Generation 40s – 四十世代

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Expired: Hong Kong government’s ideas about Chinese medicine are clearly past their sell-by date

South China Morning Post
Comment›Insight & Opinion

Philip Yeung

Philip Yeung says despite a stated goal to nurture this traditional industry, Hong Kong’s fossilised thinking and a lack of coordination between officials mean we’re falling behind the competition

For ages, traditional Chinese medicine has lived in the shadows as alternative medicine. But overnight, with a Chinese medicine researcher anointed as this year’s Nobel co-laureate for medicine, it has acquired a halo of legitimacy.

In Hong Kong, however, Chinese medicine seems about to enter the dark ages. Designated as a new pillar industry, it never got anything except governmental lip service. After six years of inaction under Donald Tsang Yam-kuen, the government is now set to impose tough regulations on proprietary Chinese medical products. More than 8,000 Chinese remedies face being taken off the shelves unless they are standard-compliant, threatening to squeeze the life out of the industry.

Insiders blame the government for three strategic blunders. First, it asks thousands of Chinese herbal remedies to meet tough European standards as Western drugs, not health products, forgetting that ours is too small a market for manufacturers to bear the cost of compliance.

Our medical bureaucracy is top-heavy with Western-trained doctors who do not know that multi-herb formulations are too complex for their active ingredients to be isolated by Western procedures.

To apply US Food and Drug Administration-style requirements on herbal medicine is to cause its death by regulatory strangulation. Why not emulate Canada and treat Chinese herbal medicines as “natural health products”?

Second, the idea of integrating the Chinese medicine market within Greater China has never occurred to our leaders, though our tiny market size can’t sustain its healthy development. China has its own regulatory body for Chinese medicinal products. It makes no sense for Hong Kong to go its own way.

Third, oversight and resource allocation are in the hands of the Food and Health Bureau, while the Commerce and Economic Development Bureau is reduced to being a bystander. This has led to bureaucratic insanities.

For years, the Trade Development Council has co-organised the annual Chinese medical products exhibition. But the Food and Health Bureau forbids any display of unregistered proprietary Chinese medicines. Unable to take samples home, foreign traders leave empty-handed and deal-starved. As the Chinese Medicine Ordinance prohibits sales outside licensed premises, traders are also shut out of e-commerce in this age of the internet. Clearly, Hong Kong doesn’t know the first thing about nurturing industries.

In Macau, by contrast, common sense prevails. The University of Macau’s Institute of Chinese Medical Sciences has state-of-the-art research facilities, while Hong Kong officials fought Baptist University tooth and nail over a parcel of land targeted for a Chinese medicine hospital.

Last week, the University of Macau signed an agreement with the Guangdong-Macau Traditional Chinese Medicine Technology Industrial Park Development Company to jointly develop pharmaceutical products and promote Chinese medicine, with four proposed centres.

Hundreds of Hong Kong’s manufacturers and traders of traditional Chinese medicine are threatening to relocate to the Hengqin industrial park, where the promise of integration with the mainland market beckons.

Will Hong Kong learn from Macau and not consign the industry to the critical list?

Philip Yeung is consultant to the vice-rector for academic affairs at the University of Macau. Dr Albert Wong, from the University of Wisconsin, and founding president of the Modernised Chinese Medicine International Association, also contributed to this article


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Despite McCarthy-style witch-hunts, the University of Hong Kong council upheld academic freedom in vote on Johannes Chan

South China Morning Post
Comment›Insight & Opinion

Lau Ping Cheung

Lau Ping Cheung says the university council did the right thing to resist smear tactics and pressure by radicals that hark back to McCarthyism witch-hunts in the US

The concept of academic freedom can trace its origins back to the 19th century, when Prussia and Germany adopted a system that accorded universities autonomy in governance and freedom of academic development and research. The model was so successful that, by the late 19th century, it had been adopted by the likes of the US and China.

Fast forward to today, and academic freedom is making the headlines in Hong Kong, as radical students, academics and pro-democratic politicians rally to amend universities’ ordinances with the aim of ousting the chief executive as de facto chancellor of all universities and changing the composition of university councils. This was triggered by a University of Hong Kong council decision not to appoint Professor Johannes Chan Man-mun as a pro-vice-chancellor. Radicals say, although they have no proof, that the chief executive put pressure on the council, undermining HKU’s autonomy and academic freedom.

