Simon's Unsubject Podcast

The specter of the Cold War continues to haunt us. In an essay written in 1945, George Orwell introduced the term "Cold War" with prescient clarity, capturing an era where nuclear arsenals promised mutual destruction and rendered total conquest impossible. This led to perpetual tension, a world caught in a seemingly endless cycle of suspicion and power play. This idea inspired his creation of the dystopian reality in "1984." And here we are, in the Cold War that never ends.We have unwittingly stepped into its sequel. Those of you familiar with television dramas know that the second season always builds on the past, yet twists the plot in unexpected ways. The collapse of the Soviet Union was such a twist; it was a catalyst that awakened the Chinese Communist Party (CCP) to the indispensable power of global financial influence. One year after the Soviet dissolution, Deng Xiaoping addressed the CCP, saying, "reform, or perish" (誰不改革誰就下台); his statement aims not at any particular individual CCP cadre but at the collective ethos of the Party.This is what the CCP wants: to remain in power at all costs. To do that, it must curtail Western influence in China, Asia, and beyond. From the CCP's vantage point, 1991 was not just about the Soviet collapse. The subsequent democratization of South Korea and Taiwan, and the social upheavals in Central Asia and the Middle East, were signs of Western encroachment. Putin's Russia and the CCP coined the term "The Color Revolution," reflecting their deep-seated anxiety.With Russia's diminished stature, the CCP sees a need to fill the void. A strategic outline emerged around 2000. Joshua Cooper Ramo, a director of Kissinger Associates, dubbed the idea the "Beijing Consensus." It was a blueprint for advocating for less developed economies to adopt an alternative approach to development, one that includes the right of sovereign nations to remain authoritarian and to resist the economic and political paradigms enforced by the West.So, who heeds the CCP's call? Look no further than Iran, Saudi Arabia, and the Belt and Road cohort; this is the region once influenced by Soviet presence, now courted by China. The CCP's outreach is strategic, not coincidental. It leverages the vacuum left by the USSR, inserting itself as the new center of gravity. While many people like to understand the CCP through the lens of political realism, anxious over geopolitics, I prefer to analyze their behavior as if they are rational agents with simple motives: to stay in power and to maximize personal interests over collective ones. Ideological labels, such as socialism, nationalism, or "whateverism," are mere convenient veneers for the CCP's survival.Nationalism is the CCP's most potent strategy, but it is a double-edged sword. The CCP is acutely aware of the make-or-break nature of nationalism but has no choice but to deploy it, especially as its economy falters and the regime fails to deliver on its promise to lift six hundred million Chinese in rural areas out of poverty.Some of us in the free world view China merely as a competitor, but the CCP perceives everything that exists, domestically and globally, as an existential threat. This is why the CCP rejects a rule-based global system and convinces itself and others that the status quo is nothing but a Western ploy to maintain dominance.For years, we in the free world harbored hopes that China's economic liberalization would bring political freedom. The CCP sees this as how the West weaponizes economic might against it; therefore, it is doing exactly the same thing to the rest of us, weaponizing economic might to advance its political agenda.From 1986 to 1989, we witnessed how the CCP closed the "Narrow Corridor" for liberalization. The Tiananmen Square crackdown and the Soviet demise solidified the CCP's resolve to fortify its control, especially over the financial system. Under the façade of "One Country, Two Systems," the CCP accesses the benefits of the global economic order while insulating itself behind a firewall. The "One Country, Two Systems" policy is not a pledge to Hong Kong, but a survival strategy for the CCP. The new Cold War revolves around China's quest to succeed where the Soviet Union failed: to reshape the global economic and financial order. From the Beijing Consensus to the Belt and Road Initiative to courting the Global South, the CCP's agenda is deceptively alluring, especially to some in the progressive left living in the free world. But as we stand here today, we should bear in mind that "1984" was not just a cautionary tale for those behind the iron curtain, but a warning to all of us. Don’t fall prey to a totalitarian regime disguised in the trappings of power, at home and abroad.This is my prepartory note for the panel discussion at Freedom & Progress 2023 on Nov 6, 2023. The subject of the panel discussion is “The New Cold War with China.” This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

