The MT Diary: Howard Davies

Howard Davies arrives in Hong Kong as the Rugby Sevens are on. In Paris, he's almost over-shadowed by Sarkozy.

by Howard Davies
Last Updated: 06 Nov 2012

Hong Kong is in an interesting condition. It is benefiting a lot from China's recent moves to open up the offshore renminbi market, which is a great boost to banks and fund managers. The domestic economy is doing fine, too, but property prices are on the rise. The dollar has been pegged to the greenback since 1983. Then the territory needed the stability provided by a secure, external anchor. The peg served it well for a long time, but now things look rather different. The US dollar has declined against the renminbi and other regional currencies, so the HK dollar is also on the slide against the mainland. There are hedge funds gearing up to go long Hong Kong, in the view that the peg will have to be shifted at some point for fear of importing inflation. It's a tricky dilemma for the new chief executive.

The election for Sir Donald Tsang's replacement was more lively than expected. Tsang was, sadly, the last knight of the realm we can expect to see in that job for a millennium or two, barring another opium war. His successor, CY Leung, was the underdog when the campaign began, but his rival Henry Tang was dogged by scandals involving extra-marital affairs and a swimming pool built in his basement without planning permission. That wasn't great for his street (or should one say shopping mall) cred.

Leung started his reign by spending the first morning at Beijing's offices - just a courtesy call, you understand, and not to pick up his marching orders for the next five years.

Even though there is a restricted electorate of just over a thousand, representing a variety of professional and business groupings, the campaign was lively and seen as a dry run for the real thing, which is supposed to happen in 2017 under universal suffrage. So Hong Kong's politics are growing up. There are blogs, Facebook campaigns, Twitter feeds and all the accoutrements of a 21st-century democratic culture.

There is even a new think-tank, the Fung Global Institute, which I went to see. There are whole regiments of tanks in Washington, Brussels and London, of course, but in Asia they have been in short supply. The new entrant, which is already well funded, plans to look at the world through Asian eyes. The timing looks good and I expect they will give some of our own dated models a run for their money.

All Hong Kong needs now to be a fully fledged, Western-style open democracy is a press ready to hack into emails and mobiles without fear or favour and a police force happy to oblige them with spare horses or maybe tigers, as it is south-east Asia after all.

It is amazing how many board meetings just happen to be scheduled in Hong Kong when the Rugby Sevens are on. This year was no exception, so I found myself with really no option but to put in an appearance. The Fijians won the final against the All Blacks - a popular result. England were knocked out by Samoa. Scotland and Wales? Best to draw a veil. The Welsh looked as if the whole team had done a Gavin Henson on the flight over.

It's a great day out and by four in the afternoon one is feeling no pain. But it is in the nature of the competition that there are unhappy mismatches between top rugby-playing nations and minnows who are there for the beer. So one approached the France-Kenya game in trepidation. This could be a cricket score, we thought.

And we were right. The games only last 14 minutes, so 39-0 is a pretty comprehensive wipe-out. The poor French, lucky to get nil as they say, looked suitably embarrassed. They really shouldn't try to play with the big boys.

Back in Paris, it was election time too. All the main candidates were invited to appear at Sciences Po to set out their stall in front of the assembled, glittering jeunesse. Marine Le Pen was greeted with the noisiest 'silent protest' I have ever heard. 'We are all the children of immigrants' was the favoured chant. Francois Hollande was received politely, perhaps because it was 9am, an early hour for the student protestor.

Nicolas Sarkozy's appearance was timed for 5pm, exactly the moment when my sell-out class on central banking was due to start in the same building. So it was no surprise at all to me that the children were cross. They made such a fuss in the entrance hall about this unwelcome intrusion into their learning experience that he chose not to show up at all, offering a lame excuse about inadequate security. His schedulers really should learn to check potential clashes more carefully in future.

In France, just as here, tax has been high on the agenda recently. But the trend is in the opposite direction. While George Osborne has decided that the 50p band should go next year ('a brave decision, minister,' as Sir Humphrey might say), Hollande has promised to introduce a 75% tax rate on all incomes over a million euros. This has made a number of hedgies and footballers quite cross.

Not to be outdone, Jean-Luc Melenchon, who stands for the far left, including the rump of the old communist party, says the tax rate should be 100% on all incomes over 350,000 euros. The French know how to do 'left'. Our own imitators are milksops by comparison. So there may be even more French exiles in South Kensington before too long, or maybe in Nairobi, if they want to go to a country with a climate closer to the Riviera's - and a decent rugby team.

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