In fact, the chief executive’s de facto chancellorship of all universities is both a legacy and a necessity. It is a colonial legacy, following the founding in 1911 of HKU, the city’s first university, by the then governor Sir Frederick Lugard. Logically, therefore, he also became the first chancellor of the university. This tradition has continued. It is also a necessity because the eight public universities are heavily funded by taxpayers’ money.

Another fact that has roused debate is that the external members of the HKU council currently outnumber university members. But HKU is not the one with such a structure. Harvard’s equivalent of the HKU council, for instance, is made up of 30 external members and 14 internal members; at Stanford, just two of the 40-person council are internal members. However, it is true that in some universities, in the UK, for example, university members do outnumber those from outside.

There is no international standard for the composition of a university’s council. However, in 2003, an independent review of HKU’s governance recommended that “the ratio of external to university members should be about 2:1”. The rationale is simple – HKU should have an open and wide world vision. HKU is part and parcel of Hong Kong society; its governance should be independent, unbiased and free of individual faculties’ favouritism.

It is thus shallow, if not arrogant, for radicals, particularly academics themselves, to call for a high degree of self-governance for universities under the pretext of academic freedom and institutional autonomy, simply because they don’t like the council’s decision to reject Chan’s appointment or because they dislike the present chancellor.

The fact that Chan openly boasted that he was the only candidate recommended by HKU’s search committee and that student union president Billy Fung Jing-en revealed what he claimed were some members’ views in a closed-door council meeting – when both matters were supposed to be confidential – were blatant interferences in institutional autonomy. Also worrying were the attacks and pressure being exerted on the council by radicals and some pro-democratic politicians.

These reckless and unsubstantiated attacks and accusations bring to mind McCarthyism. In the 1950s, “red scare” fearmongering was used by Republican US Senator Joseph McCarthy to stir people’s fear of communism and alleged Russian spying, without any evidence. Thousands were persecuted, many imprisoned and some even died, often after verdicts based on inconclusive and vague evidence, most of which was later overturned.

Such smear tactics can be very effective, at least for a short while. Hong Kong is now shrouded in a mist of McCarthyism that is sabotaging many core values, including academic freedom. Luckily, the HKU council maintained its independent and unbiased position, saving the university’s 104-year-old reputation. That, to me, is a true reflection of academic freedom and institutional autonomy.

Lau Ping Cheung is a member of the Economic Development Commission cum convenor of its working group on professional services

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The new normal: China’s holistic development of its economy moves beyond long-time focus on GDP

South China Morning Post
Comment›Insight & Opinion
China Economy

David Wong

David Wong is confident that efforts on multiple fronts to restructure the economy will turn President Xi Jinping’s ‘China Dream’ into reality

The key to sustainable growth in China is financial, fiscal, and administrative and social reforms.China has grown rapidly for more than a quarter of a century by following a strategy of high investment, strong export orientation and resource-intensive manufacturing. While this growth has lifted hundreds of millions out of poverty, it has also increased income disparity through unbalanced growth, environmental degradation (including air, water and soil pollution), corruption and unsustainably high local government debt.

In May last year in Henan , President Xi Jinping used the term “new normal” for economic development. This is a development strategy not based on gross domestic product growth alone, but includes economic, political, cultural, social and environmental development. The strategy is now playing out in China’s economy, with the shift in the balance of growth from export-driven, heavy industrial investment towards domestic consumption. This shift is particularly evident in the services sector, with an emphasis on innovation.

China’s economic growth has slowed, due to an ageing population, a decreasing rural workforce and more rigid energy, resources and environmental constraints. The expected growth rate in 2015 is below 7 per cent, with the rates for 2016-2020 expected to be around 6.5 per cent, and those for 2021-2025 around 5.7 per cent.

However, we need to remind ourselves that 7 per cent growth in 2015 is equivalent to a 14 per cent growth rate in 2007.

The key to sustainable growth in China is financial, fiscal, and administrative and social reforms.

First, China must continue to loosen control over interest rates and cross-border capital flows with full rate liberalisation as the ultimate objective. The People’s Bank of China has made great progress by implementing a deposit insurance system and freeing domestic interest rates. However, China’s financial system remains bank-dominated, with development in the bond and securities market lagging behind. Truly risk-based, market-driven corporate bond and securities markets will certainly enhance the efficiency of the financial markets in the allocation of capital.

The calibrated opening of the capital account – through the qualified foreign institutional investor scheme, the renminbi qualified foreign institutional investor scheme and the qualified domestic institutional investor scheme, plus the Shanghai-Hong Kong stock connect – were good moves but more needs to be done. The drive for renminbi internationalisation for trade and investment must continue for its eventual recognition as a convertible currency in the International Monetary Fund’s special drawing rights basket, which is of symbolic significance.