This morning, I came across a news report about Li Ka-Shing. The Singaporean authority filmed Li Ka-Shing for the centenary commemoration of Lee Kuan Yew's life. Li Ka-shing's participation was a textbook example of public relations, and it made perfect sense for him to honor the Lee family of Singapore. After all, it's reasonable to assume that Li’s values align closely with Lee Kuan Yew's values.On a related note, I've observed that the Singaporean authority, particularly Prime Minister Lee Hsien Loong, excels at leveraging the internet and social media for political propaganda. If you browse YouTube, you'll likely encounter videos where Lee Hsien Loong discusses Singapore's governance strategies and achievements. Let me be clear: I'm not singing praises of Singapore or elevating Lee Kuan Yew. I simply admire their mastery of public relations and strategy. Unlike Hong Kong, which has nothing but empty slogans, Singapore's propaganda is the real work of masters.To reiterate, I'm not lauding Singapore. When I initially created my YouTube channel, I had a video discussing Singapore that surprisingly attracted many viewers, including Singaporeans. Some comments suggested that comparing Hong Kong to Singapore was unfair—not out of humility, but because they felt Hong Kong couldn't measure up.One more thing: I generally avoid discussing individuals. I dislike personality-focused debates and don't want to fall into the trap of thinking that "great men" shape history. In reality, circumstances often create heroes. Some people, like Li Ka-shing and Lee Kuan Yew, happened to be in the right place at the right time to seize these opportunities.So, when Li Ka-shing participates in a video commemorating Lee Kuan Yew's centenary, it carries potent symbolic significance. If you were to ask Chinese people worldwide who best represents Singapore, most would say Lee Kuan Yew. Conversely, if you asked who epitomizes Hong Kong, the likely answer would be Li Ka-shing.The collaboration between these iconic figures for the centenary celebration is laden with profound implications.When Li Ka-Shing posed a question to ChatGPT comparing Singapore and Hong Kong, he received a diplomatically balanced answer, stating that the two cities are both competitors and collaborators. Li Ka-Shing found this response "interesting," but anyone familiar with Generative AI knows that it is very common for machines to churn out generic, ambivalent responses.What caught my attention was Li Ka-Shing's subsequent commentary. He reflected on Lee Kuan Yew's early policies in Singapore, which some might consider authoritarian today. He said, "In the context of their era and historical backdrop, there was no room for laxity. The focus was on improving people's livelihoods and building the future. This, in essence, was the most humane approach, and I deeply admire him for that."In the 1960s, Lee Kuan Yew initially aspired to lead his compatriot to govern the “Great Malaya” but he was ultimately compelled to make Singapore stand on its own. Few recognize Singapore's meticulous efforts in racial integration, ever since its founding. It was a response to Malaysia's racial policies that led to their separation. While many post-colonial societies veered towards nationalism, Singapore built a multi-ethnic society from scratch. This was groundbreaking, especially considering that in the same period, the U.S. was still grappling with civil rights issues.Singapore's policies, such as its housing policy, are not just about housing but also aim to foster racial integration and social harmony. Can Hong Kong undergo a similar transformation? To change Hong Kong's system, we must also change its social culture and civil society. Beijing has long considered adopting the "Singapore model" for Hong Kong. However, unlike Singaporean officials who have the autonomy to address issues, can Hong Kong achieve the same level of independence?Li Ka-shing concluded, "The limitless opportunities Singapore has created from nothing make its people genuinely proud. This is the epitome of great leadership." Perhaps Li Ka-shing genuinely misses his "friend" Lee Kuan Yew. Unfortunately, in today's Hong Kong, even mentioning a leader who guided a nation to independence is politically incorrect. Li Ka-shing's comments, therefore, are likely to spark various speculations.Hong Kong government officials are often reluctant to draw comparisons with Singapore. Yet, the growing impatience among Hong Kong's property tycoons suggests a broader societal discontent. There's also a palpable sense of disappointment with Hong Kong's current state, but some still hold out hope for a better future. I believe Li Ka-Shing is among them; otherwise, why would he inquire about the relationship between Hong Kong and Singapore?At their core, Hong Kong and Singapore are fundamentally different, yet they face similar macro-environmental challenges. In the past, mainland Chinese who couldn't accomplish certain tasks at home would turn to Hong Kong, for financing, investment, and other financial services. Similarly, Westerners unable to invest in China directly would also come to Hong Kong. This city once seamlessly bridged these two worlds, thanks to its unique position — close to mainland China yet distinct in its administrative, political, and legal systems.Those days are gone. The world is waking up to the reality that Hong Kong's status as an international financial center isn't Beijing's to bestow—it must be globally recognized. Meanwhile, Singapore is capitalizing on its advantageous position, gradually absorbing roles once filled by Hong Kong.Some perceive Singapore as pro-China, while others see it as pro-U.S. In my view, Singapore is neither; it simply acts with the sovereignty befitting an independent nation. Since its inception, Singapore has navigated pressures from all sides while maintaining its