Shallow value in short memories

SCMP January 8 2012

Identity, a sense of time, place and shared interests, matters. It matters in business as much as in societies. So there is a connection between the row over the issue of Hong Kong people's sense of belonging to Hong Kong, more than to China, and HSBC's recent announcement that it is selling its retail operations in Thailand. Clearly, the first of these is far more important but the second illustrates a major point about institutions losing their sense of roots in pursuit of short-term gain.

It should be no surprise that Hao Tiechuan of the central government's liaison office in Hong Kong is upset by a poll showing that Hongkongers' sense of local identity has increased while their sense of Chinese identity has declined. It has always been in Beijing's interest to reduce Hong Kong's sense of difference, to forget its past and to focus on a future of total integration with the mainland by 2047.

Hao has a problem common to all Communist Party officials - an inability to make a distinction between Chinese as a cultural and ethnic identity, and China as a one-party state, the People's Republic. In fact, most Hong Kong people feel Chinese in a cultural sense even when they hold foreign passports, as so many do.

Hao may be surprised at the rise of local identity just as the People's Republic has been making huge strides in the world, seeming to fulfil Mao Zedong's claim that the 'Chinese people have stood up'. But the more effort goes into promoting this pride, most obviously through the videos accompanying the frequent playing of the national anthem, the more Hong Kong, with its tradition of informed scepticism, responds with increased local awareness.

Add in actual or perceived threats, such as the mainland mother 'invasion' and the mainland's stepped-up crackdowns on dissidents, and the sense of a separate identity increases.

The fact is that Hong Kong, like Taiwan, has had a very different history from the mainland over the past 170 years. It is no shame that it should increasingly want to retain elements of that history, such as buildings and documents. Indeed mainland cities such as Shanghai and Dalian give the grandiose buildings of imperialist powers and companies an important place in their modern cultural and tourist identity. The mainland generally is beginning to be aware of the horrendous cultural destruction wrought by politics under Mao and by commercial interests more recently on historical sites of all periods.

Unfortunately for Hong Kong, it has a government that, despite being comprised mostly of the locally born and bred, is itself subject to Beijing's political pressures and local commercial ones to undermine a local identity. That identity can only be strengthened by association with the past, awareness of what has made Hong Kong a distinct community whatever the official flag.

This partly explains the refusal of the government to establish a proper system of archives, protected by law and open to the public. Of course the other part is the ingrained desire for secrecy of a bureaucrat-led government for whom accountability is no more than a slogan.

But the politics of identity explains why Hong Kong does not wish to emulate a mainland that for centuries prided itself on its keeping of records and in their use to ensure continuity in government.

Perhaps, too, the senior bureaucrats have become so cut off from the populace at large, so focused on material things and overseas qualifications for their offspring that they fail to grasp why Hong Kong's history matters.

In the same way, one has to ask why HSBC, which has its roots not just in Hong Kong but in the trade and family links between here and Southeast Asia, should be about to retreat from a major country with massive foreign trade, an open economy, a huge ethnic Chinese population and where it has been established since 1888. HSBC has declined to say what it will still have in Thailand after the sale which, bizarrely, is occurring just as it was about to be able to increase its presence from one branch to 20.

The announced reason is that HSBC is retreating from countries where it lacks what it calls 'scale'. In reality this is shorthand for savings here and there to make the new chief executive look good when he next faces a bunch of analysts, who have the shortest of time horizons, and can claim to have brought his cost ratio down by a percentage point or so. As the Financial Times reported last week, 'a high proportion of chief financial officers admits to a willingness to sacrifice economic value to meet short-term earnings targets'.

The other way for management to kill long-term shareholder value is for them to forget organic growth in the company's base region where it is a known and respected quantity, in pursuit of hubristic acquisitions of businesses they do not understand, such as HSBC's venture into low-end consumer finance in the US. The 2003 US$15.5 billion purchase of Household International appeared ludicrous even at the time and subsequently cost shareholders billions of dollars. These now have to be made good by pinching pennies in regional markets. If 'scale' is so important, what future does HSBC really have in China, Vietnam, Philippines ... let alone in Latin America?

If HSBC's sense of identity had not been eroded by the lures of size and the supposed glamour of being a 'global bank', it would not have bought Household, and would not be selling off operations in Thailand.



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