The reform process must continue in the privatisation of the financial sector for underserved customers like small and medium-sized, and rural, enterprises. The implementation of the loan-pledged relending programme in Guangdong and Shandong , which has now been extended to Shanghai and other parts of China, will help local banks to provide targeted financing for SMEs and rural clients.

Second, since the mid-1990s, local governments have had responsibility for spending but few sources of revenue, resulting in the increase of local government financing vehicles and incidents of land grabs. What is needed now is to grow the Ministry of Finance’s balance sheet and reduce borrowing by local governments. The central government will need to transfer funds to provinces for social programmes of priority. As such, the municipal bond market will have significant growth potential. The ministry’s plan to restructure 1 trillion yuan (HK$1.2 trillion) of local government liabilities through debt/bond swaps will lower their borrowing costs and offer short-term relief.

Third, reform of the hukou system of household registration that restricts the movement of rural workers to urban centres will affect at least 300 million citizens. The second-class status of these migrant populations restricts their consumption power, as a greater percentage of their disposable income has to be set aside for health care, housing, children’s education and retirement savings. As such, reform of the hukou system and urbanisation will help release consumption power.

The “new normal” will evolve with slower but more balanced growth. China has had to cope with the challenges of boosting domestic consumption, supporting the growth of the services sector and generating sufficient employment growth to maintain social stability.

As a result, the share of GDP growth by domestic consumption has increased from around 35 per cent in 2007 to more than 50 per cent today. Such consumption will continue to grow due to rising wages, the increasing share of the services sector and the trend of lower household savings.

In the past, the depressed costs of production has in effect produced subsidies for the corporate sector but “taxes” on households. However, this pattern has begun to change with rising labour costs. This will redistribute income from the corporate sector to households.

Another positive development is that the share of the services sector has now overtaken the industrial sector. This will drive employment, especially in SMEs, which will in turn further boost domestic consumption. With the implementation of social reforms, including a stronger social safety net and a better government-funded health care system, there will be less need for precautionary savings. In addition, land reform together with hukou reform will drive the urbanisation process, especially in the second- and third-tier cities, which will further encourage consumption spending.

On the fiscal front, the debt restructuring process has started, with local governments deleveraging and central government borrowing increasing to ensure transparency and discipline. Local government revenue will come from fiscal revenue and bond issues by the provincial governments.

In addition, public-private partnerships will become an important alternative funding channel for infrastructure investments. More government-owned assets are expected to be injected into these platforms to help in the deleveraging process of local governments.

China’s “one belt, one road” initiative and establishment of the Asian Infrastructure Investment Bank (AIIB) are great ways to export excess domestic capacity and create an external economy. The economic and geopolitical dividends are significant. China will be able to help meet the real need for infrastructure development among emerging economies in Asia and Africa.

Today, China is a net importer of oil and gas, minerals and food from Africa, Brazil, Russia, Malaysia and Thailand. As such, these countries would be its natural partners.

China is a net importer of oil and gas, minerals and food. Photo: APWith the liberalisation of interest rates, cross-border capital flows and internationalisation of the renminbi for outbound direct investment, bond and securities markets will remain robust. Financial institutions, banks and asset managers would be able to participate in the origination, underwriting and distribution of the financial flows from these transactions.

Professional firms, including legal, accountancy and consultancy services will benefit as well.

As an international financial centre, Hong Kong will have a major role to play in China’s new growth strategy.

The growth of consumption expenditure in health care, education, medical, and general services driven by urbanisation and the ageing population will create opportunities for private companies in the services sector. Hong Kong, well known for its excellence in services and business experience, is well positioned to capture potential opportunities in the growth of China’s services sector.

Countries that enjoy a trade surplus with China will be well placed to work on joint infrastructure development projects through the AIIB and the roll-out of the Silk Road plan. Here again, Hong Kong, with its expertise, capacity and experience in debt and equity capital markets, will be able to lead the financing through project bonds and investment funds.

China is at a stage of major structural transition. Time is short, the political and social pressure is strong, and the risks are significant. However, as long as the central government keeps the pace and direction of change, the reforms should be achievable. This will result in a more equal income distribution, and a more balanced economic structure, with slower but more sustainable growth. I am confident that the “China Dream” could become a reality.

Dr David Wong, former deputy CEO of the Bank of China (Hong Kong), is currently chairman of Halftime Hong Kong, with the mission to help business leaders transit from success to significance