stance. Hong Kong, too, was once a city that thrived in the narrowest of margins, often described as a "borrowed place on borrowed time." Perhaps it's this existential threat that drives both cities to continually evolve.From demographics, and natural resources, to geopolitics, Singapore holds significant advantages. With the rise of South and Southeast Asia, coupled with a burgeoning population, Singapore is better positioned to meet the financial needs of these nations.Let's face it: Singapore has surpassed Hong Kong in many aspects. Although Hong Kong's elites may disdain comparisons with Singapore, there's a growing admiration for the "Singapore model" among both Beijing and Hong Kong's power brokers.Many believe that the difference between Hong Kong and Singapore lies in the competence of their governing officials. However, I argue that the real distinction is in the societal systems and structures. Hong Kong's administrative apparatus was never designed for high-level intervention in society and markets.I once visited a community center in Singapore, complete with a library, sports facilities, and a swimming pool. Designed for the average citizen, it was practical yet elegant, all built for around three billion dollars. This infrastructure is part of their social policy, which also includes software like community care groups, with their own financial budget.In contrast, Hong Kong can spend billions on a pedestrian bridge that no one uses. This stark difference highlights the inefficiency in Hong Kong's public financial management. Bureaucrats here in Hong Kong have long viewed money merely as a tool to solve problems, they seldom go beyond the superficial nor do they address the root issues.Singapore has consistently outperformed Hong Kong in fiscal governance. During the 1998 Asian financial crisis, I conducted a simple data collection and found that Singapore's government expenditure as a percentage of GDP was similar to Hong Kong's, despite Singapore bearing military costs. This raises questions about where Hong Kong's money is actually going.Both Hong Kong and Singapore are small, open economies sensitive to economic cycles. When Hong Kong faces economic downturns, so does Singapore. Yet, why does it seem that Hong Kongers harbor more grievances? Hong Kong officials claim to bring "happiness" to its citizens, but who defines this elusive "happiness"?Singaporeans have a high level of trust in their government; over 40% even say they don't need to criticize it. If Hong Kong's government had such approval ratings, they'd be celebrating.Don't get me wrong; I'm not advocating for Hong Kong to adopt Singapore's big-government approach. Rather, I've noticed that Hong Kong's progress halted after the 1997 Asian financial crisis and the handover of sovereignty. If we want to rejuvenate Hong Kong, how far back should we look? Many would argue that the 1990s should serve as our starting point, prompting us to consider what made Hong Kong successful back then.What environmental factors can we not replicate? What internal elements enabled us to seize opportunities in that context? I used to believe that Hong Kong's public finance and monetary policies were superior to Singapore's, but now I'm not so sure. Hong Kong is on the brink of a fiscal cliff, and systemic changes are only a matter of time.Perhaps these questions could be posed to ChatGPT or even Li Ka-Shing: "What has Hong Kong lost from the 1990s to today?" I believe this question is far more intriguing than simply comparing Hong Kong to Singapore. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

If you're interested in a success story about the subscription economy, look no further than Apple Daily.We launched our subscription model in 2019, and within just three months, we skyrocketed from zero to nearly 800,000 subscribers. For context, it took the New York Times almost five years to reach one million paid subscribers. When we started Apple Daily in 1995, we soon adopted a hybrid model—Hong Kong's best-selling newspaper, with the city’s busiest website.However, 2014 proved to be a critical year for us. Online advertising revenue began to decline, largely due to competition from social media. Our print business struggled, and it became clear that advertising was no longer a viable business model for us.Apple Daily needed to transform.I had discussed the potential of transforming the organization with Jimmy Lai since late 2016. But it wasn't until 2018 that I was brought in again to explore a subscription-based model.We knew we would no longer be selling "paper," as such transactional models were becoming obsolete. However, we had no clue how to generate revenue from subscriptions.In the subscription economy, everyone claims to focus on customers rather than products. But what do Netflix and Spotify sell besides movies and music? Aren't those products too?Apple Daily had a clear advantage, one that even Netflix and Spotify didn't possess: we defined and drove Hong Kong's culture. We had lasting relationships with our customers that no one else had. I insisted that we call our customers "members" instead of "subscribers." We were not only building a business but also a community of Hong Kong people. Our vision was to transform ourselves into a platform from which other content and service providers could benefit due to our massive reach.However, this vision diverged significantly from our origins