. It may appeal to wannabe geeks because of the technical gibberish ("The message cannot be represented in 7-bit ASCII encoding and has been sent as a binary attachment) in some versions, but other than that why bother opening the message?

I looked carefully at the first one, didn't recognize the sender, and deleted the message. Then I noticed something on Shaky's site about the virus, and discovered that I was right to delete it. Now my virus checker has caught up, and tells me that there are nasty things in some of the incoming emails and deletes them for me.

The messages claiming I have sent viruses are bizarre, because they refer to an email address that I never use for sending mail, and come (with one exception) from people who I don't know. So I ignore them.

The problem with email, as I have mentioned before, is that it holds a horrible fascination for many people, and they waste a lot of their time reading messages that they should really ignore, and (presumably) opening attachments and clicking on links. Which, of course, is why companies send spam emails - even if only 0.01% of recepients respond it's still worthwhile.


Blockbusted

Blockbuster is giving up on Hong Kong because (they say) shop rentals are too high. As the leases on their existing shops run out over the next 18 months, they will close down. Blockbuster came to Hong Kong after the KPS chain went bust, and took over many of the locations and most of the stock. However, I don't think it has worked out quite the way they expected, and they have not expanded in Hong Kong or started up in China. In fact, over the last couple of years the shops have become increasingly tatty and it didn't look as if they were doing very well. They recently starting selling second-hand DVDs purchased from their customers, which looked like a rather desperate ploy.

The days, DVDs are cheap enough to buy, so why bother renting? Smaller shops with lower overheads can sell and rent VCDs and DVDs more cheaply than Blockbuster, and at the top end HMV has a better selection and more space. Or there's always the Internet, with CD Wow, Amazon, etc.

Shop rentals in Hong Kong are comparatively high, but companies with the right business model seem to survive.

[Just noticed that BWG has posted something similar with an identical headline. He's not normally that topical!]


A pound of your best cheddar please

It's cruel and unusual punishment, I tell you. This evening TVB Pearl screened a program called "Cheese Slices", all about cheddar cheese. Not the horrible mass-produced stuff you can buy in a supermarket, but the real thing made in a traditional way. They showed Jamie Montgomery making the cheese, and Randolph Hodgson from Neal's Yard Dairy tasting it. Apparently it was very good.

This is horribly unfair. Neal's Yard Dairy is probably the best cheese shop in the world, selling good cheddar such as Montgomery's and Keen's, and other British cheeses of all descriptions, such as Mrs Kirkham's Lancashire and proper mature Stilton. But I'm in Hong Kong, and none of the good stuff is available here. My only hope is that the new Harvey Nichols will have a food hall and might sell some good cheese, but I'm not holding my breath.

Continue reading "A pound of your best cheddar please" »


Fake Watches

Simon beat me to this one because I still haven't had time to read this week's Economist - that's the problem when it arrives on a Monday and you have to work for a living.

He has noticed this story about fake watches in China. Well, actually it's a story about the 'surprising' success of Omega in selling genuine watches when much cheaper copies are available. Simon comes over all moralistic:

But somewhere in the back of my mind is the moral dimension. Fakes are effectively a form of stealing. The original creator goes through the effort and expense of designing, manufacturing, marketing and selling the product only to have it ripped off in a matter of weeks and selling at a fraction of the price. There are rationalisations - just look at the fuss over "free" music over Napster, Kazaa and the like. These fakes may stimulate demand for the real thing. People who buy the fakes may never buy the real thing. But let's face it, just like taking songs for free of the net or fake DVDs, these fake watches are just wrong.

Surely the conclusion we can draw from this story is that the markets for genuine and pirated are often very different. If you want, and can afford, a genuine Omega or Rolex watch you will unlikely to be satisfied with a copy. Equally, most people who buy copies would never buy the genuine article. In fact, the existence of fakes is proof that the original is desirable, and may even increase sales.

Of course, these companies will carry on saying that they expect the PRC government to do more to stop piracy, and one of the ironies is that the public destruction of copy watches is good publicity both for the originals and the fakes, but in reality it is not a major problem. Strangely the Economist seems to have a bit of a blind spot on this subject.


Off the hook

[I know this has got absolutely nothing to do with the purported subject matter of this blog, but I think I can permit myself this indulgence.]

Last night I watched Lord Hutton presenting the conclusions of his inquiry, shown on BBC World (and CNN). I was expecting a fairly brief summary, but he actually read large chunks of his text, and it lasted very nearly 90 minutes. It can't have been much fun for the BBC, given that it was severely criticised by Lord Hutton, and I can't have been the only viewer willing him to get on to the conclusions rather than summarizing the facts and the evidence.

On balance I think his conclusions were correct. The BBC deserved the criticism it got, and needs to re-think the way it deals with controversial stories, and should not blindly defend its journalists without knowing the full background. Andrew Gilligan, the BBC reporter involved, behaved very badly throughout, and it's hard to see how he can carry on working for the BBC.