as a newspaper company. I faced considerable internal resistance, with many colleagues questioning why a news organization needed a department for events or services. Fast-forwarding a few years, I could have told my colleagues that our vision resembled Patreon or Substack.Transitioning from a product-centric to a customer-centric mindset is challenging, especially for a news organization with many strong egos. We were aware of potential issues and risks, such as subscription fatigue. It wasn't an easy exercise. To this day, no other media organization in Hong Kong has taken the risk of overhauling its media business into a subscription model, besides us.In hindsight, the subscription model was a natural evolution for us, and we were well-positioned to adopt it. The technology was ready, and consumers were becoming more accustomed to the concept. Most importantly, we were confident that Apple Daily represented the voice of the people. If Apple Daily had survived, we could have united other like-minded Hong Kong people to create a pro-democratic movement harnessing the power of the platform economy.We might have transformed Hong Kong's public sphere. Perhaps that's why the Hong Kong government went to great lengths to shut us down. Apple Daily ceased operations on June 24, 2021. Yet, many Hong Kong people refused to delete the Apple Daily app from their phones, turning it into a symbol of nostalgia, a reminder of what Hong Kong once was. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

The 15th-century introduction of the printing press led to the increased distribution of literary works, prompting writers to seek protection for their intellectual property. In 17th-century England, the Licensing Act of 1662 granted limited rights to authors, providing them exclusive control over the printing and distribution of their works. This early form of copyright protection marked a significant step in recognizing the value of creative works and the importance of providing authors a means to profit from their intellectual endeavors.As we enter an age of AI and abundant information, adaptation and embracing new ideas become crucial.Advertising vs Subscription: The Two Basic Media Business ModelsThe emergence of advertising as a business model coincided with the 20th-century rise of mass media. Advertising-based business models shaped the media landscape by generating revenue for content creators and providing audiences with free or subsidized access to information and entertainment.Subscription and paid models have persisted as alternatives, particularly for media outlets catering to niche audiences. These models deliver exclusive, high-quality content, charging subscription fees or requiring direct payment, ensuring a sustainable revenue stream.AI and the End of Media Business As UsualThe proliferation of AI-generated content presents a new challenge. The resulting flood of information will cause advertising "real estate" to skyrocket, leading to a decline in the average advertising dollar, and making traditional content production less viable. The overload of information has already caused a deficit in attention. Google and Facebook are busy fighting the massive inflation of content created almost at zero cost.As AI becomes adept at creating diverse and engaging content, the perceived value of paid, exclusive information may diminish. Algorithms themselves cannot be copyrighted as they are considered mathematical formulas or abstract ideas. Copyright law protects original creative expressions but does not extend to ideas, facts, systems, or methods of operation.There is debate on whether machine-generated content cannot and should be copyrighted. The prevailing viewpoint agrees that granting machine-generated content copyright could potentially result in numerous claims, overwhelming the legal system and hindering innovation by restricting access and reuse of machine-generated works.Copyrights protect intellectual property, while paywalls monetize that protected content by limiting access to paying subscribers. If contents are not copyrightable, will audiences be willing to pay for subscription services? Non-copyrightable content will definitely "sneak" out of the paywall.Remember this: “information wants to be free.”Focus on Ideas and Experience, Not InformationWhat will drive the information and entertainment industry in the future? The game industry is on the path to dominate the time we spend, especially when machines will greatly increase our productivity, thus leaving us with more time to experience life. Sports will be another area where people find excitement and participation.Unlike mere information, ideas provide purpose, values, and motivation to act. In this post-copyright era, understanding and coming up with new ideas become increasingly important.In my line with work, the answer to what I can do in the future lies in ideas. Good ideas are rare, and great ideas are even rarer. To come up with new ideas, I actively seek out different perspectives, appreciate why people think differently, and evaluate ideas based on the evidence available.It is not just the ideas or viewpoints, but how I interact and engage with my audience. Do I understand my audience’s state of mind? What kind of experience I am providing? This is why I am presenting the work myself, and polishing my presentation every day.Most importantly, am I providing any value with fresh, different ideas? While technology and machine learning can help us augment and disseminate ideas, bear in mind ideas are fundamentally rooted in the human experience. The creativity, empathy, and insight that humans possess serve as the foundation for the generation and understanding of ideas. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

Throughout history, our understanding of the world has shaped the technology available to us. As our comprehension of reality evolves, so too does our potential for innovation. This is why it is crucial to study metaphysical problems, as they can provide us with valuable insights that guide the development of new technologies.Human beings have always been driven by a need to classify and organize people, things, and ideas. This fundamental way of thinking has enabled us to identify patterns, make predictions, and develop systems of knowledge that have fueled technological progress. The tendency to classify stems from a fundamental human desire to create order and find meaning in the world. By categorizing and organizing information, we can better understand the relationships between different elements of reality and develop a more coherent picture of the world around us.Our understanding of the world has undergone a remarkable transformation. Let us use the study of biology as an example. In the days of Aristotle, the subject focus on the classification of species. Modern biology, nevertheless, is more interested in ecological interconnectedness and evolutionary processes. This contemporary worldview acknowledges the world is a complex network of interconnected systems that are constantly in flux.This shift in perspective has given rise to groundbreaking technologies such as the internet, the blockchain, and eventually networked money. These innovations represent a new paradigm in which decentralization, transparency, and trust take center stage. Blockchain technology allows for secure and efficient value exchange, while networked money like cryptocurrencies enables the creation of new economic structures that better accommodate the complexity of our interconnected world.The concept of network changes how we understand money, value, and obligations. Rather than viewing money as a static object, we now see it as a dynamic system of value exchange that fosters cooperation and collaboration between individuals, institutions, and communities.As we continue to deepen our understanding of the world and embrace the complexity of the networks that surround us, we will unlock new possibilities across disciplines. We will see the world differently. We will have totally different way of organizing society. We will have different needs for technology. Even our preferred enjoyment, human relations, and material values will be different. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

In a Facebook post, Hong Kong rapper MC Yan remarked that freedom of speech is not just about saying what you want but also about the freedom to hear what you want. But what exactly is freedom of speech, and why is it so important?Some suggest that freedom of speech includes the right to remain silent. However, I would add that the most important aspect of free speech is the ability to say things that some may find offensive.Freedom of speech is fundamental to our existence as human beings. It is a basic right that is essential for individual and societal growth. It allows us to express our ideas, beliefs, and thoughts without fear of persecution or censorship.Without freedom of speech, communication becomes stifled, and individuals become isolated. This hinders productivity and poses a threat to public safety. During times of crisis, no matter if they are natural disasters or political unrest, the inability to speak freely can prevent people from warning others or seeking help.Freedom of speech means we can show our love and affection. It allows us to communicate our emotions, form relationships, and share experiences. In its absence, individuals may be forced to repress their feelings and thoughts, leading to detachment and loneliness.Freedom of speech is not only about an individual's right to express themselves; it also encompasses our right to receive information and opinions from others. Freedom of speech is also the freedom to remain silent. Being forced to say something one does not believe in is the same as being forced to lie.A society without freedom of expression is a society without morality. Morality is based on individual values and beliefs, and without the ability to express these beliefs, there can be no discussion, debate, or consensus on what is right or wrong. Individuals may be forced to conform to a set of values they do not believe in, leading to a lack of purpose and meaning in life.People living in totalitarian regimes are afraid to express their thoughts and opinions, and creativity, innovation, and progress suffer. Societal progress eventually stops at the level which depends on the sharing of ideas and collaboration.Freedom of speech is both a necessity and a luxury. It is a fundamental human right that is crucial for individual and societal growth. It fosters an environment of openness, debate, and collaboration that is essential for progress and innovation. Without freedom of speech, we lose productivity, safety, love, and meaning in life.Thank you for reading. Please help spread the idea of freedom by sharing. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