What surprised me was that government got off so lightly. Geoff Hoon in particularly adopted a very high-handed attitude, seemingly arguing that most of the decisions were made by civil servants without his knowledge, and Alastair Campbell took the whole thing very personally (at least in part because of previous run-ins with Gilligan). I guess that Lord Hutton paid much closer attention to the evidence than I did, and drew some different conclusions. I don't believe that anyone in the government can be held responsible for David Kelly's death, but if they had done things differently he might still be alive today.

Continue reading "Off the hook" »


Chinese New Year - still going strong

This should be positively the last mention of Chinese New Year here (until next year). Promise.

This week I have managed to attend two company post-CNY lunches and witnessed the giving and receiving of Lai See packets on a fairly large scale. The amount of enjoyment that people get out of this ritual is quite something, even though the sums of money are really quite small. If you compare this with the amount of hassle (and frequent disappointments) that are involved in giving presents, this system does have a lot going for it.

People genuinely enjoy both giving and receiving Lai See, and it makes starting work after CNY a real pleasure! I previously worked in a small office with a mixture of different nationalities, but in a larger office where everyone (apart from me) is Chinese, there are a lot more people to give and receive Lai See. It's also amusing to hear the arguments about whether people are single or not, and the pretend reluctance of some people to give Lai See to people who they believe may not really be single.

Incidentally, I get the impression that a lot of people are still on holiday. I know they say that it's unlucky to go back to work on the 4th or 5th day, but today is the 7th day. What's up with people?


Sweatshops

Simon notes an interesting blog that I have seen before but don't read regularly, Asian Labour News.  It's put together by Stephen Frost, who is a Research Fellow at the Southeast Asia Research Centre, part of the City University of Hong Kong, and it is described as "an online database of news about workers in Southeast Asia and China and the issues that affect them."

He has noticed an article in Reason magazine about sweatshops:

"Want to improve the lives of poor workers in developing countries? Then rush out and buy a pair of Nikes or Levi Strauss jeans"

They are suggesting that it is actually helpful to workers in Asia to buy products from well-known brands and large retailers that are sourced from Asia.  The logic being that these companies pay higher wages and enforce better working conditions, and that foreign investment "is positively correlated with the right to establish free unions, the right to strike, the right to collective bargaining, and the protection of union members."

When I first visited a factory in China several years ago, I was fairly horrified by what I saw.  Then, after discussing it with various people, I realized that it was not as simple as it first appeared.  For one thing, most of the workers only stay for a few years, and the amount they can earn in that time is more than they could hope to earn in their home villages.  For another, it isn't really appropriate to judge living or working conditions in a factory in China by the standards of Hong Kong or the UK.  Yet, nevertheless, most companies could afford to provide decent accomodation for their workers and ought to pay them a decent wage.

So is it true that the large well-known companies pay better and provide better conditions for their workers? 

Well, in fact these well-known companies don't normally own factories, but instead sub-contract the work to other specialist manufacturers, many of which are headquartered in Hong Kong.  These companies are expected to meet the minimum standards set by their customers and also have to compete (on cost and quality) to win the business.  If the big names aren't proactive in checking that these standards are actually followed, the factory owners are always going to be tempted to cut corners.  I have seen production lines in China that are dedicated to producing products for one well-known company (that does carry out checks) which obviously do meet the expected standard, but I don't believe every company is as vigilant as that.

One of the obvious contradictions here is that large retailers such as Wal-Mart and Tesco are now extremely powerful and can drive a very hard bargain with their suppliers.  This in turn forces those suppliers to cut costs, and often prompts them to source goods from Asia to take advantage of low labour costs.  Can you simultaneously be negotiating hard on how much you pay and enforcing high standards in the factories?  

In relation to the current problems with Avian Flu in Thailand, I was somewhat surprised to find that the UK imports large quantities of chicken from that country, mainly for use in processed food.  I have already linked to this article from The Guardian:

"Waitrose and Marks & Spencer do not buy any chicken from outside the EU for their processed foods, but the decision not to use cheap Thai or Brazilian meat is believed to have added £10m a year to M&S's costs. Most other retailers have sourced the cheaper products."

In case you were wondering, Waitrose is a posh supermarket owned by the John Lewis Partnership.  If you buy food from M&S or Waitrose you will pay higher prices, but for higher quality and closer supervision of the supply chain.  However, the low prices offered by Tesco and Wal-Mart seem to be a more successful proposition, with both companies highly profitable and gaining market share.  When given the choice, most consumers seem to prefer low prices.

So how can you tell which companies really care about the working conditions and salaries of factory workers in Asia and which ones are mainly concerned with cutting costs?  Search me!    


Plasma, LCD or smoke and mirrors

I am always happy when my view of the world is confirmed. So I heartily recommend Stephen Wildstrom's column in the current issue of Business Week magazine, wherein he considers the relative merits of plasma, LCD, CRT, and projection systems when choosing a TV. He says:

The picture quality of LCD is rapidly approaching that of plasma

I have never understood the argument that LCD was better than plasma, especially not when people were saying this 2-3 years ago. Today, the best LCD screens are quite good, and for smaller sizes I'd agree they are the best option.

Coming up on the rails are the new rear-projection sets, which apparently contain a million or more tiny mirrors (but no smoke), and which are priced lower than plasma.