In the past three years, I have shared my thoughts on how Hong Kong lost its freedom with my American friends, who often ask me how liberty is lost.Liberty is more than just the absence of government control; it's the ability to think independently, challenge ideas, and pursue knowledge. It gives us the freedom to explore, innovate, and find solutions to the world's problems. But when these institutions are compromised, so too is our liberty. When knowledge is politicized, ideas are silenced, and the pursuit of knowledge is reduced to a commodity, our ability to think critically and challenge authority is diminished. We become passive consumers of information instead of active citizens.The erosion of liberty is a slow and steady process that we first see in the decline of academic freedom, the rise of censorship, and the erosion of trust in science. Institutions of education and research have a responsibility to foster and protect this liberty.Many Americans are acutely aware of liberty's erosion but view the danger differently. Conservatives see progressives, particularly on campuses, as a threat to traditional values, fearing suppressed free speech and indoctrination. Progressives worry about student debt, affordability, and higher education's failure to enable social mobility.US higher education is collapsing, concerning all political sides. Critics argue that colleges fail to prepare people for evolving technology and markets, rendering college education an overpriced bubble. Universities, whether public or private, must deliver value on investment, or students will walk away. Many institutions struggle financially, while prestigious ones thrive on massive endowments.Universities should advance our understanding of the unknown and expand our capability as a civilization. However, academics often publish papers to meet performance metrics instead of expanding human knowledge, and PhD candidates become cheap labor for tenured professors. Intolerance for differing opinions stifles debate and challenges to established views. The politicization of science replaces evidence-based research with ideologically driven studies.Higher education once served as the most important check and balance against political authorities, with independent academics' opinions holding sway. Nowadays, academics' power to check the government has dwindled.Restoring the institution of education and research is critical to preserving our liberty. This means fostering academic freedom, ensuring research is evidence-based, and valuing education as a fundamental right. We must invest in education and research, supporting institutions that promote critical thinking, scientific inquiry, and academic integrity. We must demand accountability from those institutions that fail to uphold these values.If the current system is too broken to be fixed, we must build new institutions that will serve as a beacon of liberty and a lamp of knowledge for generations to come. The stakes are high. If we fail to restore the institution of education and research, we risk losing our ability to think independently, challenge authority, and pursue knowledge. We risk losing our liberty. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com

I would like to apologize for the lack of updates on the blog in recent weeks. I have been busy learning how to use various AI tools to improve my effectiveness, which has taken up much of my time. However, I am excited to share with you that I am determined to keep updating this blog and share more with the help of these tools.I am also thrilled to introduce a podcast that will accompany the blog, and I hope that subscribers will enjoy it.Fractured Foundations - A Report on Hong KongToday I want to talk about Fractured Foundations, a report fresh off the press by Atlantic Council on the fundamental changes in Hong Kong over the past three years. The report highlights six institutional risks that need to be addressed urgently:* Unpredictable public policy administration. * The possibility that Beijing may alter the Hong Kong dollar's peg to curb capital flight. * Financial institutions may face challenges complying with international sanctions due to the existence of two distinct legal systems. * Individuals and businesses may not have access to an impartial judiciary, thus eroding the rule of law. * Businesses and individuals may face a more opaque environment as freedom of expression dwindles. * The government may increase surveillance, compromise privacy, and create new data security risks. The report suggests businesses should approach outreach to Hong Kong authorities collectively as a political campaign, emphasizing the importance of the norms that underpin Hong Kong's competitiveness. In lobbying against further changes in Hong Kong's legal and institutional structures, companies should emphasize that any crackdowns on media outlets would endanger the flow of information needed for commercial and financial transactions, and create new difficulties for addressing disinformation. Businesses should also pay attention to their compliance infrastructure. Companies in Hong Kong face increasing compliance challenges due to the growing number of restricted individuals and corporations. Financial institutions should develop contingency plans to manage high-risk clients becoming subject to sanctions by the United States or China, or potential disinvestment.What "National Security" Really Means in ChinaWhile I agree with most of the observations and recommendations of the report, it might have overlooked the underlying significance of the idea of "national security" in China, and especially why the CCP deems Hong Kong a “vulnerability” in this regard.Hong Kong was once the go-to destination for business, where Chinese and American entrepreneurs came to achieve what they could not accomplish in their respective countries. It was a hub of opportunity and innovation that attracted people from all over the world.Since 2012, Hong Kong's political landscape has undergone a tectonic shift towards Beijing's priorities, resulting in a loss of influence for the local leadership. As Hemmingway once said, changes happen gradually at first, then suddenly. In Hong Kong, the turning point came with the imposition of the National Security Law in 2020, which established an all-encompassing system of authority. Even so, some businesses in Hong Kong hold onto the hope that they will continue to receive preferential treatment despite the change in the landscape. Totalitarian states view everything as a threat, not because they fear being replaced, but because they excel at maintaining power as if their authority could continue forever. What they lack is the ability to handle power transitions, whether through the death or incapacitation of their leaders.What they are genuinely apprehensive about is internal competition. In democracies, there is an election process, whereas, in totalitarian states, power transitions frequently involve violence and the removal of the current leader.During his tenure as Chongqing party leader, Bo Xilai, a charismatic princeling and rival to Xi, had implemented tactics that Xi later adopted. However, his approach was too overt, posing a threat to the party's integrity and causing division. Before Xi's ascension, the Party Politburo ousted Bo from his position and imprisoned him. Even Bo's ally, Zhou Yongkang, the head of the party's security apparatus, was expelled from the party and given a life sentence.Since Xi Jinping came to power in 2012, the CCP has aimed to consolidate power and prevent fragmentation. The party's elites understand that any division could ultimately lead to their demise. As a result, "national security" encompasses anything that may disrupt the power structure, no matter how remote the potential destabilizing factor may be. At the CCP’s 20th Central Committee 2nd Plenary meeting last week, the most crucial item on the agenda was the centralization of power in the hands of the party. There may be some confusion about the change's significance since some consider the party and state to be the same entity. While the ruling elites, or the top echelon of the party, and the state apparatus, or the bureaucracy, often overlap, there have been inherent conflicts between the two throughout history. It is worth noting that during the Cultural Revolution, Mao essentially launched a coup d'état against the bureaucracy using guerilla warfare tactics and a network that remained functional in the 1960s. The events of recent years in mainland China can be explained in four simple principles: when conflicts of interest arise between the public sector and private enterprises, the priority is always to serve the public interest. In conflicts between the party and the state, the party takes precedence. When there are conflicts of interest between Beijing and the provinces, Beijing's interests will always be given priority. Any element that may cause fractionalization within the party or the nation will be dealt with swiftly and decisively.The CCP deems it unacceptable for businesses to exert influence over national policy direction. Provinces should never prioritize their interests over those of the nation or use the central government for their own gain. When the bureaucracy's goals diverge from those of the party, personnel and institutions are precisely replaced to align with the party's stance.Hong Kong's liberal business culture, global connections, and unique institutional framework are the cornerstone of its values. However, the CCP ruling elites view these essential features of the city as vulnerabilities rather than assets, driven by their sense of paranoia.My outlook for the future of Hong Kong is bleak. The CCP's persistent paranoia will not dissipate unless there is a fundamental shift in the nation’s institutional structure, which historically takes centuries, if not millennia to achieve. It is important for businesses and individuals to remain vigilant in the face of the changing landscape in Hong Kong. Despite the challenges, there is still hope for Hong Kong. We the Hong Kongers are resilient, and the values that have made it a thriving metropolis can still be preserved. It is up to all of us to advocate for these values and fight for a future where Hong Kong remains a beacon of freedom and prosperity.I will continue to monitor the situation in Hong Kong and provide updates and analysis. I would like to invite feedback from my readers and encourage you to share this blog with others who may find it helpful. Last but not least, thank you for your time and support. I will update this blog and podcast more frequently from now on. Stay tuned. Yours Sincerely,Simon This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit unsubject.substack.com